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Groundwater Economics without Equations

Author

Listed:
  • James Roumasset

    (University of Hawai�i at Manoa, UHERO)

  • Christopher Wada

    (UHERO, University of Hawai�i at Manoa)

Abstract

In many parts of the world, irrigation and groundwater consumption are largely dependent on groundwater. Minimizing the adverse effects of water scarcity requires optimal as well as sustainable groundwater management. A common recommendation is to limit groundwater extraction to maximum sustainable yield (MSY). Although the optimal welfare-maximizing path of groundwater extraction converges to MSY in some cases, MSY generates waste in the short and medium term due to ambiguity regarding the transition to the desired long-run stock level and failure to account for the full costs of the resource. However, the price that incentivizes optimal consumption often exceeds the physical costs of extracting and distributing groundwater, which poses a problem for public utilities facing zero excess-revenue constraints. We discuss how the optimal price can be implemented in a revenue-neutral fashion using an increasing block pricing structure. The exposition is non-technical. More advanced references on groundwater resource management are also provided.

Suggested Citation

  • James Roumasset & Christopher Wada, 2014. "Groundwater Economics without Equations," Working Papers 2014-8, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    • Handle: RePEc:hae:wpaper:2014-8
    as

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    References listed on IDEAS

    as
    1. Roumasset James & Wada Christopher A, 2011. "Ordering Renewable Resources: Groundwater, Recycling, and Desalination," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-29, May.
    2. Darrell Krulce & James A. Roumasset & Tom Wilson, 1997. "Optimal Management of a Renewable and Replaceable Resource: The Case of Coastal Groundwater," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1218-1228.
    3. World Commission on Environment and Development,, 1987. "Our Common Future," OUP Catalogue, Oxford University Press, number 9780192820808, Decembrie.
    4. Roumasset, James A. & Wada, Christopher A., 2012. "Ordering the extraction of renewable resources: The case of multiple aquifers," Resource and Energy Economics, Elsevier, vol. 34(1), pages 112-128.
    5. James Roumasset & Christopher Wada, 2012. "The Economics of Groundwater," Working Papers 2012-4, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    6. Sittidaj Pongkijvorasin & James Roumasset, 2007. "Optimal Conjunctive Use of Surface and Groundwater with Recharge and Return Flows: Dynamic and Spatial Patterns ," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(3), pages 531-539.
    7. Roumasset, James & Wada, Christopher A., 2013. "A dynamic approach to PES pricing and finance for interlinked ecosystem services: Watershed conservation and groundwater management," Ecological Economics, Elsevier, vol. 87(C), pages 24-33.
    8. Karl Jandoc & Richard Howitt & James Roumasset & Christopher Wada, 2014. "Institutions for Managing Ground and Surface Water and the Theory of the Second-Best," Working Papers 201415, University of Hawaii at Manoa, Department of Economics.
    9. James A. Roumasset & Kimberly M. Burnett & Arsenio M. Balisacan, 2010. "Sustainability Science for Watershed Landscapes," Books on Agricultural Research and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), number 2010:3.
    10. Roumasset James & Wada Christopher A, 2011. "Ordering Renewable Resources: Groundwater, Recycling, and Desalination," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-29, May.
    11. James Roumasset & Christopher A. Wada, 2014. "Energy, Backstop Endogeneity, and the Optimal Use of Groundwater," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1363-1371.
    12. Basharat A. Pitafi & James A. Roumasset, 2009. "Pareto-Improving Water Management over Space and Time: The Honolulu Case," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 138-153.
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    Keywords

    Watershed management; natural capital; invasive species; groundwater economics;
    All these keywords.

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