Out of Sight, Not Out of Mind: Developments in Economic Models of Groundwater Management

Dynamic models of natural resource management have been applied to groundwater for decades, incorporating at least two inescapable aspects: first, since groundwater stocks are carried over to future periods, dynamic analysis is essential and any costs and benefits included in the analysis will require discounting; second, the positive and normative aspects of management must be clarified at the outset. The difference is fundamental even if the results of the two model types sometimes turn out to be fairly close. A whole strand of literature has been preoccupied with the question of whether policy interventions at least have the potential of improving groundwater management in a meaningful sense. However, given the well-documented parlous state of many aquifers around the world today, the focus has mostly shifted from debating whether or not intervention is worthwhile to identifying the relevant features of complex groundwater systems, designing better policies and facilitating their successful implementation. We survey developments in economic models relevant to groundwater management, focusing especially on the depiction of uncertainty and on the different methods applied to estimate the total economic value of groundwater.