The Problems of Analysing Markets for Irrigation Water
The view that the price of water is too low and that water does not flow to its highest value end use, have led many analysts to conclude that a market for water, in which price can adjust to accommodate changes in the supply and demand for the product, is essential. However, this solution assumes that the market could approach something close to perfect competition, purely by making minor changes within the existing regime of property rights. In this paper it is argued that problems evident in this market stem from a multitude of market failures and characteristics that are particular to it. To understand this case more fully it is necessary to come to terms with the theoretical formulations of the market for water and the practical difficulties associated with it. It is concluded that it may not be possible to obtain an optimal solution in the market for water, as it currently exists. Thus, the solutions to the problems evident in the water market may need to rely on controlling quantity of water that flows through it, even though price is an ideal economiser of information.
|Date of creation:||Feb 2004|
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- Crase, Lin & O'Reilly, Leo & Dollery, Brian, 2000. "Water markets as a vehicle for water reform: the case of New South Wales," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 44(2), June.
- Geoff Edwards, 2003. "Water Policy: Setting the Scene," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 193-202.
- M. D. Young & J. C. McColl, 2003. "Robust Reform: The Case for a New Water Entitlement System for Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 225-234.
- John Freebairn, 2003. "Principles for the Allocation of Scarce Water," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 203-212.
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