26 Mar 2010

Water and human rights -- part 5

This post is one of ten in the serialization of my paper on human rights, which is introduced here.

Property rights

Robinson (2007) discusses property rights as human rights, and Article 17 of the Universal Declaration of Human Rights (UDHR) states that “Everyone has the right to own property alone as well as in association with others." Can water be owned in this way, or is it impossible to possess water as property?

Although Polanyi (1944) and others argue against the morality of water (or land or labor) being commodified as property, many more people have accepted and indeed embraced the idea that land or labor are property that can be exchanged for something else. Indeed, it is useful to pay attention to the difference between land and labor. While most agree that land can be sold or rented to someone else, we also agree that our labor can be rented, but not leased or sold (as with indentured servitude or slavery, respectively). Although it is possible to see how water might be bought or rented, it is useful to remember that property rights in water need not automatically imply that water rights must be sold. This idea leads us to the important point of whose water rights.
Private property or community asset?

Water is not your typical good, easily controlled under the conventional norms of property rights. Depending on the situation, water can be a private good (excludable and rival, like a bottle of water); a club good (excludable and non-rival, like a community water system); a common pool good (non-excludable and rival, like an aquifer under the land of several farmers); or a public good (non-excludable and non-rival, like a wetland popular with migrating birds). We need to know how water will be used before we can know how to manage it. That explains why it is not a good idea to give private property rights to water in a wetland, or make a community responsible for an individual’s water consumption.
Although it is clear that coordinated management is necessary at the community (or watershed) level, it is not clear, ex ante, whether property rights would make such coordination easier or harder.

Similarly, we have to consider the difference between a stock and flow of water. A stock of water, like a lake, can be valuable in isolation, but a flow of water has to go from here to there. If it does not make that journey, then its value is diminished, nullified or even negative. On top of this spacial aspect of water is its temporal aspect. Water may be valuable at one time (mid-summer, at the roots of a parched crop) but destructive at another (mid-winter, at the roots of a water-logged crop).

Finally, consider water quality. Although you may discharge nearly as much water as comes into your house, the change in quality as it is converted from treated, drinkable water into dirty grey water and contaminated black water means that your discharge cannot be re-used — which means that your consumption, from an economic perspective, is close to 100 percent. This quality factor is just as significant in industrial, agricultural and energy uses. Because everyone’s discharge can affect everyone’s water supply, cooperation and management at the community (or watershed) level is important; in developing countries, it is probably the most important issue.

What interesting to note is that failure in water management can often be traced to institutions, rules and operations that are scaled too large. This situation arises in any decision-making space, but it is increasingly relevant in water, where big infrastructure has often come with big management, a format that is suitable when big blocks of water are moved around and abundant supplies allow one to ignore waste, but less suitable when there are more decision makers, with more uses, and less room for allocation errors. Although decentralization from a few powerful bureaucrats to many weak owners may not seem sexy, it actually reduces risk and increases efficiency.

Even if we assume that the bureaucrat is trying to serve the interests of the owner, we know that errors will be less costly when there are many small decisions, disaggregated information is likely to be heard and acted upon, and a variety of opinions and decisions — reflecting the population’s collective preferences — drive allocation (Hayek, 1945; Surowiecki, 2004). If we consider that bureaucrats and politicians may allocate based on their interests — and not those of The People — then this efficiency grows even larger (Tullock, 1967).

In Monday afternoon's episode, I discuss the difference between owning water and using water, define how much water can be traded and show how trade will not dry out communities.