The Economics of Water and Water Filtration Systems

Do you understand the VALUE of water?

There are lots of footprint calculators, statistics on use and conservation devices avail able, but some people still fail to understand (or feel they do not understand) the value of water.

I appreciate the value after many stays in many places where there was zero water or water of unhealthy quality. If you have a Brita water filter at home, you’d find our article on whether Brita Filters are effective.

DC suggests this approach to helping people understand the value of water to them:

Instead of writing down flushes and glasses of water I “challenged” people to turn off their water at say 10 PM, turn it on in the morning for early ablutions and off again, etc., using water to do things but then turn off again for the next 24 hours. (My guess maybe on/off five six times).

Even interested parties would rather keep track of flushes, brushes, and washes. Just to notice use, but the going downstairs was too annoying…

As I said to an NPR reporter on the Charleston, W VA, spill:

West Virginia residents have — at least temporarily — flipped to a Third World experience of water. The real cost isn’t just the bottled water and the paper plates. It’s the time spent getting basic needs met.

“In the developing world, young girls don’t go to school because they spend their entire lives gathering water,” he says.

Bottom Line: The value of water depends on how much you have.

The problem is water consumption, not use

Chris Perry, a water expert whose ABCDE framework of water management I admire, thinks that it’s important for everyone to know the difference between “consumptive use” and “non consumptive use” when discussing water management in times of scarcity. I disagree with him in the short run but agree with him in the long run.

First, let’s define what we’re talking about. The impact of our water use somewhat depends on what happens to the water afterwards. On one extreme, water is not very “used” in a swimming pool, running river, or hydroelectric project. Many people can share the same pool water, look at or fish in a river, or benefit from water flowing below a dam. These kinds of non-consumptive uses do not really deplete the quantity of water currently available in an area.[1] On the other extreme, you have irrigation with sprinklers that results in high evaporation and leaves little water behind. That kind of “consumptive use” makes it much harder to stretch a lot of water across many uses and users.

The point that Chris wants to emphasize (and I agree with this) is that it is sometimes more important to manage consumptive use more than use per se. It’s in this context that people in Singapore, Orange Country, California and other places with recycled water facilities should not worry about their showers or flushed toilets. Their water use is non-consumptive in the sense that the water can be captured, cleaned and used again. The same is true (to a degree) for farmers in Palo Verde Irrigation District who use flood irrigation. They apply about 9 feet of water per acre over the year and about 4 feet run off, back into the Colorado River. Assuming their soils are well-drained, their technique does not “waste” water because the excess runs back into the river, instead of evaporating.

The trouble is that most urban utilities and irrigation districts do NOT handle their water in a non-consumptive way. On the urban level, you have lawn irrigation that is consumptive as well as a tradition (based on cost, yuck and “abundance”) of discharging wastewater into rivers or oceans. On the agricultural level, you have a tradition of “use it or lose it” water rights that are generous enough to deter investments in improving water efficiency — especially when improvements that “yield” water cannot be rewarded by selling that water.[2]

So, why or how do these differences matter? Well, they are very important when considering the definitions of water rights.[3] They also matter for water managers facing supply shortfalls. Orange Country and Singapore count on recycled water to meet demand; Las Vegas has been intensively recycling water for re-use, but the problem there is consumptive use.

Which brings me to the question of whether these definitions matter. Yes, they do in the long run because — as Chris rightly points out — you need to understand and manage all water flows. In the short run, however the differences do not matter.

In my post last week, I suggested short run and long run actions that California can take to reduce risk of water shortages. In the short run, I said to reduce urban irrigation and agricultural groundwater pumping (as well as raise prices, to maintain fiscal health), but I did not discuss consumptive vs non-consumptive use. Why? Because that difference is not important in the short run. Technology and infrastructure are fixed, and return flows and recycling rates are known. I was targeting “wasteful” uses on lawns (rather than drinking water in restaurants) and unsustainable (unknown) groundwater pumping because both reductions would leave water for other uses now and in the future. In my long-run actions, I got into market, regulation and water quality improvements where “consumptive differences” matter more.

Bottom Line: Water can be managed for efficiency, equity or physicality, for minimal energy demand, maximal environmental health, or targets of justice. Decide your community’s priority and then manage in that direction, but don’t forget to monitor impacts on your “less important” goals.

  1. I’m ignoring the fact that water in pools and behind dams evaporates, as well as the fact that dams disrupt flows and water temperatures.
  2. There some exceptions to this. San Diego paid Imperial Irrigation District $millions for water “saved” after a canal was lined (reducing seepage). The trouble with that deal (and others like it), is that some of the “lost” water was non-consumptive, i.e., it was recharging aquifers that other, Mexican farmers were using. They lost a lawsuit claiming damages from the lining because they lacked standing (=not American).
  3. Australia’s rights are evolving as farmers find ways to use less water; the idea is to extract those savings from their licenses, rather than let them sell the savings, because their “savings” end up reducing the quantity necessary to keep other licenses “wet.

Other relevant articles:

Four billion facing severe water scarcity? I think not.

Update (18 March): My letter (the post below) has been linked to over at Science Advances. Mekonnen and Hoekstra have “declined to respond.”

This article has got a lot of attention. I think the attention is undeserved,* so I wrote this e-letter (an online comment on a published article)

Dear Editors and Readers,

Mekonnen and Hoekstra estimate scarcity based on physical models comparing water flows and population densities. From these models, they conclude that “four billion people [are] facing severe water scarcity.” This title has generated headlines in the media, but it is misleading to the public. Indeed, it is even misleading to readers of the paper because management and governance — only mentioned in passing — are important, and perhaps determinant, factors in converting physical conditions into actual risk of shortage.**

Singapore and Israel, for example, have some of the lowest levels of total renewable water resources (108 and 227 m^3/ per capita per year, respectively), but the populations of these countries are not known for suffering from water risk. That is because their governments have been extremely proactive in converting natural supplies into useful supplies.

In their 1994 book, Rules Games and Common Pool Resources, Elinor Ostrom, Roy Gardner, and James Walker note that a “common pool resource situation” can turn into a “common pool resource dilemma” if (a) current strategies are leading to suboptimal conditions and (b) institutionally feasible alternatives exist that can improve on those outcomes (pp 15-16). As a water economist, I interpret their framework to mean that a change in governance or management can remove the dilemma, i.e., reducing risk to an acceptable, non-harmful level. That’s why I wrote Living with Water Scarcity (2014). I wanted to make it clear that poor physical conditions did not necessarily result in water risk.

Curious to know more? I ran a simple regression of “Access to an Improved Water Supply in Urban Areas” against Total Renewable Water Resources (per capita), Freshwater Withdrawal versus Total Renewable Resources (two measures similar to those used in the paper), World Bank data on Control of Corruption, Effective Governance, and Regulatory Quality, and GDP per capita. You can guess that the latter 4 variables control for governance and wealth. Access to an improved supply may be a flawed measure of actual risk of water shortage, but it seems to be the closest variable we can find to a problem like “facing severe water scarcity,” so I used it.

In a simple regression of Access against the two water availability variables, both were significant but only explained 1 percent of the variation (R^2 = 0.01). When I added the governance and income variables, R^2 jumped to 0.34 (the variables, as a group, explaining 34 percent of the data variation in “Access to an improved supply”). More importantly, the physical variables dropped into insignificance, and variables for income and effective governance were quite significant. This hasty regression is not the final word, but it should be an obvious hint to the importance of governance and income on water supplies people care about — and a hint that physical water conditions have little impact on those outcomes. (Data and regression results available at

Four billion people are not facing severe water scarcity any more than seven billion people are facing severe food scarcity. In both cases, the difference between initial and final conditions is determined by institutional competence, i.e., good governance and management. These points are made by authors cited by Mekonnen and Hoekstra. Rijsberman (citation 6) says, “water will be a major constraint for agriculture in coming decades and particularly in Asia and Africa this will require major institutional adjustments.” Wolfe and Brooks (citation 7) say “perceiving scarcity mainly in physical terms limits opportunities for policy-making and approaches for capacity building.” I would have liked to see more of these perspectives in the main article, which asserted “four billion people facing severe water scarcity” without very good evidence. Indeed, I cannot even type “physical water availability is a necessary condition for scarcity,” as Cherrapunji — famous for being “the world’s wettest place” regularly suffers from water shortages. Why? Poor water management.

Mekonnen and Hoekstra conclude by advising that “proper water scarcity assessment, at the necessary detail, will facilitate governments, companies, and investors to develop adequate response strategies.” This advice is followed by suggestions of raising agricultural productivity and measuring water footprints. Although these recommendations make some sense, the first is not known to reduce risk of shortage (saved water is also used), and the second seems to reflect the authors’ affiliation with the Water Footprint Network more than other, arguably more important responses, e.g., limiting water use in basins, increasing food imports to stressed basins, and — above all — improving water governance. These first two responses are mentioned in the article but the last is not. I am writing with the hope that this option will receive more attention.

David Zetland, PhD
Assistant Professor of Economics
Leiden University College
Den Haag, The Netherlands