David Zetland, the bad boy of water economics, offered up a fascinating argument the other day regarding the traditional argument that agriculture used three quarters of the water in the West. When a farmer irrigates her field, who is it who’s really the “user”?
When I use water to flush the toilet, that water only benefits me and is unavailable to others.**
Farmers, on the other hand, use water to grow products that benefit others. Put differently, we also use that water when we consume agricultural products.
So the right way to calculate “use” is not by looking at how much water one person (or sector) diverts but by looking at each participant’s share in the total benefit from that initial diversion.
For instance, say that a farmer diverts water to grow carrots. If he sells those carrots for $0.25/pound to the wholesaler, who sells them for $0.50/pound to the retailer, who sells them for $1.00/pound to consumers who value carrots at $2.00/pound, then we can say that the farmer and wholesaler each get 12.5% of the total value, the retailer gets 25% of the total value, and consumers get 50% of the total value.
So consumers are using 50 percent of “agricultural” water.
The numbers are merely notional here. It’s the underlying logic that’s important.
John:
Mr. Zetland raises a valid point, and his logic is sound. But does that mean that using water for agriculture is the highest and best use? Particularly in the arid west?
Work through the same exercise using Intel, for example. I can be reasonably certain that the Rio Rancho plant uses a significant quantity of water, but what is the ultimate economic impact? It probably dwarfs that of agriculture by orders of magnitude.
Don –
I think you’re almost certainly correct, but more importantly, the sort of market-based water pricing Zetland advocates is a good way to find out.
Agreed.