What Water Is Worth: Overlooked Non-Economic Value in Water Resources

Overlooked Non-Economic Value in Water Resources

K. Russo, Z. Smith

• Publisher: Palgrave Pivot
• Year: 2013
• Print ISBN: 9780230340763
• eBook ISBN: 9781137062499
• Topic: Politics & International Relations
• Subtopic: Ecology
• Index: Politics & International Relations

What Water is Worth addresses both conventional and non-conventional values of water, discussing the value of water as it relates to conventional microeconomics, water's true utility and government regulation, and new and currentpractices in water management.

1

Conventional Values of Water

Abstract: This chapter addresses tangible values of water. Here we see that even by conventional microeconomic standards, valuing water is a complex matter. In order to set the stage for a discussion of water marketing, we introduce the terminology that we will use throughout the book, and we briefly address the idea of commodification. After that, we begin the challenging discourse about value. We look at the literature regarding both conventional and non-conventional values of water, and we place these in the context of policy learning. Finally, we examine specific ways in which water managers place value on water in a market system, and we include various branches of economics that allow broader views on the topic.

Keywords: Value of water, conventional value of water, non-conventional value of water, water management, monetary value of water

Russo, Kira Artemis and Smith, Zachary A. What Water Is Worth: Overlooked Non-Economic Value in Water Resources. New York: Palgrave Macmillan, 2013. DOI: 10.1057/9781137062499.

Introduction: the many facets of value

As a consumable commodity, water serves many uses. The most obvious of these are water for human consumption and water for food production. Other less apparent uses of water are those for mining, industry, municipalities, energy, navigation, and recreation. In addition, water is used to support the environment.

In this chapter, we address these tangible values of water. Here we see that even by conventional microeconomic standards, valuing water is a complex matter. In order to set the stage for a discussion of water marketing, we introduce the terminology that we will use throughout the book, and we briefly address the idea of commodification. After that, we begin the challenging discourse about value. We look at the literature regarding both on conventional and non-conventional values of water, and we place these in the context of policy learning. Finally, we examine specific ways in which water managers place value on water in a market system, and we include various branches of economics that allow broader views on the topic.

Terminology

In the context of this book, we use the word “commodification” rather than the term “commoditization.” The latter emerged in 1965 from business theory.¹ This is the way in which goods become discernible among others in the marketplace. Unique qualities distinguish them from others so that the market can create a perfect competition among competing brands.

On the other hand, “commodification” originated in 1968 from a resurgence of Marxist theory to describe the process through which value is assigned. Karl Marx stated that a commodity derives its use-value from its ability to “serve the conveniences of human life.”² He described exchange-value such that two commodities of unequal use-value can be reduced to a third non-commodified value that is different from the use-values of either of the commodities. In other words, two commodities of unequal value can be traded through the use of a third, substituted, value.³

Monetary values define the ways in which water is typically used and how it serves financial purposes. We use the word “monetary” to define values that can be commodified and, therefore, exchanged. Monetary values can be symbolized through units of currency. Once they are symbolized, these values can be exchanged or traded in numeric ways, even in future time. Money is not only a means of exchange, but it also stores value.

As stated in the preface, the underlying assumption is that choices about use reflect human values. When market values become the substituted value for two commodities, two or more social values can be represented and exchanged. Differences between use-values and exchange-values often become apparent, however, when we address future substitutability. Accordingly, disconnect between real and substituted values of commodities often results in environmental problems.

We use the term “utility” as it is defined within the discipline of economics. As such, the word embraces the idea of pleasure or satisfaction derived from a good or service.⁴ This definition often includes the more popularized notion of the term regarding utilization or use; here we contend, however, the criteria of pleasure or satisfaction might also denote non-use.

Within this paper, the word “economic” is defined by Paul Samuelson, a former professor at Massachusetts Institute of Technology (MIT) and a Nobel Laureate. He defines economics as “the study of how society ends up choosing, with or without the use of money, to employ scarce productive resources that could have alternative uses, now or in the future” (emphasis added).⁵ Use of the word “economic” also denotes a distribution of wealth or an accumulation of goods or services. More broadly, the word is addressed here as ecosystem services as defined in the Millennium Ecosystem Assessment (MA). The MA describes ecosystem services as “the benefits people attain from ecosystems.”⁶ This definition includes all of the following uses of environmental resources: provisioning, regulating, supporting, and cultural uses.

The words “exchange” and “trade” are used interchangeably here. Both can be applied to the terms monetary as well as economic. Additionally, the words “societal” and “cultural” are interchanged in this paper.

Commodification

Marx asserted that money and value are not necessarily connected. “Money is the universal and self-constituted value of all things. It has therefore deprived the entire world—both the world of man and of nature—of its specific value.”⁷

Substitution of money to exchange two or more values is, for that reason, subject to scrutiny. Commodification can serve to represent both physical and moral values within society; paradoxically, this strategy can also undermine this worth. Igor Kopytoff explains how commodification represents societal values:

From a cultural perspective, the production of commodities is also a cultural and cognitive process: [C]ommodities must not also be produced materially as things, but also culturally marked as a certain kind of thing. Out of the total range of things available in a society, only some of them are considered appropriate for marking as commodities. Moreover, the same thing may be treated as a commodity at one time and not at another.⁸

Kopytoff further states that shifts in differences about what is chosen to be commodified reveal a moral economy. We argue here that it is important for water managers to define when commodification represents principled social values and when it does not.

Highlights from the literature

Conventional values of water

This section focuses on scholarly research that addresses the many facets of value; we address the topic of valuation itself more explicitly in Chapter 3. Comparative estimates of value regarding utility and investments for production are the most common ways to address valuation in the water management literature.⁹ Some discussions of the value of water as a commodity include extensive calculations for global estimates of this worth while others focus on market values in local economies. Estimates that attempt a value for water on a global basis tend to be weak because they fail to take into account local issues.

Even studies that focus on narrow issues often neglect the complexity by which the tangible values of water must be measured. In the report titled “Water Sector Policy Review and Strategy Formulation: A General Framework,” the Food and Agriculture Organization (FAO) of the UN addresses this difficulty.

Estimating the value of water is not easy because its value varies with quality, use, location and time. During dry periods of the year, or during droughts or during drought years, water values will be much higher than in other periods. Moreover, certain seasons or times of the year may also be important ... because of critical water demands for crop growth, heating, cooling, industrial production or shipping.¹⁰

Contingent valuation (CV) is one method that has developed over the past 25 years for assessing non-use or non-market values of natural resources. CV is a favored topic of study among scholars who study market values of water. Although this method is an accepted standard for valuation of non-quantifiable considerations, water managers do not commonly incorporate non-monetary values into their decision making.

Another preferred subject of researchers who study water management is government regulation...

Table of contents

• Cover
• Title
• 1  Conventional Values of Water
• 2  Economic Grounds for Current Practices of Water Management
• 3  The Millennium Ecosystem Assessment
• 4  Non-Conventional Community Values of Water
• 5  Cooperative Communities: The Future of Water Management
• Glossary of Terms
• Bibliography
• Index