The Institutional Economics of Water

The Institutional Economics of Water

A Cross-Country Analysis of Institutions and Performance

R. Maria Saleth and Ariel Dinar

This outstanding new book provides the most detailed and comprehensive evaluation of water reform and water sector performance from the perspectives of institutional economics and political economy.

Chapter 1: Water Challenge: An Institutional Diagnosis

R. Maria Saleth and Ariel Dinar

Subjects: economics and finance, environmental economics, institutional economics, environment, environmental economics, water


As the world ushers in the new millennium, water scarcity – in both its quantitative and qualitative manifestations – is emerging as a major development challenge for many countries. In countries racing toward their physical limits to fresh water expansion, the amount of water available is a key concern. In other countries with expanding urban settlements, industrial sectors, and commercialized agriculture, water quality is a major concern. Since pollutioninduced deterioration in water quality reduces the utility of the existing water resources, water scarcity is also a growing concern even in countries with no apparent limits for fresh water expansion. Considering the serious economic, ecological, and welfare consequences of floods in many countries, water crisis is also to be viewed in a much broader sense than as a mere scarcity issue. Although the nature and severity of water problems are different from country to country, one aspect is common to most countries: water scarcity – whether quantitative, qualitative, or both – originates more from inefficient use and poor management than from any real physical limits on supply augmentation. This is the crux of water crisis and such diagnosis raises our hope that the crisis can be averted by improving water use and management. But the task is not easy, as it involves radical changes in the way water resources are developed, allocated, and managed. How to design, initiate, and sustain these changes and tackle the water challenge on a durable basis, within the economic, ecological, and political constraints are at the heart of the ongoing...

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