Water: Commodity or Social Institution
by Paul Seabright, University of Cambridge, UK
This paper begins with the idea that water is an economic resource, characterised by scarcity, and goes on to explore the many different economic characteristics that water has in different circumstances. It notes that while freshwater is not globally scarce its scarcity arises from the fact that it is costly to make available in the right quantity and the right quality in the place where it is needed. Its uses are multifarious and the economic characteristics of systems of water use and management are correspondingly varied.
Furthermore, the kinds of property right vested in water vary greatly according to circumstances: the degree of scarcity and the nature of the external effects between different users influence to a considerable extent the character of legal and social systems where water management is important for the overall economy. Although such systems have historically shown remarkable flexibility and adaptability to the needs of water use, they are far from being adequate to the changing demands on global water resources that will arise in the coming century.