The Economics of Water Demand: The Dynamics of Water Use and Price
V. Kerry Smith, Regents Professor, W. P. Carey School of Business, Department of Economics
Doug Frost, Principal Planner, Water Services Department, City of Phoenix
Gary Niekerk, Director of Corporate Citizenship, Intel Corporation
When and Where:
Price is often suggested as a simple straightforward tool to encourage people to be more efficient in how they use water. However, the economics of water demand are not that simple. Water is used for many purposes. Water is used to meet the basic necessity of life, consumption and hygiene. Water is used to create an atmosphere that suits our lifestyles, landscapes and pools, and perhaps long hot showers. Water is used for economic gain, from creating places attractive to customers to washing silicon chips. The sale of water is also used to finance the infrastructure and costs associated with making water available to a community. Each of these water uses has its own economic dynamics based on behaviors and motivation for water use which can vary among the consumers in each category. At the same time, the economics for each of these water uses are related, changes in one can affect the other. Thus, decision making about the price of water is not as clear as it may initially appear. The goal of this climate briefing is to increase the awareness of the complexities associated with the price of water by facilitating a discussion about the differences and relationships that exist in the economics of different water uses.
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