It may be boring but can it help? Figure 2 colin green, Flood Hazard Research Centre, Middlesex University fhrc

What is economics? The application of reason to choice To make ‘better’ choices To be more successful in implementing those decisions fhrc

Economics and water management Economies of scale Why do we have to choose? What might we mean by a ‘better’ choice? Charging for water Why metering is usually inefficient and dangerous fhrc

fhrc Total cost Total number of properties in the area Cost of providing piped water supply or sewerage Digging a well or cesspit Figure 2 Total number of properties in the area fhrc

Why do we have to choose? Choice = conflict + uncertainty If all are agreed as to which is the best option, then the choice has been made There have to be at least two mutually exclusive alternatives Figure 2 fhrc

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“I don’t know what to do” An inability to differentiate - between courses of action fhrc

I don’t know what to do I don’t know what I can do I don’t know what will be the consequences of adopting each course of action I cannot choose between them fhrc

Knowledge about the world Perfect knowledge No knowledge Knowledge about the world Perfect confidence Decision certainty Figure 2 Starting point Complete uncertainty fhrc

The dimensions of choice who The dimensions of choice Figure 2 when how fhrc

Choice is always prospective Trying to choose the future Future = change and uncertainty fhrc

Making ‘better’ choices What do we mean by ‘better’? Making the ‘right’ choice - just and correct Just - both outcome equity and procedural equity Equity = moral principle consistently applied fhrc

How might reason help us? Understanding Simplification Communication Address sources of conflict Confront uncertainties fhrc

Stages in project appraisal Define problem, determine the objectives Stages in project appraisal Determine impacts of each option Invent options Identify the critical parameters that will influence the choice between the options SENSITIVITY ANALYSIS Eliminate unreasonable options Compare benefits and costs of each option against a baseline Identify the ‘best’ option Test the robustness of the choice Select the preferred option fhrc

Charging for water Financing provision in the first place Keeping the system operating Allocating or sharing a scarce resource Moral principle(s) Changing people’s behaviour fhrc

Value to A Value to B Figure 2 fhrc

Value to A Value to B Figure 2 fhrc

Marginal value Marginal cost quantity price fhrc

Marginal value Marginal cost quantity Q price P fhrc

Marginal value Marginal cost quantity All externalities price fhrc

Marginal value Marginal cost quantity All externalities price fhrc

quantity price fhrc Marginal value in use B Marginal cost Externalities associated with use B price fhrc

Marginal value for uses A and B Marginal cost quantity price fhrc

quantity Q price fhrc All to A Marginal value net of externalities Marginal cost quantity All to A Q price fhrc

quantity Quantity available price fhrc Marginal value net of externalities Marginal cost quantity Quantity available price fhrc

quantity price fhrc pa pb Real marginal cost of use B Quantity available Real marginal cost of use B pb pa price fhrc

UK: efficiency of water use in the textile industry Figure 2 fhrc

North Carolina: water use efficiency in the textile industry Figure 2 fhrc

North Carolina: water use in food processing Figure 2 fhrc

Figure 2 fhrc

Determinants of domestic water demand cultural technology demographics fhrc

Determinants of domestic water demand income price cultural technology demographics fhrc

Figure 2 fhrc

Figure 2 fhrc

fhrc reduction in demand (litres/day) One person household Two person household Three person household Four person household reduction in demand (litres/day) If metering is very effective in reducing demand Equivalent water cost of metering % by which metering reduces demand Figure 15-1 The economics of metering quantity used (litres/day) fhrc

fhrc reduction in demand (litres/day) One person household Two person household Three person household Four person household reduction in demand (litres/day) If metering is very effective in reducing demand Equivalent water cost of metering % by which metering reduces demand Figure 15-1 The economics of metering quantity used (litres/day) fhrc

fhrc reduction in demand (litres/day) One person household Two person household Three person household Four person household reduction in demand (litres/day) If metering is very effective in reducing demand Equivalent water cost of metering % by which metering reduces demand Figure 15-1 The economics of metering quantity used (litres/day) fhrc

fhrc Figure 15-2 Behavioural and technical price elasticities marginalcost2.xls fhrc

fhrc Figure 15-2 Behavioural and technical price elasticities marginalcost2.xls fhrc

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Integrating integrated catchment management Coastal zone management Groundwater management Emergency management Energy policy Transport policy Urban and rural development All media pollution control Catchment management fhrc