Saturday, March 22, 2014

World water day.To reflect about the uses of a key resource

Today is the so called “world water day”, which means a world wide call for caring about what we do with water. Some Celebrities and institutions (Rotary International), have made a commitment to improve the understanding about the key role, a better use of water has for mankind. They are right about it, so we should support them. The United Nations set in 1993 this day, precisely to reflect about it. Because of population increase, the demand for water has actually increased by a factor of three, while the supply remains the same, barely 1% of all water available in the planet, which have more than 95% of it, as a salty water. Whether the demand is higher than supply, there is a problem which market would solve with prices mechanism. But for prices to do its job, it requires to solve the property right issue. Water is the kind of common property good: it belong to all and none of us, would voluntarily pay a price for water, unless some claim their property right on it. Once again, markets needs an institutional framework to work properly. Thus, to allocate property right is the first step to set a price. Because its “shadow Price“ is so high, a lot of people would be interested to get such a property right because it would allow its owner to sell water, mainly for agricultural activities by far the most water intensive activity (77%), next come industry (12%),mining (6%),and at last, it is human consumption with the remaining 5%.(Data for Chilean’s economy) However, in this situation human consumption,(the least important of all alternatives of water uses), would have to pay a huge price. Besides, Markets do not take into account the ability to pay the prices it set. The State may complement markets to allow the access to all of clean water, throughout the production of public water at lower prices, just like it does with other services. The alternative option, would be to transform salty water of the sea, into the input mining activities needs, or water recycling for agricultural and industries requirements. In this two cases prices would also be lower, because supply of water for human consumption would be higher. Even so, the challenge to improve the rationality of water uses still remains on. Demand is still moving upward, at a faster pace than supply.