Thanks to twitter I recently discovered The Economist's April 2009 article on the water market. I like it so much, I decided to make a post solely on this article. Here are my favorite points taken directly from the text:
1. Ideally, efficient water use would be encouraged by charging for it, but attempts to do so have mostly proved politically impossible. A more practicable alternative is a system of tradable water-usage rights.
2. As our article explains, many water problems have global causes: population growth, climate change, urbanisation and, especially, changing diets. It takes 2,000 litres (530 American gallons) of water to grow a kilo (2.2lb) of vegetables but 15,000 litres to produce a kilo of beef—and people are eating more meat.
3. Because water is usually free, thirsty crops like alfalfa are grown in arid California. Wheat in India and Brazil uses twice as much water as wheat in America and China. Dry countries like Pakistan export textiles though a 1kg bolt of cloth requires 11,000 litres of water.
4. Any economist knows what to do: price water to reflect its value.
5. The result of this trading is a market that has done what markets do: allocate resources to more productive use.
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