Aguanomics

Take a break from all the election coverage to learn more about Aguanomics. Economist David Zetland started out tracking water management practices in Southern California, but his research now has far reaching implications for the economics of water.

His theories are factored into the Global Innovation Outlook’s deep dive into tackling the problem of our oceans and water through creative solutions. One of the primary questions is the diamond-water paradox — we all know that water is more valuable and useful to us that diamonds, but why are diamonds much more precious?

The paradox has been outlined as one of value versus utility: The one may be called ‘value in use ;’ the other, ‘value in exchange.’ The things that have the greatest value in use frequently have little or no value in exchange; and those that have the greatest value in exchange frequently have little or no value in use.

With much of the world’s water sources allocated to growing food, and factoring in the changing global climates and drought, water is becoming more precious. Follow the GIO’s discussion on the price and value of water.

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3 responses to “Aguanomics

  1. Hi Cynthya,

    My interpretation of the diamond-wate rparadox is different, and it’s driven by marginal values.

    Basically, we attach a VERY high value to the first unit of water (in use or exchange), but lower values to additional units. (These values are arranged into a demand curve.)

    Since we do not have many diamonds around (esp. given DeBeers actions to limit supply), we give high values to the ones we’ve got. If there were diamonds everywhere, we’d think they were worth about as much as water (or sand 🙂

    I mentioned the diamond-water paradox @ GIO because I wanted to explain WHY people feel water is “too precious” for prices or markets (that first unit IS the key to life) while we are selling water at such low prices (about $3/750 gallons at your tap). It’s because we’re getting so much of it.

    Thanks for the plug and enjoy the elections!

    Cheers!

  2. Thanks for the clarification David – that explanation makes sense. Some great insights on your blog…I’ll certainly check back often.

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