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Economists have advocated efficient use of water resources through the demand management tool of marginal cost (including opportunity cost) pricing policies for several decades, using increasingly sophisticated models to point out the welfare gains of this policies. More recently, water markets have become de rigueur in many articles, books and texts as a way to "automatically" include both delivery and opportunity costs. A review of the experience in both the developed and developing world, however, suggests that the adoption of these policies has been infrequent at best, particularly for irrigated agriculture. The objective of this paper is to review existing demand management activities in many countries, including the U.S., and to try to provide some understanding of the failure of water management agencies to employ these tools. Water subsidies for agricultural water are found in many developed countries, such as the United States, and widely among developing countries, even when water is in critically short supply. Most papers and reports describing the application of marginal cost pricing and/or water markets, the same few references appear over and over (Chile, Israel, and Australia, for example). Many authors suggest that the reason for the widespread absence of full marginal cost pricing and/or water markets lies in the rent seeking behavior of current beneficiaries and the inertia in water management systems. While these barriers are important, technical and institutional difficulties also playa critical role, especially in irrigated agriculture. Based on examples from many countries, it is clear that water measurement at the user level does not exist and that it will be costly to implement and maintain, reducing the ability of managers to apply efficient pricing. Moreover, creating water (use) rights also requires some form of water control and measurement at the user level. For systems with many very small farmers, the problem is multiplied substantially. Institutional barriers also are difficult to overcome. Some of these barriers, such as reluctant administrations and powerful lobbies, reflect, at least in part, the kind of rent-seeking and inertia economists (and others) often point out. Some involve the economic reality of long-term leasehold interest and consequent large losses of investment value. Some are related to institutions other than those for water, such as insecure and/or fragmented land tenure. Still others are cultural and social, and represent a broad consensus of society, rather than specific beneficiary groups. The many examples of the institutional and technical difficulties suggest that as demand management increasingly becomes the rhetoric of water economists, and the water management community in general, finding workable solutions to the those problems is absolutely essential if efficient water pricing and water markets are to be implemented.

Total and use-related willingness to pay for wilderness designation and for maintaining currently proposed wilderness areas in open-access multiple use was determined for rural and urban residents of Utah using dichotomous choice contingent valuation. The hypothesis that the wilderness controversy is a rural/urban issue was only partially borne out. Supporters and opponents of wilderness designation appeared to have similar mean WTP estimates for both total and use values; however, a higher proportion of rural residents were opposed to wilderness designation. Comparisons of total values suggested that the sample-weighted WTP of opponents to wilderness was greater than the weighted WTP of supporters, although results were statistically weak. Sample-weighted use values for urban respondents were larger for supporters than opponents, while the opposite was true for rural respondents. Finally, a log-linear estimation procedure was tested and was found to yield theoretically inconsistent results.

Responses to a dichotomous choice contingent valuation (DCCV) of wilderness designation in Utah were used to determine if individuals who identified themselves as having no opinion or being neutral to wilderness designation in general and for two specific wilderness proposals would have nonnegative willingness to pay for such designation. In cases for which a sufficient number of observations permitted estimation, the estimated willingness to pay was positive and significantly different from zero and often exceeded that of individuals who identified themselves as supporting wilderness designation. This appears to support the contention that DCCV studies may generate values from respondents whether or not those respondents truly have positive willingness to pay.

Evidence of strong opposition to wilderness proposals in Utah suggested that the nonmarket value ofretaining those areas in multiple-use management might be significant. A contingent value analysis of both supporters and opponents of the two major proposals for wilderness designation in Utah indicated that there existed significant nonmarket willingness to pay on the part of opponents, and that standard contingent valuation practice, which does not explicitly consider these values, could lead to a misestimation of aggregate willingness to pay.

Both point allocation and total and use values for wilderness designation in Utah were compared to examine use and nonuse values. Results indicated that use, option value, existence value, and bequest value statistically have almost identical allocations across groups favoring wilderness in general, the Bureau of Land Management proposal for wilderness, and the Utah Wilderness Coalition proposal. However, when the difference between total and use values calculated from willingness-to-pay measures is compared to the point allocations, there does not appear to be a consistent relationship between use and nonuse values; that is, option value cannot clearly be defined as either use or nonuse.

In January 1992, Utah State University undertook a study of the potential localized economic impacts of land designated as wilderness. The original proposal for $3 10,000 over five years was scaled back to $210,000 over three years due to the absence of funds. The primary source of funds for the study was from Utah State University's portion of mineral lease funds, but other contributors included the Department of Community and Economic Development, the Utah Agricultural Experiment Station, the Utah Extension Service, and the Department of Economics (Colleges of Agriculture and Business) at Utah State University.

Any developed economy, whether national, regional, or local, is characterized by a high degree of interdependence among producing sectors. As examples, agriculture requires steel from the mineral sector, fuel from the petroleum sector, and numerous other inputs from other sectors. Likewise, outputs from the agricultural sector are used in the product; on processes of many other industries. Each economic sector is not only a producer of goods and services but also a consumer, purchasing goods and services for use invarious production processes.

Twelve measures of regional economic growth, including populations and three measures of income were compared for areas with and without water investment in 246 counties and 42 water resources subareas in the states of Utah, Colorado, New Mexico, Montana, Wyoming, Idaho, and Nevada. Simple mean omparisons for these measures compiled for the decades of 1940-1950, 1950-1960, and 1960-1970 failed to support the hypothesis that economic growth of those counties and subareas receiving water investment was significantly highter than in those areas which did not, with the possible exception of the 1940-1950 decade. This result is obciously tempered by the fact that with-without comparisons taken on a cross-sectional basis may be inaccurage to the extent that spatial units used in the analysis are not homogenous in all respects but the presence or absence of water investment. Population, farm income, median family income, and per acre agricultural land values as measures of economic growth were regressed on various classes of water investment (Total, M&1, Recreation, and Irrigation investment, and other related variables) for the spatial units. Results obtained from this analysis were inconclusive with respect to the hypothesized role of water investment in effectuating economic growth. For small areas in New Mexico where more detailed records of water investment were available, a nine equation econometric model was estimated using a three-stage least squares analysis. As specified, this model facilitated an examination of the interactive effect of water development as a causal variable and as an endogenous variable which responds to other growth inducements. Test statistics for multi-equation systems are only indicative, and the statistical results were nonconclusive, although expected signs on the coefficients were obtained in most instances. Input-output and economic base-models were used to examine two case studies of water investment in Western Coloado. The objective was to demonstrate the methodology and the magnitudes of change in regional economic activity (gross regional output, exports, income, and employment) which could be associated with major irrigation-type water developments. In this analysis it was found that total gross output attributable to the projects ranged from zero in the petroleum and mining sectors to a high of 260,302 in the dairy industry. Multiplicative effects on employment income and gross economic activity ranged from 1.06 to 2.30 times their initial magnitude. Income and employment multipliers were of similar magnitude. it should be recognized that these estimates cannot e viewed in the same manner as similar growth increments at the national level, as would typically be done, because of the strong possibility of regional offsets occurring in other regions not participating in water development. To the extent that growth in other areas is reduced by the growth of a particular region, these reductions should be subtracted from the growth measured in the latter set of regions. In all tests conducted no conclusive evidence was found taht water development causes regions to grow faster than those regions which did not receive water investment. This is not to say that growth in those regions receiving water investment was not higher than it would have been had the investment not been made. However, it does provide evidence that, an average among the regions included within this analysis, that those areas which did not receive major water investments grow at a faster rate than those which did. Thus, the input-output approach shows potential inpacts from water investment in a general equilibrium context, but rest son the assumption that other concurrent events which could produce similar or offsetting effects in the region are held constant. The cross-section analysis measures total changes in a regional economy overtime, but the multiplicity of events, other than water investment, may obscure the effects of water investment.

A joint research effort by the Utah Water Research Laboratory and the Nevado Center for Water Resources Research applied two multiobjective planning models to the Virgin River Basin in order to test the efficiency and practicality of applying such tools in water resrouces planning. The surrogate Worth Trade-off (SWT) method couples mathematical optimization to quantify trade offs among noncommensurable objectives with interviews to compare public preferences with respect to these trade offs. PROPDEMM uses information on interest group objectives, balues, willingness to pay, influence, lebel of information, etc. to compare the political feasibility of alternative courses of action. Both models were applied to assess the difficulties in doing so and the usefulness of the results. The trade offs identified by the SWT method showed agricultural water use to be so dominant in the basin that slight adjustments in irrigation efficiency could supply all foreseeable needs for additional water for other uses, such trade offs to be too inconsequential to identify and compare public preferences, and other trade offs to be impossible because of the position taken by ecologists that any environmental change would destroy a rare species of minnow. Prior to analyzing a situation by the SWT method, the planner should make sure that the trade offs will be of a magnitude meaningful to the public and that the model selected will be sufficiently refined in analyzing small units in time and space to identify locally significant trade offs. PROPDEMM showed the politically most controversial trade off to be between construction of energy generating facilities and life support for the minnow, a controbersy that would probably be decided in favor of the environmentalist because of their power and non-openness to change. Improvements to the model to do a better job of interfacing environmental with social data were recommended. Social modeling in such low population areas was found to be restricted by laws against disclosure of private information because of the very small numbers of individuals living in many evaluation units.

Using a conceptual model of a multiple-product firm, the necessary conditions for an optimal input and output allocation were determined for a region constrained by resource availabilities and/or policy constraints. A linear programming model was developed to deteremine the optimal allocation of water between agricultural and coal-fired electrical generating entities as well as the trade offs which could occur if electrical generation were increased. Other areas of potential trade offs such as coal source restrictions and air quality regualtions were also examined. Coal mining and transportation costs were included as were SO2, Nox, and particulate emission rates on a coal and plant basis. Few trade offs between electrical power generation and irrigated agriculture were noted. However, substantial changes within the energy sector were discovered as coal capacities and air quality energy sector were discovered as coal capacities and air quality standards were changed. Net revenues declined sharply as air costs after and/or pollution and coal capacity restrictions were imposed and/or increased. It was determined that substantial changes in regional economic activity occurred as a result of these restrictions on development.

This research used a linear programming model of the agricultural and energy sectors of Utah to examine the economically efficient allocation of water between agriculture and energy. Data were collected for agricultural returns, costs, and water requirements; energy returns, costs, and water requirements; and water supply costs. Results indicate that if large scale energy development occurs in the Colorado River Basin in Utah, most of irrigated agriculture will be eliminated, given Utah’s consumptive use constraint under the Upper Colorado Rive Compact. On the other hand, for two more “probable” levels of energy development, including the Energy Research and Development Administration’s projections for the year 2000, only minor reductions in irrigation acreages would be expected. Under conditions of severe, prolonged drought, energy demands would consume almost all the water currently used in agriculture, given either of the “probably” scenarios.

water availability and use has a history of conflict in the arid West, and the large-scale development of the energy resources in the Upper Colorado River Basin and the Great Basin can be expected to add to the competition for water. In addition, air and water quality have also become major parameters in the allocation decisions. It is not clear whether energy development will have a detrimental or beneficial effect on water quality in the region, at least with respect to salinity which is the currently acknowledged major qu al ity problem in the Colorado River System. The institutions and circumstances under which energy development takes place are critical with respect to water quality. Several recent research projects at Utah State Universi ty have been focused on both the quantity and quality constraints on water use in Utah. The results are the bases for this paper.

Managers of public wildlife resources generally are concerned with enhancing the quality of recreation by increasing wildlife through habitat manipulation. However, current recreation valuation studies have focused upon variables that are inappropriate for use in these management decisions. The economic criterion for these decisions should be the value of a change in the stock of the wildlife population compared to its cost. An estimate of such a value was made for the Oak Creek deer herd in Utah, using a household production function approach in an optimal control framework. The value of an additional deer in the herd was estimated to be approximately $40.00.

In the years since the environmental movement has gained political power, United States policy with respect to the environment has developed into an all-or-nothing approach. Zero discharge limitations, although not currently in effect, are the final goals of Water Quality and Air Quality legislation. The interim limitations, Best Practical and Best Available Technology, are aimed at forcing producers into approaching the zero discharge requirement. There are two aspects of the zero approach that are troubling: first, there is a total disregard for the costs of achieving that good, just as there has been disregard of the pollution costs by producers; second, there is no recognition of the wide variances in local circumstances. There exists a large and well-developed body of economic theory with which to assess the desirability of these, and other, environmental controls. [See, for example, Seneca and Taussig, 1974; Edel, 1973; Schultze and Kneese, 1975; Enthoven and Freeman, 1973; Dorfman and Dorfman, 1972].

The development of international markets for coals from the Intermountain West will create competition for those resources for other uses, particularly the production of electrical power. Coal exports may have considerable effect upon the location of electrical generation facilities and their use of alternative coal sources. This, in turn, may cause redistributions of economic activity within the Intermountain West and the State of Utah. Most state governments are actively pursuing export markets in the Pacific Rim (Japan, Korea, Taiwan, and Southeast Asia), without a knowledge of the possible results to local industry. An analysis of the competitiveness of various coals in the region, and the probable distribution of coal export and local use for electrical generation should yield information to decision makers with respect to planning for development.

After a decade in a long-tenn research program at Utah State Univers'ity it is appropriate to review the concepts, progress and possible changes in direction. In the late 1960's grants were received froln the Office of Water Resources and Technology and the U.S. Army Corps of Engineers. Funding was also received from the Utah Center for Water Resources and the Utah Agricultural Experiment Station. These grants enabled a beginning of the research using extensive linear programming models that is still underway, many grants and many people later. The list of publications at the end of this paper fonn the basis for this report, but are not cited herein. A number of studies in other departments also drew from the program.

Attempts to measure distribution changes have fallen into categories: measures of personal income or wealth distribution called personal distribution and measures of returns to factors of production called functional distribution. Specific measures of personal distribution consist of the traditional formula measures (Gini, Pareta, etc.) and the more recent use of functional measures or estimations (Beta, Gama, etc.). Functional distribution research utilizes production functions and other output models to measure changes either quantiles of income or in formula or functional measures. Evaluation of the various distribution measures depends upon the requirements of the specific research task. Care must be taken to temper the analysis with non-operational structural i mpacts. Future problems will be the 1I0ld" problems, such as the definition of inequality, as they relate to new areas of research.

Most regional policy-makers have, as one of their important policy goals, some form of maximization of regional economic activity. Obtaining maximum output, employment, and income from a state's, or region's, resource base appears to be central to many planning and policy agencies. For example, the State of Utah considered limiting the sources of coal for new electrical generation plants in the state, to in-state coal fields through legislative or administrative fiat. While such a policy was not implemented, it represents the conviction that verticle integration within a region will increase that region's economic welfare. The wide-spread use of industrial revenue bonding and provision of tax incentives to attract industry is another facet of these policies. However, the will ingness of firms to locate within a region, or to utilize resources from that region, depends primarily on the profitability of the action. Thus, to induce firms to locate requires subsidies of one form or another. In this study, the loss in profitability to energy and agricultural sectors resulting from increasing gross economic activity was examined, to determine the opportunity cost of growth in regional gross output.

The primary purpose of the study reported herein is to present methods for using estimated project benefits as the basis for distributing the capital, oeprating, maintenance, and replacement costs associated with the proposed Senegal River development program. The problem is complicated because the Senegal River is an international stream, so that it is necessary to consider not only the various economic use sectors involved with the program, but also the three separate countries of Mali, Mauritania, and Senegal. In attempting to meet the primary objective stated above, the report proposes an economic model which estimates economic benefits of the development program for each of various use sectors. These benefits then are distributed to each of the three participating countries. In order to demonstrate the use and capabilities of the model, the results of several computer runs are included in the report. Each run is based on specific assumptions concerning such parameters as commodity prices and rate of project development. The model is based on sound economic priniciples, but at present there are many unknown factors and conditions associated with the proposed river development program. Thus, the model results contained in the report are of necessity based on many assumptions. For example, the project configuration itself was assumed. however, at the present time the model is capable of providing some indications of the relative sensitivities of the conomic system to various input parameters and system variables. Four commonly accepted cost allocation methods are examined and of these, one method, the adjusted separable cost-remaining benefits method, is recommended for adoption in future cost allocation analysis pertaining to the proposed Senegal River development program. In this connection, as project configuration, costs of production, and other input quantities become more clearly defined, cost allocations suggested by the model will become more accurate and realistic. However, it is emphasized that the relative benefit streams from the proposed development program to each of the participating countries will be continuously changing in terms of the constantly shifting pictures of (1) world prices and (2) the rate of development for project utilization within each of the countries involved.

The enforcement of the Federal Water Pollution Control Act Amendment of 1972 (PL92-500) has been primarily directed at "point sources" of pollution, that is, those polluters who se effluent is easily isolated and identified such as municipalities and industrial plants. Violators have been fined varying amounts depending upon the frequency, extent and type of violation. The long run goul of the legislation is, however, to eliminate all man-caused effluent--to reach a zero discharge level of effluents for all activities. If and when these standards are applied to irrigated agriculture several problems may appear, both in the attempt to enforce effluent standards and in the effect that enforcement may have on agriculture in general and irrigated agriculture in particular. Some of these problems will be suggested in a general context; a detailed discussion of some of the possible impacts of water quality controls in t he Colorado River Basin will then be undertaken, with particular references to the zero discharge requirement.

A chance-constrained separable programming model of water allocations between agriculture and energy production was developed in order to examine the effect of the variability of water supplies in Utah. Using an incomplete gamma function, based on method of moments estimation of parameters, the water flows at 85, 90, and 95 percent probabilities of occurence were generated. These flows were then used as constraints in the allocation model. Results indicate that water quality could be a more significant constraint on irrigated agriculture than water quantity in the face of large scale energy development, and the variability of water availability alone is likely not to be a significant factor in economic growth in Utah.

A growing population together with rising per capita income has resulted in increased demand for water for virtually all uses. At the same time there has been increased public concern for maintaining the quality of streams for recreation, sight-seeing, and other social uses, and to conserve environmental values. A partial answer to these conflicts in water use and management is more extensive waste water reclamation and reuse. Heretofore, water salvage and reuse has been mainly practiced in specific operational cases, such as recycling industrial process water, or on an ad hoc basis, such as a series of diversions and subsequent discharges of waste water along reaches of a stream. However, in areas experiencing growing demand for water for virtually all social, economic, and environmental uses, an integrated region-wide approach to water reuse may be necessary in order to insure adequate supplies. This requires a more explicit understanding of the systems relations among social and economic water using activities and the environmental and technological aspects of waste water disposal in order to evaluate the opportunities for as well as the constraints on water salvage and reuse.

Water is recognized as an essential element in Utah's agricultural economy. It is the subject of much controvery and litigation and yet most discussion of the subject is based on opinions and prejudice rather than upon the basis of sound scientific evidence. This paper attempts to provide some of the economic information necessary for sound decisions in the development and use of Utah's water resources with respect to agriculture. Utah has been divided into ten drainage regions (hydrologi subregions) and the presently irrigated and potentially irrigable land according to land class were estimated for each country or portion of a county within each of the regions. Water use factors, crop rotation constraints, costs of porductions, yields, product prices, and costs of bringing new land into production were also estiamted. These values were then used in a linear programming model to estiamte a normalized demand (marginal value product) schedule for water to be used in agricultural production within each regions. The amount of water made available to the production model for each hydrologic subregion was varied so that the model created a shadow price (marginal value product) at each level. These were then combined to estiamte the relationship between the quantity of water and its economic value (a demand schedule or function). The general conclusions from the study indicate that most parts of the state suffer from a water shortage in that more production could be obtained from the presently irrigated land through the use of more water and/or the tranfer of water from lands with low productivity to higher quality land. There are, however, many cases of water waste. The model is not designed to adequately evaluate the economic feasibility of water importation projects but those regions with the greatest potential for development are identified. The models indicate that, given the present cost and price structure, agriculture alone probably could not economically justify most water importation schemes at this time.

The economic efficiency of water development in Utah, including transfer systems, has seldom been examined, not has the costs of public policies which result in deviations from efficient allocations. In order that public officials be better informed about water allocations, the present effort examines the efficient allocation of water in time frames up to 2020 under several alternative assumtions and calculates that cost of alternative policies. Using mathematical programming techniques, a computer model is developed to determine the supply (marginal cost) and demand (value or marginal product) relationships for agricultural water, given depletions for municipal and industrial (M&I) and wetland requirements. The model maximizes net profit per acre to an average agriculturalist in each of ten study areas in Utah. Proposed interbasin transfers and their costs are included in supply. The optimal solution generated is an efficient allocation, since maximization of net profits occurs only when value of marginal product equals marginal cost. The requirements for M&I water are projected into the future using trending and probable industrial development. An efficient allocation (optimal solution) is generated by the model for 1965, 1980, 1990, 2000, 2010, 2020. The timing of investments in water distribution systems can be determined from these solutions. Using alternative temporal distributions are determined. Additionally, the effect of restrictions on groundwater pumping (present levels of storage must be maintained) is examined. The costs to users in higher supply curves (marginal costs) are approximated by areas between supply curves. In addition, losses to agricultural users from diminished efficient new production can be approximated. The critical factor in large proposed water transfers in Utah appear to be the growth of M&I requirements along the Wasatch Front, particularly in the Jordan River Basin. Sufficient water is available in the Colorado River Basin to provide maximum transfers, full oil shale and power generation development, and efficient agricultural production. Restrictions on groundwater pumping and water salvage in the Jordan River Basin and maintenance of high inflows to Great Salt Lake make earlier transfer necessary. The costs of such restrictions approach 25 percent of the total investment by agriculture in transfer systems. If no restrictions are made, but investment in these systems occurs now, a loss of foregone returns to alternative investment equal to about 70 percent of the total agricultural investment is incurred by society.