Water Use and Risk: the Use of Prospect Theory to Guide Public Policy Decision-Making

Water is fundamental to human existence and it has no substitutes. As such, policy disputes over water can be expected to be more severe than policy disputes involving almost any other resource. This chapter considers two types of policy disputes over water and water usage. The first type of policy dispute concerns development projects, which are usually very large-scale projects like dams, irrigation systems, and desalination plants, and involve major investments by governments and/or corporations. The second type of policy disputes concerns conservation projects, which typically involve restricting flow rates through existing facilities or otherwise altering existing utilization habits, and thereby involve small measures taken by a large number of individuals. The purpose of this chapter is two-fold—to explain the source of these disputes and to examine the usual attempts at managing the resolution of these disputes. Both the source and the resolution of these problems rest on the psychology of human decision-making.