Alternative Institutional Arrangements for Controlling Drainage Pollution

Abstract

Inefficiency is endemic to the arrangements that govern most of irrigated agriculture. Particular attention is paid in this chapter to two problems: (1) Public demands for instream flows may be subordinated to farmers’ demands for water withdrawals, and (2) drainage water from irrigated land may be excessive in quantity and pollutants.

A total value framework is presented for benefit cost analysis and methods of estimating nonmarketed use and existence value are discussed. Assuming that the benefits of water quantity and quality in instream and wetlands uses can be estimated, the chapter considers what kinds of institutional arrangements can be developed to ensure that these benefits are fully addressed in water management and policy. Commonly suggested solutions include regulation, administrated efficient prices, and property rights to facilitate water markets; more recently, the possibility of stable cooperative solutions to common property problems has been suggested. These alternative approaches are examined at the conceptual level. Many of the inefficiencies of the water economy could be eliminated via water markets based on transferable property entitlements. However, this solution alone is unlikely to provide adequately for instream and wetlands uses. Literature on principal-agent problems is discussed which suggests some promising approaches.