November 10, 2006
The Diamond-Water Paradox
Posted by Fred Tung

A recent New Yorker issue carries a fascinating piece on water--the politics, economics, and culture affecting the provision of clean drinking water around the world.  Besides being substantively interesting, the piece contains a number of great statistoids, some detailed below.

The diamond-water paradox (as Adam Smith referred to it) is that although water is essential for life, and diamonds are valued mostly for aesthetic reasons, the price of water has always been far lower than the price of diamonds.  In general, people simply resist having to pay for water.  Only within the last twenty years, for example, has New York City even required water meters.  So water is overused, and shortages result. 

Why don't people want to pay for water?  One explanation is that we generally don't think of water as being used up when it's consumed.  Unlike oil, which is gone forever once it's used, water "never actually disappears:  when water leaves one place, it simply goes somewhere else.  Water that dinosaurs drank is still consumed by humans, and the amount of freshwater on earth has not changed significantly for millions of years."

For developing countries, water shortages are especially problematic.  Increasing urbanization and middle-class prosperity cause people to eat more meat, and meat is enormously more water intensive to produce than agricultural products.  It takes  1000 tons of water to produce a ton of grain, but 15,000 tons to produce a ton of cow.  Great statistoid:  one hamburger requires 1300 gallons of water to produce!  For a steak, it's double that.

Other great statistoids in the piece:

[A] standard cup of coffee require[s] a hundred and forty litres of water, most of which is used to grow the coffee plant.  This means that it takes more than a thousand drops of water to make one drop of coffee.

On the same amount of land that Chinese farmers grow four thousand kilograms of rice each year, Indians grow no more than sixteen hundred, and they use ten times more water to do it than is necessary.

For a large rural and agrarian population like India's, there is strong political pressure to supply water cheaply to farmers.  But that skews farmers' decisions about what crops to plant.  Rice is quite a popular crop, but it's also the most water intensive.  Add in the government's price guarantees, and farmers have no incentive to grow anything else or use less water.  Without rational pricing of water, needy areas do without.  The article goes on to discuss competition for groundwater among farmers sharing the same aquifer. They race to dig deeper and deeper wells to suck out as much water as they can and sell it in times of need--the paradigmatic common pool problem. 

Solutions?  The "hard" path includes more dams, but their ecological costs and toll in human disruption have made them unpopular.  The Three Gorges Dam, for instance, is predicted to provide one-ninth of China's electricity needs when it is fully operational, but 1.2 million people will have been displaced, and 200,000 acres of farmland and forests submerged.  Moreover, sixty percent of the world's largest rivers are already dammed. There is even talk of dismantling existing dams.  The soft path involves simply using less water, which at least in the US has surprisingly been the trend since 1980.  Per capita water consumption since then has fallen by twenty-five percent, driven largely by higher energy costs, environmental laws, and conservation (think lo-flow toilets).  How this all works out on a global basis is up for grabs.

Globalization/Trade, Health Care, India | Bookmark

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