Efficient Allocation of Scarce Resource

Efficient Allocation of Scarce Resource

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nIntroduction

nScarce resource refers to a resource, which is inadequate as compared to the demand in the population. Scarcity leads to economic challenges because many people are unable to meet their needs. A certain resource is scarce when it has limited accessibility in relation to productive use. Examples of scarce resource include water, oil, gold and diamond. The paper discusses water as a scarce resource. Water is considered a scarce resource particularly safe, clean drinking water. Currently, approximately one billion people especially in the third world countries lack accessible water. Water is very important in the life of humans. In addition, most people across the globe utilize much of their time searching for water (Zetland, 2011). For instance, in Sub-Saharan Africa, people waste much time collecting water. Water-borne diseases, which limit their full potential, affect them. Research indicates that by 2025 approximately 2 billion people will be affected by severe scarcity of water across the world. Additionally, 2/3 of the global population will be struggling to survive under water scarce conditions. Scarcity of water is therefore, a global problem that currently concerns various countries worldwide.

nA study by Winkler, (2014) also indicated that there are both threats in terms of demand and supply of water required to satisfy the needs of population. In this case, there is supply threat because the rate of freshwater harvesting from groundwater aquifers and surface water sources are higher than rates of recharge or replenishment (Winkler, 2014). Furthermore, large quantities of freshwater across the world are being polluted or degraded which affects its supply. On the other hand, the global population is increasing which affect the demand of water. Moreover, most of the people are living in geographical regions that cannot achieve sustainability demand of water (Maestu, 2013). Due to new technologies, some processes waste large quantities of water as compared to alternative technologies.

nMethods of Allocation of Scarce Resource

nEfficient methods of water allocation should be implemented because there is high competition for water in the current society. There are a number of methods used in water allocation, which include market allocation, administrative allocation, and user-based allocation (Spulber & Sabbaghi, 2012).

nMarket allocation

nMarket allocation of water refers to provision of water rights based on trade. It also referred to as exchange of water rights. It can be based on informal and formal water markets. Market allocation of water considers water for economic value. Research by Spulber & Sabbaghi, (2012), demonstrate that market allocation of water involves exchange of measureable allocation of water between a willing seller and buyer. In this case, the buyer has water challenges and is willing to pay to meet the needs while the seller is the water right holder (Spulber & Sabbaghi, 2012). Market allocation is based on the principles of supply and demand. The advantages of this method are that it ensures that water is used for productive ways in the economy. It also beneficial because the prices would be formulated based on demand of the users (Maestu, 2013). It also promotes water quality because only productive users utilize it economically. However, the method has various disadvantages because it promotes overuse of this resource since both the buyer and seller do not encourage water conservation measures (Renzetti, 2012). Moreover, this method encourages water pollution. The method is disadvantageous because it promotes social injustices, as wealthy individuals tend to buy huge quantities of water at the expense of the poor (Maestu, 2013). In this regard, there should be a moral worth that determine the buying and selling of water.

nAdministrative allocation

nAdministrative allocation of water means that a state authority has the right to control, distribute and abstract water. The state acts as a monopoly because it establishes a regulatory authority to manage water. Most countries use administrative water allocation process (Pereira, Cordery & Iacovides, 2009). The method use blocks tariffs, price discrimination and quotas system to allocate water resources to users. The advantages of this allocation method are that it enhances social value of water.

nA study by Grafton, Chu, Stewardson, & Kompas, (2011), suggests that the main aim of administrative allocation is to enhance social goals such as food security, climate conservation. Advantages of this method is that it play a major role in correcting failures in the market in case of public goods in order to safeguard heritage, tourism and agricultural heritage (Grafton, Chu, Stewardson, & Kompas, 2011). Different agricultural activities may provide more benefits relative to market value in the use of water. The disadvantages of this method are that it can be politicised. Therefore, inefficiencies are common in the administration of water (Lautze, 2014). For instance, the administrations tend to shield and favour certain users especially farmers even when misuse of water is evident. Consequently, farmers continue to use water inefficiently hence produce surplus and low-value crops. Furthermore, administrative allocation promotes misallocation of water in the market (Booker, et al, 2012).

nUser-based allocation

nUser-based water allocation is normally evident in the community especially management of hand pumps, and community wells systems. In addition, this method applies to watering of animals, irrigation, domestic water and village ponds management (Kneese, 2013). The method needs an institution, which conducts collective actions in decision making concerning water. In most cases, local institutions are involved in management of water including conservation. Similarly, social norms in a community encourage conservation of water especially when they are supported by regulations that discourage excessive consumption.

n Therefore, member of the community are aware to use the resource on common good. Its advantage is that it is flexible hence, users are able to adapt to patterns of water delivery. In addition, it meets the local needs such as bathing, washing clothes and watering animals (Jones, Vardanian & Hakopian, 2009). However, the disadvantage of this method is that differences in local interests may leads to conflicts such as farmers performing irrigation, pastoralists and women (for domestic use).

nRecommendations

nBased on the research findings on three methods of allocation of scarce resource administrative allocation of water is the most efficient allocation method because water is a scarce resource that cannot be left to the mercy of water dealers. In addition, this method is the best as compared to other methods because it caters for social objectives especially in agriculture. Similarly, the method ensures constant supply of water to important functions such as recreation, generation of hydroelectric power, irrigation and tourism (Hearth, 2012). Furthermore, most of water sources are openly accessible hence needs regulation from the government. Regulation also helps to control depletion of groundwater and surface water supplies. Most importantly, state control is important because water must satisfy the basic needs of the people. However, in order to increase efficiency of this method, the government should ensure better management of water services and infrastructure (Renzetti, 2012). There should also be fair regulation implementation.

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nReferences

nBooker, J. F., Howitt, R. E., Michelsen, A. M., & Young, R. A. (2012). Economics and the modeling of water resources and policies. Natural Resource Modeling, 25(1), 168-218.

nGrafton, R. Q., Chu, H. L., Stewardson, M., & Kompas, T. (2011). Optimal dynamic water allocation: Irrigation extractions and environmental tradeoffs in the Murray River, Australia. Water Resources Research, 47(12).

nHearth, G. (2012). Institutional aspects of water management. Hauppauge, N.Y.: Nova Science Publishers.

nJones, J., Vardanian, T., & Hakopian, C. (2009). Threats to global water security. Dordrecht: Springer.

nKneese, A. V. (2013). The economics of regional water quality management (Vol. 7). Routledge.

nLautze, J. (2014). Key concepts in water resource management. Abingdon, Oxon: Routledge.

nMaestu, J. (2013). Water trading and global water scarcity. Abingdon, Oxon: RFF Press.

nPereira, L., Cordery, I., & Iacovides, I. (2009). Coping with water scarcity. Dordrecht: Springer.

nRenzetti, S. (2012). The economics of water demands (Vol. 22). Springer Science & Business Media.

nSpulber, N., & Sabbaghi, A. (2012). Economics of water resources: from regulation to privatization (Vol. 13). Springer Science & Business Media.

nWinkler, I. T. (2014). The human right to water: significance, legal status and implications for water allocation. Bloomsbury Publishing.

nZetland, D. (2011). The end of abundance. Amsterdam: Aguanomics Press.