Study Notes on Water Economics and the Diamond-Water Paradox

Check-in Questions

  • Diamonds are more expensive (per ounce) than water.
  • Does this mean that water has less total value to society?

Agenda for Today

  • Discuss Water Economics
  • Wrap up Activity 8 & Complete Writing
  • Reflection #11!

Diamond-Water Paradox

Introduction

  • Who's heard of the Diamond-Water Paradox?

Explanation of the Diamond-Water Paradox

Definition
  • The Diamond-Water Paradox illustrates the difference between the high market price of diamonds relative to their low total utility compared to water.
Key Concepts
  • Price ($): The monetary value assigned to goods.
  • Quantity: The amount of good available or consumed.
Graphical Representation
  • Graphs illustrated supply and demand curves for diamonds and water showing how prices are derived from marginal benefits and supply.

Key Graphic Points about Diamonds

  1. Supply of Diamonds
    • The quantity of diamonds available for sale affects their market price.
  2. Marginal Benefit of Diamonds
    • The additional benefit derived from consuming one more diamond.
  3. Price of Diamonds
    • The monetary cost of purchasing diamonds.
Key Graphic Points about Water
  1. Supply of Water
    • The availability of water for consumption or use.
  2. Marginal Benefit of Water
    • The additional benefit derived from consuming one more unit of water.
  3. Price of Water
    • The monetary cost associated with acquiring water.

Total Benefits Analysis

Total Benefit of Diamonds vs. Water
  • Total benefit derived from diamonds is lower than the total benefit derived from water, which is more utilized in daily life.
  • Observations:
    • Total Benefit of Diamonds < Price of Diamonds < Price of Water
    • Marginal Benefit of Diamonds < Marginal Benefit of Water

Water Economics

Uses, Institutions, Rights, and Conservation

  • Complex interrelated variables determine water allocation:
    • Quantity: Amount available.
    • Quality: Suitability for use.
    • Temporal Distribution: Availability over time.
    • Spatial Distribution: Distribution across different locations.

Sources of Water

  • Various sources contribute to water supplies:
    • Rainfall
    • Ground Water
    • Local Surface Storage
  • Each source has specific characteristics affecting water availability and cost of use.

Water Demand and Usage

Competing Demands for Water

  • Water makes up approximately 70% of the Earth's surface, yet less than 1% is available for human consumption:
    • Agricultural Needs: Irrigation, livestock production, aquaculture.
    • Industrial Use: Manufacturing processes.
    • Residential Use: Drinking, sanitation.
    • Recreation: Pools, lakes.
    • Power Generation: Hydroelectric power stations.

Water Use in the U.S. (2015)

Overview
  • Total U.S. water withdrawals averaged nearly 322 billion gallons per day in 2015.
  • Water usage breakdown:
    • Thermoelectric: 132,944 million gallons
    • Irrigation: 118,131 million gallons
    • Public Supply: 38,999 million gallons
    • Industrial: 14,788 million gallons
Withdrawal Distribution by County
  • Circle sizes represent rates of water withdrawals by county.
    • The breakdown varies based on regional demands, such as agriculture in drier areas or industrial needs near water bodies.

Applications of Water Use

  • Specific areas in the U.S. demonstrate larger withdrawals for various uses:
    • For example, steel production requires access to large water supplies in industrial regions.
    • Irrigation in the Western U.S. supplements agricultural needs where natural rainfall is insufficient.

Marginal Costs of Water in Tucson

  • Tucson’s tiered water pricing structure:
    • Tier I (1-7 CCFs): $2.18
    • Tier II (8-15 CCFs): $4.02
    • Tier III (16-30 CCFs): $8.50
    • Tier IV (31+ CCFs): $13.10
  • Average tub uses approximately 50 gallons. One hundred cubic feet of water corresponds to about 15 baths.
Fees Associated with Water
  • Central Arizona Project Fee: $1/CCF
  • Conservation Fee: $0.10/CCF
  • Green Stormwater Infrastructure Fee: $0.13/CCF
  • Various taxes based on consumption and local provisions add to the total cost of water.

Managing Water Resources

Water Institutions

  • Define legal rights, responsibilities, and social norms governing water ownership and use.
  • Institutions crucially determine:
    • Water supply management
    • Transport systems
    • Infrastructure for storage and distribution
    • Quality control measures for water

Summary

  • The discussions centered on the economic principles surrounding water use, the implications of the Diamond-Water Paradox on valuation, and the complex nature of water allocation in society today.
  • Reflection and writing activity aid in synthesizing these concepts for deeper understanding.