Chapter 1 The International Context: The Water Crisis and Debates About Water Policy

Bauer notes the increasing water scarcity problem on the Spaceship Earth and points to how it also relates generally to pollution and water quality (p. 7). Bauer points to how international water policy debates have pointed to the need for a “integrated” water resource management approach. A second theme has been to make it more “economic” in nature. The third theme has been to address poverty and social inequality.

Integrated water resources management

Bauer reminds the reader of the fact water must be viewed more broadly, as in --- using the DIT lens here, seeing water in  thermodynamic terms. The fact that Spaceship Earth is a water planet needs to be acknowledged in the sense of a hydrologic cycle with conveyance and storage that operates on a planetary scale. As a result, Bauer is justifiably speaking to the need to adopt a more integrated approach in management especially looking at both water use and land use simultaneously.  Bauer refers here to the Dublin principles. Said principles include: “1) freshwater is a finite and vulnerable resource essential to sustain life, development, and environment 2) water development and management should be based on a participatory approach, involving users, planners, and policymakers at all levels 3) women play a central part in the provision, management, and safeguarding a water, and 4) Water has an economic value in all its competing uses and should be recognized as an economic good (pp. 8-9).” Through the DIT lens, water has both profane and sacred dimensions, which need to be considered jointly as in profane&sacred.

Bauer notes the  little agreement on what is the best approach. Bauer points to how integrated approaches considering economic, social, and environmental issues may just be incompatible. Well, DIT would see it as economic&social&environmental, as in all jointly arising and being completely non-separable. Bauer points to how integrated water resources management --- often abbreviated IWRM ... “Requires understanding of the overall water cycle that is the continuous processes of water as it evaporates from the oceans precipitates as rain and snow, and flows downhill across land surfaces and through rocks and soil back to the oceans.” As DIT would make clear, water must be framed in thermodynamic principles. Bauer refers back to the Dublin principles as to how one should think about this IWRM approach. Bauer points to the triangle with the three essential criteria related to economic efficiency and growth, social equity, and environmental protection. These three are referred to as the triangle of sustainable development. Through the DIT lens, such sustainability can only arise on a path 0Z with due consideration for balance in the profane&sacred.

Bauer points to how water governance relates to “the exercise of economic, political administrative authority to manage a country's affairs at all levels... it comprises the mechanisms processes and institutions through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations, and mediate their differences (p. 9-10 ).” In DIT terms, it is about the Other Forum. Again, DIT would point to using the Ostrom IAD design principles, in giving structure to, organizing, and operating within the Other Forum.

Perspectives On Water as an “Economic Good”

Bauer points to how there is a full range of views on water as an economic good. Using Figure 5, one would say that the narrower view used by mainstream economists would put water exclusively on self-interest only path 0G, even a path near the vertical axis for the extreme libertarians, where price P is the only relevant measure of value in the domain of the profane. Yet, people also see water more as a human right, and would be looking at value O on path 0M in the domain of the sacred. As DIT makes clear, neither one of these paths can achieve efficiency. Both economic and social efficiency --- as in striking balance in price P&value O --- can only arise on path 0Z, as in economic&social  efficiency.

Bauer chooses to focus exclusively on property in the water resource itself, and not in services. He also distinguishes “narrow” and “broad” perspectives on economic analysis. A notion of a broad perspective leads and points to the underlying institutional setting. Bauer points to the institutional as including “the legal, political, and social norms, rules, and organizational structures that shaped the patterns of human behavior (P .11).” This naturally is Figure 5 and

Figure 6 working in tandem, the institutions of Figure 6 working the influence the market forum of Figure 5. 

Bauer sees the narrow perspective of economics as that represented in neoclassical economics as well as neoliberal framing. He points to how some of these economists do recognize the importance of legal, institutional, and political arrangements, but put them in a non- economic category. DIT puts all such framing back into the economic framework in that  legal, institutional and political considerations are all part of the shared other-interest. Bauer points out how the World Bank has gone to very much a narrow economic perspective, touting the market forum.  DIT is an integration of neoclassical&neoinstitutional (the latter coming from the old line of institutional economics as in Veblen, Commons, and modern researchers like Daniel Bromley).

Baur goes on to argue that IWRM must go beyond simple reliance --- using DIT terms --- on just a  Market Forum and must work at: “…coordinating different water uses, upstream and downstream at the level of river basins and watersheds; resolving water conflicts; internalizing or otherwise dealing with economic and environmental externalities; defining and enforcing property rights; and monitoring compliance with the rules about water use and management (p. 15).” So, Bauer refers more to “law in action” --- as in “law and society” academic traditions. Bauer uses an interdisciplinary approach. He is into comparative law and economics.  Such matters are addressed in the Other Forum(s) represented in DIT.

Economic Interpretations of the Fourth Dublin Principle

Bauer points to a World Bank economist by the name of Briscoe that uses SIT to explain value, cost and opportunity cost. Briscoe sees only the profane path 0G in Figure 5, only the Market Forum is to be used, and, Figure 6 --- no  Other Forum to represented value O --- apparently does not even exist.  The entire sacred realm of shared other-interest is just framed --- as SIT has no placeholder for such things as social and environmental value in the domain of value O --- as simply monetary cost C to be paid, as in paying for the “externality.”

As DIT makes clear no such “external cost” even exists, as the water economy --- thermodynamically speaking --- is completely embedded within the Spaceship Earth hydrologic, conveyance and storage system so nothing is external. And, on opportunity cost, to Brisco simply measured as the price P in some other use, well, that cost is very much affected by the value O coming out of legitimate Other Forums. As Bauer says it, the Brisco framework is too narrow to account for the environmental or social factors: DIT agrees, as SIT ignores the shared other-interest in water represented on path 0M.

Bauer then turns to the Global Water Partnership and writing by a team of economists represented in Rogers, Bhatia, and Humber.  Said team did recognize water may have an “intrinsic value” whatever that might be.  DIT would refer to it as a value O. If said intrinsic value is somehow related to the notion of value O coming out of the Othe Forum, DIT could support the claim. Bauer suggests the team gives a somewhat wider attention to the social and environmental values and considerations, but, again, using DIT, it is greatly restricted in the “patch” to the flawed self-interest only SIT which the team is applying.

Again, DIT has a placeholder for the law, politics and what the social sciences beyond economics bring into view.  All said arenas are primarily about the shared with the other-interest represented on path 0M in Figure 5, and all related to the resolution of the pushpins (money-valued) and poetry (non-money-value) problem in Figure 6.

Bauer next mentions three development economists --- Perry, Seckler, and Rock --- who see a problem in the profane economic “vs” sacred human right aspect of water. But, said economists fail to see what DIT clarifies.  The “vs” is not the frame one needs, but rather it is the soft-& when money-oriented people are sufficiently attentive to the human need and right to water, sufficient attention paid to the shared common good in doing such things as sustaining an aquifer and/or the instream flow in a river.  Also, DIT has an opening for sometimes need for hard-& to enforce it when the individual does not act on own volition.  In both cases, the goal is striking a balance in the profane-economic&sacred-human-need.  It is not path 0G “vs” path 0M, profane vs sacred, but rather striking balance on the joint path 0Z. And, as Perry et al make clear, as in Bauer pointing it out, without adequate attention to the common good in the domain of the sacred then full water pricing and all water allocation going on in a Water Forum focused on only individual could well do more harm than good.

Bauer points to  research by McNeil who has voiced concerns  ---  using the DIT lens to interpret the claim, about a strict focus on price P measures of value. Bauer also points to Brown, who sees the translation of water into thinking of it only as an economic commodity and not seeing the community side of is problematic.  Through the DIT lens, focusing only on path 0G without regard for path 0M is the problem, albeit apparently Brown sees it as a simple tradeoff, in contrast to DIT that sees the nonseparability, jointness of commodity&community.

Stretching The Neoclassical Paradigm: Institutional and Ecological Economics

Bauer cites Institutional Economist Daniel Bromley who clearly understands the key role of law and institutions in affecting what is in fact economically efficient. Through the DIT lens, Bromley implicitly recognizes that alternative law and institutions represented on different paths 0M will affect the best path 0Z  So economic efficiency cannot be separated from the idea of law and institutions. And, that is what the neoclassicals and neoliberals --- and especially the libertarian in the FME frame of thinking --- always wants to do, claiming that the market somehow operates independently of the law and institutions.  Quoting Bauer, “Bromley emphasizes the essential role of law and legal institutions --- courts, legislatures, and administrative agencies--- in determining economic values.” Through the DIT lens, Bromley is seeing the institutions bringing value O into affecting  the price P that evolves on the path 0Z. Bauer points to how Bromley highlights the need to answer 3 questions namely: Who makes the rules? Who receives the benefits? Who pays the costs?

            Bauer then points to Aguilera, who works in both institutional and ecological economics.  To Aguilera, Water is not only a factor of production and a financial asset but it's also a “eco-social asset.”  Through the DIT lens, Aguilerais simply pointing to the fact that water has a jointly profane & sacred. DIT reflects both institutional economics and ecological economics, the  latter through seeing thermodynamic reality.

International Significance of the Chilean Model

Bauer points to how Chile's 1981 water code is held up by some as being the model for the world. World Bank economists have touted it. Many are pushing the idea that water needs to be turned into a commodity. Bauer points to how several United Nations agencies have been very concerned about this frame of reference, especially with respect to the UN Commission for Latin America and the Caribbean. Said Commission has worked to counter the glowing reports floating around Latin America about the Chilean water markets.

Bauer mentions  how a number of Latin American countries have considered introducing water marketing including Mexico, Peru, Bolivia, Argentina, Nicaragua and El Salvador. Outside Latin America, other countries have also considered it such as in Australia, Indonesia, South Africa, Spain, Taiwan, and Vietnam. Yet, no other country has actually copied the Chilean Water Code. Key questions that need answering include: 1) How successful have the water markets in Chile actually been, 2) what is the relationship between water markets and other critical water management issues in Chile. Bauer points out how the second question has not had much attention. To Bauer, the question is whether water marketing is compatible with the need to integrate water management.

            Pointing to a researcher by the name of Briscoe, Chilean water markets may be useful in dealing with water scarcity, but less useful in dealing with water quality. Also the same author has pointed to how basin level management decisions have been poorly handled in Chile. And while Briscoe sees the Water Forum  as the bedrock of Chilean water management, it is leaving out important considerations. Bauer also points to couple of other researchers Rogers and Hall who described the Chilean case as a world leader in water governance, who then go on to claim that the water market is adaptive to other problems. Bauer points out the reality that Chilean water markets have not been adaptive at all. Rather, the water market analysis that has been done has been rather naïve,  on the edge of being misleading and dangerous. Through the DIT lens, using only the Water Forum and ignoring the key role of the Other Forum is a serious oversight.

Water Markets and Water Policy in Other Countries

Bauer mentions the huge variability in the way water markets  have been applied around the world. India and Pakistan peasant farmers, for example, trade in water rights in canal water that's in effect managed by the government. Australia has some water marketing going on relating to salinity, but it also pays attention to the maintenance of flows. In Spain some limited water marketing has developed to deal with perhaps not having to  develop more water resource infrastructure.

Bauer then goes on to point out that the western United States is the most highly studied area in terms of water marketing, with water markets especially emerging in that area in the 1970s and 80s. Quoting Bauer: “… (in the Western US, one is seeing) an “(increased) concern for economic efficiency and market incentives on the one hand, and increased concern for integrated water resources management, a basin wide focus, and environmental restoration on the other (p. 29).”  Bauer claims that water markets in the western United States have been seen as an important part of the larger water management context, but not the controlling principle.

Neoliberal Leanings 1976-1981: Private Property And Free Markets

Bauer highlights the conflict that arose between the neoliberals, really the libertarians as represented in “the Chicago boys” as they were called, and the more traditional conservatives. Also, traditionally engineers and lawyers had been involved in Chilean water allocation issues. The entrance of economists into the mix was new in Chile, with said economists coming to dominate what happened next.

The Constitutional Commission (1976): Private Property But Not Free Markets

More traditional conservatives were influential at first. The main issue was that irrigation canals had deteriorated.  The lack of definition in the exact character of private rights in water were affecting investment in repairing the canals. Bauer goes through the details of negotiation within the military junta and with the conservatives, with the bottom line that it was not resolved at the time. The debate remained as to what role would the public play in the private ownership in water rights, and whether it was just rights of use or actually ownership of the corpus of water that would be put into play.  As Bauer says it, “the idea was to increase the legal security of use rights by treating them in effect as property rights (p. 43).”

Decree Law 2603 (1979) Swinging Right To The Free Market

By 1979, the Chicago Boys had come to control most aspects of economic and social policy. In the realm of water, it was claimed the public ownership of water had led to extreme economic inefficiency, as in not investing in irrigation canals and water development. Bauer quotes the Constitutional Commission statement in Decree Law 2603: “The rights of private parties over waters, when recognized or constituted according to law, will grant their owners property over those rights.” Water rights were also separated from land ownership rights. Water rights could now be freely bought and sold. Water rights were registered in real estate title offices. It was also declared that water rights could be taxed like land ownership rights. Consistent with the neoliberal Chicago Boys way of thinking, using the DIT lens, it is  clear that water was to be  framed exclusively in the domain of the profane, treated exclusively as a commodity. The sacred was of no accord.  Said frame would bring attention to path 0G, the supposed path of economic and social efficiency, which DIT makes clear is not the efficient path.  Only path 0Z can achieve said kind of efficiency.

In DIT terms, the Chicago Boys pushed for unattenuated water use rights, as in private, exclusive, and transferable. The focus was exclusively on the incentive, without regard for the sacred.  And, taxing the water right as a kind of real estate tax would further ensure a path 0G was the focus. The Chicago Boys even proposed public auctions of all water still held in the public domain.  Profane, indeed.  Bauer points out a great deal of push back came from the engineers, lawyers, and irrigators who had traditionally dealt with the water issues in Chile, who historically were putting more emphasis on the public aspects --- DIT would say, the sacred aspects --- of water.

Intriguingly, the agricultural irrigators were actually also opposed to the move to free market trading. Set irrigators did want more assurance of having access to the water, so private water rights were supported. Trading in said rights was not something deemed necessary, or perhaps even desirable. Also, irrigators did not see that having transferable water rights would necessarily improve efficiency.