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The Paradox of Water--Its Value and Its Rhetoric. A paradox arises in dealing with the value of water. The political and media rhetoric asserts its enormous economic importance. This conventional view, however, contrasts with the reality that the resource exhibits a relatively low economic value at the margin. Conceptually correct empirical estimates of the direct marginal value productivity of irrigation water usually fall in the range of $25-75 per acre-foot (Young, 1984). For the majority of crops the estimates are in the lower part of this range. Based on the cost of supply, the value of water in the municipal sector is no more than an order of magnitude greater. In other words, resources devoted to water development, conservation or management can justify a cost of only 1.5 to 3 cents per' ton for irrigation and perhaps 30 cents per ton for household use. While a substantial total economic value may still be implied for large water supply projects, the point is. that the m~!:gi!l_~! value of irrigation water to the user is often insufficient to justify major capital expenditures. (Compare, for example, with other liquids important in modern economies. Gasoline retails in the U.S. at about $330,000 per acre-foot, implying users are willing to pay 10,000 to 20,000 times more per unit volume than they wi 11 for irrigation water). In the municipal sector, although the value of water is greater, it seldom compares with the rhetoric surrounding it. Having looked at the value of water used in an application where it usually has a market price, what can be said about the intrinsic value of the natural system from which it is removed? Because aquatic ecosystems---habitats, wetlands, and streams--are not traded in conventional markets that reflect such values, other methods must be used. There are direct methods, like contingent valuation (Le., asking individuals their willingness to pay), and indirect methods that infer value from use. (For a thorough review of both, see Stavins, 1984). In addition, there are other survey methods that try to estimate "option values" and "existence values" that are above and beyond what individuals would be willing to pay now for an option to ensure accesS to, or existence of, an environmental resource in the future. Another approach is to base the value of a natural system on the cost of mitigating its loss, should it be destroyed. Appropriate application of these methods can establish the value of natural systems and their associated water resources. The statement that aquatic ecosystems are not traded in the market is not entirely true. There are states in which instream flow programs allow water rights to be purchased for the protection of natural systems. Presumably, rights are purchased at market rates and data on these purchases would provide an indication of instream flow values. Moreover, ownership restrictions found in some instream flow programs (e.g., Colorado's program prohibits private ownership of instream rights) may reflect a concern that, were a market to operate freely, instream flows values would set the price. (For example, rafting companies might attempt to purchase the water rights necessary to maintain minimum boating flows). Closing such interests out of the market suggests there may be fear, in some quarters at least, that instream values may exceed those of traditional "beneficial use" categories. The point is, natural systems do have value, their value can be measured (if only indirectly in certain cases), and, with regard to the economic - 12 -