9369 ‎(2)‎

• UCREFRP Catalog Number: 9369
• Author: Colorado Water Workshop.
• Title: 12th & 13th Annual Colorado Water Workshop.
• USFW Year: 1987.
• USFW - Doc Type: Western State College of Colorado.
• Copyright Material: NO

well-being of a region, the value of these habitats may be significant. Their
loss cannot be left out of the accounting in water resource investment plans.

In the context of the loss of natural systems, a particularly interesting
phenomenon arises when applying direct methods to measuring the value of a
natural system. Damage or loss in well-being can be measured by either the
maximum sum individuals would be willing to pay to avoid the loss, or by the
minimum compensation they would require to accept it. The two were always
assumed to yield equivalent results. Recent evidence suggests a strong and
consistent disparity between outcomes based on paying for loss avoidance as
opposed to compensation for its acceptance (Knetsch, 1984). In almost all
cases, based on experimental and empirical data, the latter method yields
valuations two to three times greater than the former, i.e" the compensation
for the acceptance of loss exceeds the willingness to pay to avoid the loss.
Such a divergence becomes particularly important when assessing the economic
attractiveness of a project that would destroy a natural system.

Despite the data, in the ordinary course of discussions over the way in
whi.ch a region may use its water resources, there appears to be a tendency to
overemphasize its value when diverted (for example, see CACI, 1987)
and underemphasize its value when left undistur'bed (CWCB, 1952). In Colorado,
as elsewhere, water must. be developed to have wort.h; left in its nat.ural
cour'se, it remains "unused" and, by implication, useless. It appears the
debate over water resources is based on assumptions of growth that lack an
empirical foundation, an imputed value for water in certain applications that
does not stand up to close examination, and an accounting system that heaviJy
discounts the worth of the resource left in place.

The Status of Colorado's Water Economy.

Colorado's water economy has passed from its "expansi.onary phase" (Le.,
new supplies were readily available, few interdependencies existed among
users, and--after accounting for federal subsidies--projects were relatively
inexpensive), into what might be called its "mature phase" O,e., costs of new
supplies are rapidly escalating, water users are linked by an elaborate
physical systems, they are increasingly interdependent economically, and
federal subsidies have evaporated) (Young, 1984), The system has reached its
present state under rules based primarily on technical feasibility, i. e, ,
water management has traditionally been reviewed as a technical or engineering
problem. Thus, the solution of problems rather than the efficient allocation
of resources has been both the guiding principle and the basis for' rewarding
achievement (Young, 1986). As a consequence, structural solutions favored by
engineer-managers have led to elaborate physical systems, It should also be
pointed out that believing in the hypothetical relationship between
investments in water supply systems and economic development nurtured the
process that led to selecting these solutions.

Given the maturity of the system, the relative value of water in
agricultural and municipal applications, and the increasing recognition of
instream values, we are led to question how efficient and equitable it is to
continue allocating the resource and augmenting supplies in the same way we
have done it in the past. Applying a Pareto optimality criterion (i.e., a
system's state is said to be Pareto optimal if one entity can be made better
off only at the expense of another), decisions that involve supply expansion

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