PUB00057

• Year: 1978
• Title: The Colorado Water Study Directions for the Future
• CWCB Section: Water Conservation & Drought Planning
• Author: EDO DNR
• Description: First publicatiom of the Colorado Water Study volumes
• Publications - Doc Type: Brochure

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society of various water uses through the investment which appropri-
ators are willing to make in order to develop a water right, or
through the prices agreed upon by buyers and sellers of water rights.
Put another way, the market "allocates" water to those most willing to
pay for its use. Thus, individual water users, each acting to promote
his or her own welfare, decide how water in Colorado will be used.

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While the market system is a commonly employed means for allocat-
ing water, as well as many other resources, it is not without its
shortcomings. One significant difficulty arises when a resource can-
not be privately owned. The problem stems from the fact that when
property rights to a resource are not, or cannot (as in the case of
air), be defined by the legal system, then the values associated with
the use of that resource will not be taken into account by the market
since one cannot express his or her preferences through the purchase
of the resource.*

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For example, so long as water is physically removed from a
stream, it is possible to identify it as the property of someone in
particular. In turn, that person can use the water as desired and
can also exclude all others from benefiting from its use. Thus, if
someone else wants to put the same water to a different use, they
have to buy the water. The price at which the water is sold will
then be an expression of the relative importance of two different
uses of the water.

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On the other hand, it is difficult, perhaps even impossible, to
define privately owned rights to water that is to be used in a stream.
This stems primarily from the fact that water in a natural stream
(like air) is a "fugitive" resource which cannot be claimed by one
person to the exclusion of all others. Thus, until 1973, instream
uses of water, and the recreational, ecological, and aesthetic values
associated with such uses, were not accounted for because the water
rights system did not provide people with an opportunity to make
their preferences known through the operation of the marketplace.

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*It is a common misconception that only economic values (e.g.,
the production of income) are taken into account by a market system.
On the contrary, a market system recognizes any of the values which
people place in a resource (be they economic, ecological, aesthetic,
social, cultural, or recreational) so long as property rights to the
resource in question can be defined by the legal system. A good exam-
ple is the use of water to irrigate lawns and gardens. The values
associated with this use are essentially non-economic, yet the water
rights system clearly affords the opportunity to preserve these aes-
thetic values to the extent desired, as measured by people's willing-
ness to pay for municipal water service.

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