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. the marginal external damages imposed on others, and society benefits . W ~',from expanding per acre water use. ~ Afte r OA e the reverse is true. The conclusion is quite clear. So long as negative externalities are imposed on downstream users by upstream users, salt concentrations . will be above the social optimum as long as the water right allows more than OA units of water use per acre. Potentially, at least, the river e . may yield a greater total economic product by somehow reducing the salt inflow upstream. This can be accomplished in numerous ways. Restricting the quantity of water use to OA units is one way. Policies e . that will shift the MNB and MED functions to more socially advantageous positions are another. The best way to accomplish the shift is an institutional as well as economic problem. Some options may achieve . a given salt concentrating effect at lower economic costs than others, but under the institutional rules called the "law of the river" may be . politically infeasible. We will next consider several of these options and state some general principles that will govern their economic and institutional feasibility. . Economic Considerations in Managing Salinity Thus far we have assumed that the social optimum can be defined by an 11economic efficiency" criterion, i. e., an optimum situation will . exist when the total value of the economic product produced in the basin I is maximized. Social welfare, however, is influenced not only by how . much value is produced, but by how it is distributed among income and 7 . .i-._