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<br />533 <br /> <br />C"IIVERSITY OF COLORADO U,W REVIEW <br /> <br />[Vol. 5i <br /> <br />The :\ew York couns have taken a broad \'iew of the interestS that <br />may be ~ompensable under this provision, 'u <br /> <br />V. ECO"O~l1C AS-\L YSIS OF ARE.-\-OF-ORIGIJ' PROTECTIOS <br />SCHDIES <br /> <br />This section presents an economic analysis of the issue of ,rea-of. <br />origin protection. [t begms with a consideration of the rationales for <br />protection and then presents tWo conditions which must be met for a <br />transbasin diversion to be economically desirable. (I) it must be the <br />least.cos! source of reliable water supply 10 the prospective user: and <br />(2) its benelils must exceed all related costS, Forms of protection are <br />then considered, Compensation paid bv exporters to the area of origin <br />is seen to playa panicularly important role. The section ends wlCh a <br />set oi general economic guidelines fot designing compensation <br />schemes, <br /> <br />./ <br /> <br />.~. Why Protect Areas oj OrigIn? <br /> <br />The primary reaSOn for protecting areas of origin is to deal equi- <br />tably with those areas during periods of economic and demographic <br />change. Water. perhaps more than any other natural resource. is <br />thought of as a natural and necessary part of the environment that. to <br />som~ c.\[enc, should no[ be- de-nic;:d [0 the area of origm eVen In the <br />intacsrs of the larger society. <br />Yet there are important economic reasons why it mIght be desira- <br />ble to provide parlicular types of protection when water expons are <br />being considered, These reasons relate to the economIC efficiency of <br />water use throughout the region in which the area of origin is located, <br />Economic efficiency is concerned with maximizing the IOtal value <br />of the OUtput of goods and services produced through water use. agri- <br />cultural outputs. forestry products and services. instream uses for tish. <br />eries and waler quality. municipal water and waSte disposal services. <br />etc, Achieving this maximum total value requires that the allo~ation <br />of ,vailable water among uses and locations be kept flexible over time <br />to respond to changing demands and values, <br />The conditions for '" cCOllomically efficient pattern of Water use <br />can be expressed by saying that the \'alue of the marginal product of <br />water (VyIP) in each use anLl each location should differ not more <br />thiln {he C'o:"t of physically tran:-;pnrting the Willc;:r ;J.lTIong usc;:s and lo- <br />cations. That '5. V\OIP" ::: Vyll'". for ,II l.j.1. and k where i ,nd j <br />",tand f\'r ~L:,e:". ~tIld 1 :lIlJ k IIH.lil'~llC' Il)(~lll\lll... <br /> <br />I <br />1 <br />