WSP05845

• File Number: 8507
• Description: Rio Grande Project
• State: CO
• Basin: Rio Grande
• Date: 7/1/1997
• Title: Water Management Study: Upper Rio Grande Basin part 2
• Water Supply Pro - Doc Type: Report/Study

An Overview of the Basin's Resource-Management Problems

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value on the resource see their demands go unmet. Although those who
enjoy the use of resources at prices less than the true costs associated with
the use undoubtedly also enjoy a standard of living higher than they would if
this disparity were erased, the nation's overall standard of living is
diminished.

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b. Water and Related Resources Are Not Just Private Goods, But Also Public
Goods.-Many factors underlie the absence of competitive- market conditions
for the water and related resources of the Upper Rio Grande. One is that the
resources are not strictly private goods, subject to full control and disposition
by the owner, but have a strong public-good character! The water rights for
water flowing down the river bed or canal may be the property of a private
landowner, for example, but this flow might generate economic benefits or
costs for others in the general public by increasing the risk of flooding,
opportunity for fishing, or aesthetic quality of nearby residences. Economists
call these benefits or costs public goods (if positive, or public bads, if
negative).

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America's economic and legal systems have not yet devised a good
mechanism that allows the public to express their demands for public goods
in a market setting. Owners of rights to use resources often make decisions
about the use of the resource as part of their attempt to maximize their
eamings from the resource, overlooking the public-good consequences. In
some instances, decisions to maximize private eamings can yield results that
are optimal from the public-good perspective, but this is not necessarily the
case. In most instances, the outcome is suboptimal, or less than ideal, and
society is deprived of goods and services that are more valuable and of
contributions to a standard ofliving that is higher than those derived from
the current uses of the resources.

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The legal and economic systems are not, however, unaware of the tension
between the private-good and public-good aspects of water and related
resources. Water rights, for example, embody this tension insofar as they
are limited property rights that give the holder rights to use water within
functional and geographic boundaries and subject to supervision by the state,
and the state exercises its authority based, in part, on its obligation to
protect the public interest. Historically, there was little tension between the
state's public-interest obligations and the prior-appropriation doctrine that is

" Public goods are also known as free-access goods or free-rider goods. All these terms
refer to goods-and services-where the consumer cannot obtain them through a transaction
that allows her to exclude others from consuming them.

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