Environmental Economics and Policy 162

 

ECONOMICS OF WATER RESOURCES

Spring Semester, 2007

 

Prof. Michael Hanemann

327 Giannini Hall

E-mail: hanemann@are.berkeley.edu

Office hours: Tuesdays 4:30-6:00, and other times by appointment (email me)

 

GSI:  Damian Bickett

314 Giannini Hall

E-mail: damian@are.berkeley.edu

Office Hours: Monday 3-4 and Wednesday 1-2 (& by Appointment)

 

 

ENV ECON 162: THE ECONOMICS OF WATER RESOURCES (3) Two 1-hour lectures and one hour of discussion per week. Prerequisites: EEP 100 or Economics 100A or Economics 101A; EEP 101 is also recommended. Topics covered: urban demand for water; water supply and economic growth; water benefit-cost analysis, water utility economics; irrigation demand; large water projects; economic impacts of surface water law and institutions; economics of salinity and drainage; economics of groundwater management.(SP) Hanemann

 

 

The course covers the economics of water resources, with special emphasis on areas such as California where water is a scarce resource. The aim is to teach both about economic tools – how economists go about analyzing key aspects of water policy – and also about the specifics of water in the US West – what has been learned by applying these tools to water issues in the region.  The course assumes a knowledge of intermediate microeconomics, and some familiarity with linear regression.  The course consists of two lectures plus one section per week. The sections will be used to review the lectures, prepare for the problem sets, and review the answers to the problem sets. There will be six problem sets. In addition, there is a required research paper. There is no midterm exam. The final grade will be based on the final exam (50%) and the paper (50%), with problem sets potentially pushing you up a grade if you are on the margin.
 

COURSE OUTLINE

 

1.      INTRODUCTION AND BACKGROUND

 

2.      INDUSTRIAL DEMAND FOR WATER

A.     Economic Theory of Input Demand

B.     Linear Programming

C.     Input-Output Analysis

 

3.   RESIDENTIAL DEMAND FOR WATER

A.     Demand Modeling

B.     Conservation

 

4.      WATER UTILITY ECONOMICS

A.     Benefit Cost Analysis

B.     Pricing Urban Water

C.     Drought and the Value of Reliability

D.     The Cost of Urban Water Supply

E.      Why Public Ownership? The Privatization Debate

 

5.      AGRICULTURAL DEMAND FOR WATER

A.     Background

B.     Crop-Water Production Functions

C.     Econometric Demand Studies

D.     Programming Models of Demand

E.      Adoption of New Irrigation Technology

F.      Economics of Agricultural Conservation

 

6.      LARGE FEDERAL AND STATE WATER PROJECTS

A.     Background

B.     Pricing of Irrigation Water

C.     160-Acre Limitation and the Subsidy

D.     General Equilibrium Impacts of Water Projects

 

7.      SURFACE WATER LAW AND INSTITUTIONS

A.     Economics Implications of Surface Water Rights

B.     Economics of Local Water Districts

C.     Water Markets

D.     Economics of Instream Flows

 

8.      SALINITY AND DRAINAGE

A.     Background

B.     Salinity and the Colorado River

C.     Drainage Problems in the San Joaquin Valley

 

9.      ECONOMICS OF GROUNDWATER RESOURCE MANAGEMENT

 

There is no text for the course. Instead, there is a Reader in two parts. Part 1 covers Topics 1-4, while Part 2 covers Topics 5–9. Part 1 is available now from Ned's Bookstore.