ECONOMIC VALUATION OF WATER AS AN ESSENTIAL RESOURCE

This article considers assigning of appropriate value to water resources in a way that derives the maximum benefit from this resource as the modern economic approach to the allocation of this scarce resource. With the increasing scarcity of water resources as a good and service and multiplicity of demand from different sectors for a share of this scarce resource, the traditional approach, where water is treated as a free resource of unlimited supply with zero cost at the point of supply, has been found inadequate as an allocation mechanism. The key to assessing water resources is to establish the functions that they provide, that is, the relationship between the structures and processes of water resources and the goods and services they provide that are of value to society. This review article is designed to encourage its readers to think about water as a limited but very valuable natural resource. This article discusses the various methods that can be used by an economist or a researcher to be able to determine the value of a particular water resource.