Economic principles and the allocation and pricing of water: a theoretical review for Zimbabwe
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In most of Zimbabwe water sources were widely available with much of the potential runoff and underground water still unexploited. However, in the past two decades water has become increasingly scarce. As water becomes scarce, so it becomes more important to develop institutions which ensure that the available water is allocated to the best uses for the whole society. Economics is the science (or art) of the allocation of scarce resources. In economic terms only commodities which are scarce have value. The air we breathe is probably the most vital resource with respect to life but it has no economic value in Zimbabwe. If good quality air should become scarce then it will start to have an economic value. This is because decisions must be made about how much is used, when and by whom. Costs may be incurred in cleaning, storing and delivering the air and these have to be covered by its "price" but until available air is limited, there is no price or financial value attached to the air itself. In the past two decades Zimbabwe has faced declining average rainfall. In some parts of the country, the area average over the past century has not been achieved for 15 years. At the same time human and livestock populations have been increasing. This, together with increased economic activity, has seen a significant increase in demand for water. As it becomes scarce, problems arise over the allocation of this water.