When water meets behavioral economics (or: it is not all about money!)

Abstract:

Water engineers do not like people; we are better with numbers, equations and models where people behavior is only a variable, usually constant, or in the best case a probabilistic approximation. On the other side, most economic studies relate to people’s behavior, and when economists develop engineering-based models, engineers usually think that econometric approaches are too simple to represent complex systems that engineers like to work with.

Besides this simple-minded cliche, there is a lot of field to explore in the intersections of both disciplines. Even though the development of infrastructure cost-benefit analyses after Dupuit’s work, or the more recent growth of hydroeconomic modeling, we are still missing a lot of potential synergic benefits from integrating behavioral economics and water infrastructure design and management.

To present a simple example: urban water infrastructure design is based on water peaks, so reservoirs, pump stations and pipe dimensions have to be built to serve these peaks; water-related energy assessment studies have shown that there is a lot of energy used for every drop of water used in our houses, farms, and industries, and energy peaks are even larger that water peaks, creating expensive troubles for energy supply; and all this energy consumption means greenhouse gas emissions. Therefore we agree that reducing water peaks might create a lot of benefits, but could water customers change their behavior? Which incentives do they need? It is only about money, or it may be managed with better information?

Beyond this example there are many other promising economic topics that could help in our daily water problems, such as: game theoretic approaches to understand decisions; science-based agent models that help us to understand the performance of a system as the sum of agents’ actions and interactions; or the analysis of institutional-driven management to avoid the tragedy of the commons that depletes groundwater resources globally.

And no need to remind that all resource scarcity problems will increase with population growth, so it would be better to begin work sooner on these problems.