ABSTRACT
This chapter focuses on some of the essential concepts and principles that underlie the economics of watershed development and that need to be considered in public policy. A watershed has clear conceptual unity in hydrology, physical geography, and other natural sciences. The economics of watershed projects, including benefit-cost analysis and other quantitative techniques for evaluating projects, comprises only a segment—and sometimes only a small segment—of the economics of watershed policy. In such project analyses, significant aspects of watershed policy are mentioned, if at all, as "institutional constraints." In proceeding to the objectives of watershed policy, one encounters a problem of unity of social objectives and criteria. The literature on benefit-cost analysis and related techniques has increased by leaps and bounds. The claim of the "new" benefit-cost analysis is that evaluation of public investment in water resources projects is viewed for the first time as a problem of optimizing social welfare under budgetary constraints.
