ABSTRACT
Economic analysis of the water sector is useful, even if water might be regarded as an elementary need for human life that should be available at zero or negligible cost. Water is often thought of as being freely available, with the main tasks of public utilities to bring it to the locations of the demanders and return the sewage, after appropriate treatment, into the environment. The efficiency of the distribution system and how to deal with fluctuations over time in demand for and availability of fresh water so as to serve the needs of society in an optimal way are important issues, as is the determination of the appropriate degree of treating the sewage before it is disposed into the natural environment. In fact, water supply is much more complicated than just bringing fresh water to demanders through pipelines. The production process used to reach and maintain a high quality level can be quite complicated and may require large investments. A similar remark can be made with respect to sewage treatment. This suggests that it may be useful to apply the tools of economic analysis to the water supply and sewage treatment industries. 1 It is the purpose of this chapter to show that such an analysis can provide fruitful insights into the efficient use of water resources. 2
