Understanding the relationship between water price, value, and cost
Yoder, Jonathan K.
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Discussions about issues related to water in arid regions like Central Washington tend to be contentious. Tensions can be exacerbated when there is a lack of clarity over what is being discussed. This often arises when discussing the economics of water using the terms price, value, and cost. These are typically the metrics over which policy alternatives for water reallocation are made and non-economists tend to use them interchangeably. However, each term represents a fundamentally different concept and confusion over their meanings can generate arguments and confusion to an unnecessary degree. This bulletin will explain the difference between price, value, and cost in the context of water, and when each concept is relevant and when it is not. It concludes with a review of data on observed water prices, values, and costs in Washington.