EFFECT OF WATER SCARCITY ON RESIDENTIAL PROPERTY PRICES

EFFECT OF WATER SCARCITY ON RESIDENTIAL PROPERTY PRICES

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Pricing and regulatory strategies, when used as policy instruments to manage water resources, presuppose that all individual firms will follow the same behavioral pattern. However, there can be as much discussion and debate about whether firms respond mainly to self-interest, whether incentives are more effective than disincentives, and about the role of norms vis a viz government policies. In many cases none of the industrial firms may fit the image of an omniscient rational producer who attempts to optimize the benefits to costs of using an input. Firms may even be unaware of effluent standards or have no idea of the technological engineering and organizational prospects for upgrading their production system i.e. to use less water, abate wastewater treatment, or of the costs involved in responding to price and regulatory pressure (Braadraart, 1995: 449). In the absence of a general pattern of behaviour, only policy prescriptions unique to each firm would be desirable. On the other hand, in some cases, like the Porter hypothesis (1991), environmental (wastewater) regulation (and by implication – water pricing) has been mis-construed to imply a free lunch (or even “a paid lunch"), that is, regulation (and pricing) induce innovation or practices whose benefits exceed its costs, making regulation (and pricing) socially desirable, even ignoring the environmental (or resource use) problems it was designed to solve.

STATEMENT OF THE PROBLEM

The way in which the industries choose to exploit resources as well as provide the means of minimizing and managing adverse impacts on the environment will significantly alter the development process in any economy. Any short-term achievements of long-term sustainable goals must therefore be preceded by a critical focus on the activities of the industrial sector. This need arises because the industrial sector can immensely contribute to sustainable development especially since it is well positioned to