Improving Water Resource Allocation Through Demand‐oriented Water Policy1

In the arid and semi‐arid regions of the Western United States the water problem is generally perceived as one of “inadequate” supply. This conception of the problem engenders supply‐oriented water policy, or policy focusing exclusively upon a single class of solutions–the various schemes for augmenting an area's water supply. In a more complete or balanced conceptualization, the water problem is viewed as one of “inadequate” supply and/or “excessive” demand. When the water problem is so conceived, water policy is broadened to include demand‐oriented water policy, or policy aimed at reducing the quantity of water demanded in an area. The purpose of this paper is to describe and explain demand‐oriented water policy. Basically it consists of changing the set of commodities produced by the economy, cutting back and/or eliminating goods requiring large quantities of water in their production and introducing and/or expanding goods which require little water. This paper also reports briefly on research undertaken to test demand‐oriented policy in Arizona. Results indicate that such a policy can be extremely efficacious in solving a region's water problem.