Liquid Assets: An Economic Approach for Water Management and Conflict Resolution in the Middle East and Beyond (Resources for the Future) [Paperback]

Franklin M. Fisher (Author), Annette Huber-Lee (Author), Ilan Amir (Author), Shaul Arlosoroff (Author), Zvi Eckstein (Author), Munther J. Haddadin (Author), Salem G. Hamati (Author), Ammar Jarrar (Author), Anan Jayyousi (Author), Uri Shamir (Author), Hans Wesseling (Author)

Book Description

Publication Date: September 16, 2005 | ISBN-10: 1933115092 | ISBN-13: 978-1933115092

Liquid Assets shows that the common view of water as an inevitable cause of future wars is neither rational nor necessary. Typically, two or more parties with claim to the same water sources are thought to play a zero-sum game with each side placing a high emotional and political value over the ownership of the water. However, Franklin Fisher and his coauthors demonstrate that when disputes in ownership are expressed as disputes about money values, in most cases, the benefits of ownership will be surprisingly small. By assigning an economic value to water and treating water as a tradable resource, parties see that the gains from cooperation exceed the costs resulting from the change in ownership. A zero-sum game becomes a win-win situation. To support this new approach, Liquid Assets presents an innovative water allocation model that can be used to assist water management, the cost-benefit analysis of water infrastructure, and the resolution of disputes. The model takes system-wide effects into account and is the first to overcome the failure of actual water markets to cope with the divergence between social and private benefits (as implied by agricultural subsidies), permitting the model-user to impose his or her own values or policies. Liquid Assets applies its methodology to Israel, Jordan, and Palestine, a region where water is scarce and water conflicts are often thought to be explosive. Indeed, this book is the result of a joint effort of Israeli, Jordanian, Palestinian, American, and Dutch experts. But the book�s message and methods are not restricted to the Middle East. They are applicable to water management and water disputes around the globe.

Editorial Reviews

Review

'Liquid Assets shows where economics can be useful to the profoundly political aspects of water conflicts, but it is not authoritarian about what should be done. It is, rather, illustrative of what could be done, and why it might make sense to do it that way. I can see the book playing a significant role if and when Israel, Palestine, and Jordan are able to move forward with a plan that will bring peace and harmony.' Daniel W. Bromley, University of Wisconsin, Madison

About the Author

Franklin M. Fisher is the Jane Berkowitz Carlton and Dennis William Carlton Professor of Microeconomics, Emeritus, Massachusetts Institute of Technology. Annette Huber-Lee is the senior research director at the Stockholm Environment Institute, Tellus Institute.

Product Details

• Paperback: 272 pages
• Publisher: RFF Press (September 16, 2005)
• Language: English
• ISBN-10: 1933115092
• ISBN-13: 978-1933115092
• Product Dimensions: 9.2 x 6.2 x 0.5 inches
• Shipping Weight: 14.1 ounces (View shipping rates and policies)
• Average Customer Review: 4.5 out of 5 stars  See all reviews (2 customer reviews)
• Amazon Best Sellers Rank: #2,150,033 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

4.0 out of 5 stars Sensible analysis of emotional topic, December 17, 2009

By 

David Zetland (Amsterdam) - See all my reviews
(REAL NAME)   

This review is from: Liquid Assets: An Economic Approach for Water Management and Conflict Resolution in the Middle East and Beyond (Resources for the Future) (Paperback)

Liquid Assets (RFF 2005) is an important and useful book. It is important because it addresses a very important topic: the use and allocation of water in Israel, Palestine, and Jordan. It is useful because Franklin Fisher, Annette Huber-Lee, and their nine co-authors not only do a very good job of describing their technical approach but also because they directly and clearly address the political dimensions of water in the region. This book should not only be read by those interested in the political economy of natural resources in the region; it should be read by anyone who wants to understand how to make a thorough analysis of optimal water allocation in any part of the world. (Hear that Californians?)

Here are their main conclusions:

1. Israeli-Palestinian cooperation over water (not exchange in water rights) can create benefits of about $100 million per year
2. Most Israeli desalination is not "worth it," except in drought years.
3. Without cooperation, desalination is necessary in Gaza.
4. Recycling plants in Gaza and the West Bank are a good idea.

Note this important implication of their conclusions: Despite the political rhetoric (water rights, water security, human rights, thirsty children, etc.), the authors estimate "that the value of the water in dispute between Israelis and Palestinians is considerably less than $100 million per year. Such amounts ought not to be a bar to agreement between nations" (p. 62). In other words, the "problem of water" is not that big--about ten dollars per person per year, which ensures that economic constraints will not block negotiation. This quantification is useful as a counterbalance to the "life or death" significance that partisans attach to their positions (but see more below).

As many would guess, the story behind the book is fascinating. In the preface, the authors describe how scholars from Israel, Jordan, Palestine, the US, and the Netherlands worked together on the Middle East Water Project. After an early stage of establishing the project (1993-1996), they worked on it until 1999, when the Al Aqsa Intifada (the "Second Intifada") stopped their work. This book summarizes what they accomplished.

The authors' main goal is to describe the supply and demand for water in the region. They use data and (reasonable) parameters to recreate the physical and economic space under which water is -- and can be -- allocated within and among countries in the region. They then use GAMS (General Algebraic Modeling System) to calibrate and estimate "optimal" water allocations. These allocations are then compared to actual patterns of water use to estimate system inefficiency. The GAMS model also allows them to find bottlenecks in the system--places where high "shadow values" indicate that additional water or infrastructure would be valuable.

GAMS models are tricky to work with, calibrate, and explain, but they are sometimes the only way to see how a complex system works. Although the authors do an excellent job--their writing on water economics and simulations is some of the clearest I've ever read--the complexity of the topic and method of analysis is not for the Freakonomics crowd (I spent 30 minutes trying to understand Table 5.2.2!). Overall, I think that they have used the best tool for the job and done an outstanding job explaining their method, assumptions, and results.

The book is divided into two parts. In part I (chapters 1-4), the authors discuss general methodology, their Water Allocation System Model, an agricultural submodel, and international conflicts and cooperation. In part II (chapters 5-8), they report on water use and efficiency within Israel, Palestine, and Jordan, as well as the value of bi- and multilateral cooperation among these countries. The institutional details of part II are very interesting, but--sadly--they confirm the destabilizing impact of subsidies to agricultural water use. Agricultural water users in Gaza pay only 2-4 cents per cubic meter (m3) of water and consume two-thirds of Gaza's available water supply. I really wonder what Gaza's leaders are thinking when their policies lead to this outcome. The authors do not necessarily say this; as in many places in this book, they state many facts and then leave the drawing of conclusions to the reader. (The clearest example of this "diplomacy" is when they evaluate water supplies in East Jerusalem, giving that area to Israel in chapter 5 and to Palestine in chapter 6. They also point out that this exercise is mostly political, as the value of water under dispute in East Jerusalem is trivial.) That same situation (subsidized/cheaper agricultural water) is repeated to a lesser degree in Israel (relatively well-managed) and Jordan, a country that has only 191 m3 of water per capita -- far below UNEP's 500 m3 threshold of "absolute scarcity." It is more sad than surprising to me that Jordanian farmers use 70 percent of that country's water, perhaps because they only pay 1.4 cents per m3. (Recall that desalinated water costs $0.60-1.00/m3.) In chapter 8, the authors calculate and estimate the costs and benefits of various infrastructure and cooperation options. Although desalination has been touted as the be-all-end-all for the future, it is merely the solution to a worst case scenario that would be necessary if -- as we've seen for too long -- politicians continue to fight among themselves and against the best interests of their people.

I hope that more people read this book. Then I hope that they take their copy into the legislatures, newspapers, courtrooms, and palaces and use the analysis to shift the debate away from "unbearable costs" and towards feasible solutions. It's just so obvious that the barrier to an economic, social, and environmental allocation of water is mere will, neither money nor technology. And when they do decide to "fix things," the first people they should call are the authors of this book.

BOTTOM LINE: I give this book FOUR STARS only because they could have improved the display of technical information, making it more accessible.

5.0 out of 5 stars Excellent work on water allocation, September 12, 2009

By 

Neelanga Weragala (USA) - See all my reviews
(REAL NAME)   

This review is from: Liquid Assets: An Economic Approach for Water Management and Conflict Resolution in the Middle East and Beyond (Resources for the Future) (Paperback)

This is an excellent book on economic efficient water allocation. The book covers the theoretical as well as practical aspects.Describes the use of a computer model in water allocation. One of the few great books on this theme,is worth every penny you pay for it. Highly recommended for everyone who is interested in the subject.