President's Report Masthead
September 30, 2013
Economics and the environment

Economics and the environment

Two farmers plant alfalfa. One doesn’t worry about his water supply; he can use as much as he wants on his crop. The other also can use all the water he wants, but he has to pay a tax on it. Who is likely to make more money?

If your answer is the first farmer, you are in good company. For decades, economists could find no monetary benefit to managing access to groundwater. But, as researchers at Binghamton have proven, you and all those economists are wrong.

“We know that groundwater is a problem around the world,” environmental economist Neha Khanna says. “Groundwater is being depleted. You can talk to anybody on the street and they’ll say, ‘I know that, and we need to start thinking about it.’ Strangely, though, economists have always believed that if we put in some sort of system to manage water, it wouldn’t lead to much gain in terms of overall welfare. We have pretty much ignored the issue.”

In the 1980s, several prominent economists analyzed the possibilities. They found such marginal gains from managing access to groundwater that it became an established result among economists: There’s no reason to implement water-management systems.

Learn more about how Binghamton researchers reversed 30 years of common wisdom on this subject.