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Water Demand Management

The economic laws of supply and demand stipulate that greater quantities of water will be produced at a greater price, while demand diminishes with increasing prices. The market then reaches its optimal equilibrium point when the cost of producing a certain quantity of water is the same as the price that consumers are willing to pay for that same quantity. Figure 21 illustrates the principles of supply and demand.

The global community, as reflected in the Dublin Principles, the Johannesburg Declaration and many other international agreements calls for the attribution of water as an economic good that can be regulated by the market with subsidiary controls of regulatory bodies.(ICWE, 1992) Thus, supply and demand is generally accepted as central to supporting effective IWRM where adequate pricing is used to curb demand. The graph, in Figure 21 shows the effects of pricing on demand whereby the steeper the demand curve, the more effectively price influences demand. The slope of the demand curve is often referred to in economic literature as elasticity. The shadow price is the price that will result when demand increases by one unit, or a price increase results in a decrease in demand by one unit. Knowing the shadow price allows economists and decision-makers, in theory, to determine the effect of pricing changes on demand.
Figure 21: Supply & demand

In all of my interviews about water resources management in Figuig, price was not discussed as a significant factor in influencing production or demand. This is in despite of the Oasis having a water market that offered water for sale as a commodity traded in the market place. In fact, none of the many various stakeholders interviewed, including those who maintained distribution facilities, those with water rights, and those who required provisioning, made reference to the actual price of water in monetary terms without being probed. When introduced, it was routinely noted that it was a minimal cost that was not prohibitive. Rather, each spoke of inter-Ksar hostilities that continued over water control, or the digging of the main access well, Tzadert. When posing the question specifically, a monetary value the approximate figure of 25dh/kharouba (45 minute interval), approximately $2.50/kharouba was noted ($.07 per cubic meter). It is important to note that the interviewees systematically introduced the notion that the price was peripheral, and did not have a notable effect on the system of supply/demand as profit maximization was not goal of the producers. The price was further qualified as a function of current conditions, but, was cautiously evaluated to avoid causing hardship. Most importantly, each person interviewed noted that the price was very low and non-restrictive.

According to the many individuals who responded to questions about pricing. The value of water resources to the community was considered far greater than what competitive market pricing could relay. Social and political influences were routinely considered and an examination of the impact of history and geography on the Oasis’ survival were regularly cited to relay the actual value of water resources. The elasticity of demand for water, it appeared was not limited to price, but, influenced by numerous other factors that appeared to have a greater impact on conservation efforts.

A demand curve that is limited to quantity and price is incomplete and, in fact misleading. As in the case of Figuig a basic demand/supply curve presents an inaccurate picture of how consumption is checked. The following reformulated graph (Figure 23) illustrates the change in elasticity of demand when other factors are introduced, such as environment, history and society. Classical economists account for the latter as externalities by sliding the supply curve upwards (Figure 22). Supply level is controlled by price just as before adding externalities. In other words, these externalities, according to classical economists, do not affect elasticity. According to my research in Figuig I posit that these externalities result in making supply less sensitive to price. This is represented by pivoting the supply curve toward the vertical. A perfectly vertical supply curve says that the supply level is the same regardless of how much people are willing to pay for the water. Given infinite financial resources one will be able to bring water from the North Pole for instance. While this will resolve the supply problem, it will not resolve the environment impact problem.

Figure 22: Classical economy’s treatment of externalities

Figure 23 shows how supply and demand curves change as other factors are introduced. History, society, and environment, in the case of Figuig, as represented in Figure 23, influence the slope of the curve significantly while price has little impact on demand. This is illustrated by the decreasing slope of demand.
Figure 23: Effective supply & demand

The supply curve is similarly modified once other hidden costs are introduced such as aquifer depletion, environmental concerns, etc. The slope is increased representing a scenario whereby the quantity of water, produced and consumed, remains constant regardless of pricing. Once again, pricing has little impact on demand.

An effective supply and demand curve shows that pricing is less relevant in Figuig because price alone does not capture the real value and cost of water. This scenario, however, is not limited to this case. Around the globe, including in the developed world, governments cannot, and often do not rely on pricing policy strictly dictated by the supply and demand equation. Governments often revert to the use of subsidies and regulations to adjust for the deficiencies of the simple supply and demand model. Repositioning water to convey its real value is often overshadowed by excessive outside manipulation.

While many economists stipulate that market forces will ultimately assign a price that truly captures the value of water, including all other factors that affect its perceived value such as history, culture, society, and environment, I argue that the market is unable to achieve a sustainable solution. Assuming that price is increased to curb demand two key issues remain: 1.) The wealth effect assumes that those with financial means most likely will not curb their demand because of pricing, as any price that the average consumer could pay would not be restrictive as it represents a minimal percentage of the individual or family wealth. 2.) The poor, on the other hand, could be unable to procure an adequate amount of water necessary for their survival. In the case of Figuig, where the survival and prosperity of the Ksar depends on the strength of the whole as opposed to the individual, and whereby social norms do not allow for the poor to be left out.

While most economists would argue that every economic good has a value that can be measured in economic terms, markets tend to be driven by the prospect of accumulating wealth. In the case of Figuig, social values that do not promote wealth beyond reasonable necessity, are therefore difficult to incorporate into an economic model. Consequently, market pricing could not adequately represent the value of water. Rather, the absence of free market pricing actually reflects the true value and status of the resource that knows no substitute and is vital to the survival of the community, the polity, and the oasis itself and its unique positioning in Morocco.

Market forces play a secondary role, equally as important as price controls, maintaining economic profit. As defined by economists, one is making economic profit when their current profit is higher than profits they could be making doing something else. The people of Figuig were working towards preserving the group as their survival depended on the strength of the community, as opposed to encouraging individualism. Profit, was subsequently defined in terms of group profit as community gain was considered before individual profit.

An anecdotal historical event illustrates the social value of community: one of the Asraïfi in Figuig had been very active raising funds for the resistance against the French occupation. After independence, as a reward for his patriotism from the King he was offered a farm in some of the most fertile lands of Morocco. He declined the gift because "it was an honor and responsibility to serve my country and fellow citizens.”(Figuig Interviews, 2005) Moreover, any gift was, and continues to be considered a weakness resulting in a lack of independence. This attitude toward service, community and independence is an entrenched tradition in society in Figuig.(Figuig Interviews, 2005) Moreover, consistent with Sofist tradition it highlights the limited importance of wealth in society

Water security in Figuig, many argue, was worth risking possible death as numerous men gave their lives to gain access to the main spring, Tzadert, located in the depths of the rocky mountainside. The strength of the community and the survival of each family, throughout history, has been closely linked, as it is today, to the sustainability of the Oasis, which is, in turn, universally dependant on a continual supply of limited water resources.

While the need for water was great, gains of a prolific access point were considered a matter of survival. The robust mountainside required hard labor to break through the barrier walls of the earth that harbored deep, prolific springs. To support the strong and motivated labor force the residents of Figuig would replace with gold the fragments of rock each worker collected in their hats and brought to the surface from the tunnel.(Figuig Interviews, 2005)

A tradition of conservation, in Figuig, throughout history encouraged agricultural practices that used water efficiently, reuse practices, careful consideration of appropriate development including the building of cluster housing to provide temperature control, water transportation efficiency to reduce evaporation, and clustered farming. Figure 26 shows traditional clustered farming versus modern farming in Figuig. Most of the new farms that have been developed in recent years with a lack of institutional controls and social supports have utilized new imported farming models that diverged dramatically from traditional models that supported Figuig’s culture of resource conservation. The new farms use substantially more water due to the nature of the crops planted and neglected the importance of clustered farming, allowing for excessive evaporation under the hot sun of the Sahara. Table 2 shows temperature, precipitation and evaporation in Figuig in a typical year (source Gassem, 1986).