Huffaker, Ray G.

McGuckin, J. Thomas

Michelsen, Ari M.

Taylor, R. Garth

Whittlesey, Norman K.

English

Research Papers in Economics

Journal  ofAgricultural and  Resource Economics 23(2):571-572
Copyright  1998 Western  Agricultural Economics Association
Evaluating the Effectiveness  of
Conservation Water-Pricing Programs:
Reply
R. Huffaker, N. Whittlesey,  A. Michelsen,
R. Taylor, and T. McGuckin
The comment  offered by Griffin is correct in asserting that equation (2) in our paper
measures the derived demand for consumptive water use, and that its use in our model
produces a positive relationship between streamflows and increased consumptive water
rates. A slight modification to equation (2)  produces  a derived demand  for delivered
water that is consistent  with the ambiguous  relationship  between  streamflows  and
increased  water delivery rates that  we  demonstrate  in equation  (12).  The modified
equation is:
(2')  PyFc(C)E = P,
where
aY  dC = F=(C)d  = FC(C)E
aQQ  dQ
is the marginal product of delivered water. The implicit derivative of (2') with respect
to P is:
PyFcc ac E  + PyFc  E  =  1,
P  P  C  P
or, in elasticity form:
I  Fr  P
(9')  IQP  - EP  cF  -E,  P-E-
[cFccF  PyE
where  eQ p =  (PIQ)IQ/aP  is the price elasticity of demand for water deliveries, and ep =
(PIE)aE/lPis  the elasticity of demand for investment in improved on-farm irrigation
efficiency with respect to the price of delivered water. The sign of the term I  eQp  - rE,P
is ambiguous  since it is greater (less) than zero, as  E  p is less (greater) than critical
value P/(PyFcE).  This  ambiguous term determines the sign of the partial derivative
Huffaker is associate professor and Whittlesey is professor, both in the Department of Agricultural Economics, Washington
State University;  Michelsen  is  assistant professor,  Department  of Economics,  Washington  State University;  Taylor  is
assistant professor, Department of Agricultural Economics, University of Nebraska;  and McGuckin is associate professor,
Department of Economics,  New Mexico State University.Journal  of  Agricultural and  Resource Economics
measuring the marginal impact on streamflow of an incremental increase in the price
of delivered water in the absence of irretrievable water losses:
awx  C(Pi)
(12)  (leeQ,p  - EEp)ax.
aP  P1
Hence, the sign of dWx/aP also must be ambiguous. Consequently,  equations (2'), (9'),
and (12) support the major result of our paper that, in the presence of irrigation return
flows, increasing block rates on delivered water have an ambiguous impact on stream-
flows,  and  thus can  be an unreliable  policy  tool for  generating  agricultural  water
conservation.  This is a general result produced by a relatively simple hydroeconomic
model. Contrary to the comment's concluding remarks, it is not a narrow result reliant
on "local phenomena" reflecting "a temporary shifting of flows or a disjoint hydrology."
[Received September 1998; final revision received October 1998.]
Reference
Huffaker,  R., N. Whittlesey, A. Michelsen, R. Taylor, and T. McGuckin.  "Evaluating the Effectiveness
of Conservation Water-Pricing Programs." J. Agr. and Resour. Econ. 23(July 1998):12-19.
572  December 1998

EVALUATING THE EFFECTIVENESS OF CONSERVATION WATER-PRICING PROGRAMS: REPLY

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