Teaching/Communication/Extension/Profession,

Adamson, David

Shi, Tian

English

Research Papers in Economics

 
The Australian Journal of Agricultural and Resource Economics
 
, 50, pp. 463–468
 
© Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd 2006
doi: 10.1111/j.1467-8489.2006.00349.x
 
Book reviews
 
Siren Song: Chilean Water Law as a Model for International Reform
 
, by Carl
J.  Bauer. Published by Resources for the Future, Washington, DC, USA,
2004, pp. X + 172, ISBN 1-891853-79-1 (hdbk), US
 
#
 
33.90.
Over the past two decades, the establishment of tradable property rights in
water and development of markets in these rights has attracted considerable
attention in the international water policy arena. Chile was the world’s ﬁrst
country with a comprehensive water law that established a system of tradable
water rights. What are the macroeconomic conditions and political processes
that make the formulation and implementation of water policy possible? How
should the evolving social reality engage with the dominant decision-making
process? The process of policy development and implementation in existing
institutional settings is clearly a political concern. However, these processes are
not well understood (Shi 2004). Endeavoring to understand these dimensions
of water law and policy has been a dynamic social process, and understanding
this complex process might provide an opportunity to bridge the gap between
policy rhetoric and on ground practice rather than maintain the status quo.
After 
 
Against the Current
 
 (Bauer 1998), 
 
Siren Song
 
 is Bauer’s second book
about water law and policy in Chile. This time, the author tracks water rights
issues in Chile over a long period (from the mid-1990s to early 2004) and takes
a more comparative and international perspective. This book presents an up-
to-date overview of Chile’s experience with water resources management and
highlights the signiﬁcance of the Chilean model for international debates
about water policy. As the book’s title indicates, ‘the Chilean model has been
like a song of the sirens to would-be [water policy] reformers in other countries,
so alluring in its free-market purity that many have been deaf to the risks below
the surface’ (p. viii). The book also emphasises a more qualitative and inter-
disciplinary approach to law and economics than was provided in Bauer (1998).
Boldly introduced in 1981, the Chilean model has become the world’s lead-
ing example of a free-market approach to water law, water rights and water
resources management. Internationally, the predominant view is that the Chilean
model of water management has been a success. This book challenges that
description and presents a more balanced view of the Chilean model. As the
author said, ‘I want to tell the story of contemporary Chilean water policy
both from the inside, for outsiders, and from the outside, for insiders’ (p. viii).
In doing so, the text reﬂects the author’s depth of experience with water law
and policy in Chile.
The book is divided into ﬁve chapters. In Chapter 1, the international con-
text of the Chilean case is framed by reviewing recent international debates
about the global water crisis and the growing need for major reforms of 
464 Book reviews
 
© Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd 2006
 
water law and policy. In Chapter 2, the author discusses the characteristics
and background of Chile’s 1981 Water Code. The review focuses on the leg-
islative history and political background from the 1960s to 1973, which is
crucial to understanding the more recent issues examined in the next two
chapters. In Chapter 3 the author looks at the evolving political and policy
debate in Chile about how or whether to reform the Water Code, after the
country’s return to democracy in 1990. The broader message is ‘the overrid-
ing importance of the national political and institutional context for mean-
ingful changes in water policy and management’ (p. 4). In Chapter 4, the
author reviews the progress in research and analysis about the empirical
results of Chilean water markets since 1990, describes recent and emerging
water policy issues, and points to directions for future research. Finally, the
conclusions about Chile’s experience with free-market water law and lessons
for current international water policy debates are presented in Chapter 5.
This book has much to recommend it and is suitable for a wide range of
audiences. Those unfamiliar with water law and policy in Chile will ﬁnd it to be
a key resource. Even those familiar with the Chilean model will likely beneﬁt from
the updated descriptions and detailed discussions of Chile’s water manage-
ment issues that are not available in the previous literature. The author does
a commendable job of presenting a comprehensive picture of the Chilean model,
whereas at the same time emphasising often-overlooked institutional settings
that shape the development of water market and policy. Also admirable is the
discussion of the historical development of water law and policy in Chile. 
Amid the many positive aspects of this book, two stand out as principal
strengths. The ﬁrst is its emphasis of institutional arrangements and sociopolitical
context that come before water markets developed in Chile. Internationally,
there is a simpliﬁed description of the Chilean model by many economists
and experts in the World Bank, the Inter-American Development Bank, and
related institutions. The general tendency has been to emphasise the model’s
advantages and play down the importance of its ﬂaws. ‘The problem is that
their arguments rest on assumptions that are rarely met in practice, and this
makes it dangerous to treat the arguments as policy recommendations’ (p. 15).
It is often argued that when the research process considers policy issues,
detached analysis may result in irrelevant analysis and/or policy inaction
(Tacconi 1998). It is therefore important to keep in mind although water
problems faced by countries and regions seem similar in many ways, they are
shaped by different political, economic, geographic, and historical circum-
stances. In fact, ‘both the strengths and weaknesses [of the Chilean model]
are built into the current legal and institutional framework in Chile, in ways
that have made them effectively impossible to separate’ (p. 2). And the ‘insti-
tutional arrangements shape the way in which markets determine value and
allocate resources’ (p. 49). Such distinction is of particular signiﬁcance when
one seeks to provide policy recommendations to solve real-world problems.
A second principal strength of this book is its advocate of an interdisciplinary
approach on law and economics in the design of policy reforms. The book 
Book reviews 465
 
© Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd 2006
 
claims as the larger goal is ‘to try to understand the world and the human
conditions as fully as possible, we must keep in mind that individual disciplines
are only means to that ends’ (p. viii). The book uses water as vehicle to highlight
the shortcomings of traditional academic disciplines in addressing complex
issues such as water management. The current global water crisis is intertwined
by water scarcity and water conﬂict. Economic principles can be powerful tools
to deal with the former, but legal and political institutions are the key to
resolving the latter. An interdisciplinary approach enables ‘broad’ analyses of
water management that draw more on history and other social sciences and
focus more attention on institutional issues. In this regard, an interdisciplinary
perspective provides both a richer understanding of the real world and a
more grounded approach to public policy. The book accomplishes this goal.
However, this book has two limitations. The ﬁrst limitation is the author
aims to place the Chilean experience in a broader international context, but
does not provide an extensive literature review about water law and policy in
many parts of the world (particularly the USA, Spain and several other Latin
American countries, in which the author has research and work experience).
Moreover, relative to the substantial published work on water markets in
other countries, the literature reviewed in the book is sparse and references to
more recent work are scarce.
A second limitation is the tendency of the author to totally focus on qual-
itative descriptions of water law and policy in Chile. Although the author
pointed out that ‘much of the discussion about Chilean water markets has
been long on theoretical or ideological argument and short on reliable infor-
mation’ (p. 75), the book would have beneﬁted from incorporating quantita-
tive analysis or case studies to help readers to better understand the inner
workings or policy implications of the Chilean experience. 
The strengths of this book, however, far outweigh its weaknesses. The book
represents a signiﬁcant addition to the environmental and resource policy-
making literature. It ﬁlls an obvious gap in the literature addressing the
beneﬁts and limits of water markets and will likely be of substantial use to
readers interested in water law, economics and policy reform.
TIAN SHI
Senior Economist
Primary Industries and Resources South Australia
Adelaide, South Australia
 
References
 
Bauer, C.J. (1998). 
 
Against the Current: Privatization, Water Markets and the State in Chile
 
.
Kluwer Academic Publishers, Boston, MA.
Shi, T. (2004). Ecological economics as a policy science: rhetoric or commitment towards an
improved decision-making process on sustainability, 
 
Ecological Economics
 
 48, 23–36.
Tacconi, L. (1998). Scientiﬁc methodology for ecological economics, 
 
Ecological Economics
 
 27,
91–105. 
466 Book reviews
 
© Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd 2006
 
Book reviews
 
Common Waters, Diverging Streams: Linking Institutions and Water Management
in Arizona, California, and Colorado
 
,
 
 
 
by William Blomquist, Edella Sclager and
Tanya Heikkila. Published by Resources for the Future, Washington, DC,
USA, 2004, pp. x + 205, ISBN 1-891853-86-4 (pbk), US
 
#
 
30.95.
In this volume, Blomquist, Sclager and Heikkila provide a review of institu-
tional frameworks that are best suited for developing a conjunctive manage-
ment process in the USA. Conjunctive management is a process of actively
managing surface and groundwater resources as one entity. This is achieved
by harvesting surplus surface water and storing it in underground reservoirs
and then augmenting supplies in periods of low water supply. The authors
argue that conjunctive management is a fundamental necessity in increasing
water supply in the long term.
The book is divided into three parts: (i) the introduction involves an
outline of the issues associated with conjunctive management; (ii) the second
details the current institutional arrangements and water resource policy in
California, Arizona and Colorado; and (iii) in the conclusion the authors suggest
various institutional framework changes and list policy recommendations to
improve water management.
The authors argue that conjunctive management addresses the four
factors of water management: (i) water scarcity, (ii) water variability, (iii)
population growth, and (iv) environment. Preservation of water in under-
ground reservoirs provides many beneﬁts: (i) low capital costs versus dams,
(ii) minimal evaporation and contamination issues, (iii) long-term storage
options, and (iv) the ability to blend fresh surface water with saline water to
make it useable.
In Australia, 92 per cent of city run-off and 86 per cent efﬂuent water is
wasted (Dillon 2002). As all capital and many major cities and towns in
Australia are currently operating on water restrictions, any suggestions to
utilise these neglected resources is highly topical. Already conjunctive
management has been adopted in Australia: (i) the recharging of the caves
system at Yanchep that supply Perth with water, and (ii) the Aquifer Storage
and Recovery program operating in South Australia being prime examples.
Therefore any book containing practical issues to consider when undertaking
conjunctive management should be well received.
The authors have performed an exhaustive review of the policies and
organisations involved in regulating water management and have spent sig-
niﬁcant time detailing the shortcomings in property rights for surface and
groundwater in the three US states. Their in-depth look at the existing, some-
time conﬂicting, policy legislation highlights how it has shaped both private
and public institutions in the water management region. These chapters are
the strength of the book.
There are a number of areas where the book could have been improved.
Easily digestible forms of communication should have been utilised to convey
complex issues (the book contains eight tables and only ﬁve ﬁgures). As the 
Book reviews 467
 
© Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd 2006
 
material is based on Arizona, California, and Colorado in the USA, this
impedes readers not familiar with these localities.
Unfortunately, the authors have been primarily concerned with water supply
and institutions for management and have not provided detailed information
about conjunctive management. Issues of water quality and economic efﬁciency
have not been covered in detail. Although there are discussions about potable
water, there are many hydrological and social implications of storing potable and
recycled water underground that are not fully addressed, especially in regards
to consumer conﬁdence. Practical information ensuring the conjunctive water
storage is below a conﬁning layer under the groundwater table is not mentioned.
If the geographical and hydrological conditions below the surface are not right,
the best institutional systems do not matter (Dillon 2002).
A few misleading comments have slipped through with the discussion. For
example, the authors argue that ‘. . . surface water slips away to the ocean or
some other sink from which it cannot be recovered later for consumptive use
if needed’ (p. 23).
The recent discussion of desalinisation plants in Sydney, let alone their
widespread use in the Middle East, negate this comment implying that the sea
is only a sink. Although desalinisation might not be as economically efﬁcient
as storing water underground, property rights are a lot easier to assign and
the free rider problem of poorly deﬁned access rights to ground water in a
conjunctive management framework are negated (i.e., this might occur if
group A recharges the groundwater and group B access that water in another
catchment or state without compensating group A). The issues of poorly
deﬁned property rights are always compounded with any cross-state or
border resource. Unfortunately, the authors’ coverage about the development
of policies and procedures associated with managing these spill-over prob-
lems have fallen short.
Conjunctive management does provide some good alternatives for certain
regions where the geographical requirements are met. However, it should be
only one tool in an integrated package to maximise the resources we have to
help with water security and environmental issues. The failure to link a pre-
cautionary principle approach to the whole process of using surplus water
where there may be additional environmental or other consequences could
generate long-term problems.
Conjunctive management is more an urban water security tool as the
ability to divert storm and recycled waste water into underground storages
would help improve water security. One question would be where this water
could be subsequently used. Application to gardens, parks and sporting grounds
is likely to be uncontroversial, whereas concerns about potable water standards
and legislative requirements prevent contamination and protect health
standards that would make it difﬁcult to use conjunctive management to as a
component in domestic supplies.
The book is light on practical steps to implementing a conjunctive man-
agement process. However, the authors’ research into institutional frameworks 
468 Book reviews
 
© Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd 2006
 
really cannot be faulted. The strengths of the volume are the authors’ reviews
of institutional water frameworks in some western parts of the USA that will
limit its saleability outside that country.
DAVID ADAMSON
School of Economics
University of Queensland
St Lucia, Queensland, Australia
 
Reference
 
Dillon, P. (2002), National bid to save water, 
 
CSIRO Land and Water Link
 
 September, 1–2.

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