Wikipedia’s definition of economics is, partly, “a social science concerned with the factors that determine the production, distribution, and consumption of goods and services.” While that is accurate, I prefer Robbins‘ definition that it is the study of “human behaviour as a relationship between ends and scarce means which have alternative uses”.
What then, is WASH economics? It’s worth thinking about that with respect to Robbins’ definition, and its key components:
- human behaviour – people’s decisions about WASH goods and services (which may or may not be “rational”)
- ends – WASH assets (such as a borehole or toilet) or outcomes (such as people’s use of the services provided by those assets over time)
- scarce means – resources such as capital, labour or land (and water!) used in the provision of WASH goods and services.
- alternative uses (i.e of the means) – other ways to use those means, e.g. a capital-intensive sanitation programme might build toilets, whereas a labour-intensive one might involve promotion.
Building on all this, I like to define WASH economics as “the study of how people make decisions about the allocation of scarce resources in the delivery and use of WASH services.” This takes in both the provider and user perspective, and also emphasises how economics is fundamentally about people (and their decisions).
There are many ways to undertake the “allocation of scarce resources.” Markets are one way – they use the price mechanism to allocate resources to the highest valued use. Planning is another example, whereby a government or other institution uses a plan to allocate resources to an intended use. More about markets for WASH goods and services in another blog sometime.
Returning to the Wikipedia definition, it is also worth thinking about how that relates to WASH economics: “a social science concerned with the factors that determine the:
- “production… – how much output (e.g. WASH services at a given level) produce with given inputs (capital, labour etc.) and with what technology
- …distribution – how WASH services (or costs/benefits of those services) are distributed among individuals, households or social groups
- …and consumption – how much people spend on WASH goods and services and how this varies over time and according to prices and other factors
…of goods and services.” It’s worth making the distinction between these two things explicit. WASH goods are tangible things, such as soap, a latrine slab and tap or bottled water. WASH services are not tangible, such as the promotion of hygiene, the emptying of a pit, or the ongoing availability of water through a household connection.
Water is a tricky good, because it can be packaged in many kinds of ways. e.g. Evian bottled water is a different good to utility tap water, even though it looks (and even is!) extremely similar in most respects (depending on where the competing tap is…). The Evian differs in the sense that it can be bought on the move and it can be chilled. However its key attribute is, especially if you’re somewhere with a dodgy utility, that the brand-name is a quality signal. “Quality” is nebulous and the satisfaction associated with it will differ from one person to another (though I’m sure we’d all agree that microbial quality is the most important…). In many respects, the two goods are “substitutes” (an economics terms meaning they have similar uses). While you might drink the tap water, you wouldn’t use Evian to irrigate your vegetables. It is therefore their value in use which is critical to their distinction in price. More on this in another blog.
With these definitions in mind, what are the kind of questions we’re trying to answer when applying economic theories and methods to WASH goods and services? It will be things like:
1. How much will this proposed sewerage system cost per person? The issue of how much things costs, whether in financial or economic terms, is a crucial aspect of WASH economics. Unfortunately, costing is not as easy as you might hope. Where is the data coming from, or are we assuming things? What is the time-horizon, e.g. are we doing a “life-cycle costing”? and so on. Knowing what something is going to cost is crucial when making a strategy or investment plan.
2. Should we build this sewerage system, something else, or nothing at all? Forms of economic evaluation such as cost-benefit analysis and cost-effectiveness analysis are important aids to decision-making. They help us ensure that investment decisions are not based only on politics, pre-defined ideas and other factors. Various economic evaluation methods exist to total up the costs and consequences of different intervention options, and to compare those to each other or to a policy threshold.
3. What should the tariff be? Pricing of WASH goods and services is one of the most obvious WASH economics questions. Numerous factors will go into setting a price, including production concerns (too low and people will overuse) and equity (too high and the poor will underuse) and so on.
4. and many, many more types of questions…
This blog will, over time, attempt to frame questions like this and present economic theory and methods in an accessible way. The aim is, generally, to further the understanding and use of economics in WASH policy and programming. This post has served to give a general overview and introduction of the kinds of things to be considered. Thank you for reading!