Drawing of boundaries and further defining them as the need arises has been a major force in allowing efficient trade to take place on the basis of separate pursuit of the individual's own interest. Boundary drawing and minimizing communal and especially unowned property allows the assignment of appropriate values to different inputs. An indispensable key to efficiency is the clear allocation of property rights together with the rule of law and the ability to trade. Externalities are the most persuasive reason why markets may not provide efficient development. Through Pricing Pricing comes with property rights to produce the best allocation of resources.
Prices condense all manner of values into a single item.
But even in relatively primitive places where water was scarce, it was husbanded and charged to ensure its rationing. Instructive in this respect is the scene from Lawrence of Arabia where Lawrence's guide was killed for drinking from a well owned by the Arab chieftain played by Omar Sharrif. If, like indigenous land rights, the commodity is required to be used by the owners or not used at all, its value is drastically reduced and the signals the market might offer are severely attenuated. Where, as in most urban situations, water is based on property values rather than its actual usage, there is too little incentive to frugal usage. But for urban households, water pricing is really about ensuring an adequate cost recovery for the distribution and waste water disposal systems rather than putting a price on virgin water.