proach taken in Westem Europe and the United States. systems have been devised with little orno idea about how Although intellectually satisfying, it is not clear whether it the information is to be used. Thisresults in over-collection is the best approach to practical problems. It is helpful for of some types of data and under-collectiOn of others. The the physical aspects of rainfaU and run-off but much less experiences of GIS users to date have not been uniformly helpful from the point of view of politcaljurisdictions and happy. Most systems concentrate solelyupon physical and economic markets. la the United States it has since been scientficdata,andthereislittleornocoverageofimportant abandonedbyalilmajoragenciesinvolvedinnationalwater economic facts. Although many of the economic data do planning. Today agencies allow the specific pioblem to not need to be collected according to detailed geographic dictate the unit of analysis. With innxeasing concem for distributions,theeconomicrealitiesmaybeasimportantas broader problems such as environmental quality, the idea the physical datathat do, andmaybe critical tounderstandof analyzing "problem-sheds" rather than river basins is ing the meaning of the physical givens. More attention gaining ground. A recent book by Major and Schwarz should also be paid to the statistical variability of the data. shows how river basins can be building blocks in larger Currentlyavailablemethodstoest4blishstatisticalreliabilproblem-sheds. The Bank will have to examine closely the ity should be insisted upon in all data Analyses and be types of issues faced by its clients before recommending a carried over into the analyses of particular investment particular planning approach. decisions.

At the practical level, however, little planning ofany One issue that tier the methodology and the data kind seems to have been applied consistently across water together is the issue of "uncertainty." Not only is it uses inthe economy. For example, inmanyplacesthe uses important to develop and use reliE" . data but it is also of water are still examined separately on a project by imperative that the planning methods used elucidate the projectbasis.Thus,in Algeriaitispossibleto findexamples uncertainty regarding the planning decisions. All too often ofcarefully planned irrigationprojects alongside carefully inthe water resources areathe bulk ofthe analysis is aimed pianned urban water supply projects, with no way of at the consequences of hydrological uncertainty when, as reconciling the conflicting demands that both have for the demonstrated by James, Bower, and Matalas (1969), the same water supply. In Brazil there was surprise when the largestpartoftheuncertaintyintheimplieddecisionsstems introduction of a tariff on wastewater discharges led to from the economic parameters which typically receive large dc reases in revenue to the water supply utilitv little stochastic evaluation. almost leading to its bankruptcy. In these cases the unit of analysiswasnotlargeenoughtocapturetheexternaleffects In its Policy Paper the Bank should make a serious of policies dealing with individLal components. efforttoshowwhatarerealisticexpectationsaboutthedata One issue that tier the methodology and the data imperative that the planning methods used elucidate the demonstrated by James, Bower, and Matalas (1969), the largestpartoftheuncertaintyintheimplieddecisionsstems from the economic parameters which typically receive little stochastic evaluation.

In its Policy Paper the Bank should make a serious efforttoshowwhatarerealisticexpectationsaboutthedata that may reasonably be gathered, and the levels ofreliabilThere is a need to ensure that appropriate models of the ity that can be achieved by the use of these data. water sector be included in any project appraisal. The unit ofanalysis must be large enough to ensure that most of the _4.1.4 The Political Economy of Pricing_ relevant extemalities are captured in the analysis. In irigation projects, ground and surface water as well as drainage Apart from certain aspects of religious and health must be analyzed as one unit. Urban water supply cannot significance, most people in every day use do not regard be divorced from wastewater disposal and its downstream water as an end in itself. It is a commodity like "ships and impacts. Water diversions from rivers must consider alter- shoes and sealing wax," consumed directly or used as an native in-stream uses of the same water for navigation, input to otherprocesses. Empirical observation shows that fisheries, downstreamusers, andthe maintenance ofstream in Boston as well as in Beijing, if the price of water is ecosystems.Wellestablishedmethodsusingmathematical increased, consumers will use less of it. In other words, progammingandsimulationmodelsshouldberequiredas there is a "willingness-to-pay" for water that is not an a prerequisite for project appraisal in such cases. abstwacteconomicconceptdependingonelaboratetheories Apart from certain aspects of religious and health abstwacteconomicconceptdependingonelaboratetheories of private property, but rather is a reliable behavioral trait - and is a good basis locations. The most accessible water for human use is the In any policy study the quality of the data used of consmners of the products. The same behavior can be - determines to a large extent what conclusions can be expected in Kansas and Kathmandu and is a good basis reliably reached. However, there is a mind-set, that always for assessing the economic demand for water. (Water has looks formore and more data and more and more complete adownward sloping demand curve.)We can expecthuman coverage of a region or basin. Geographical information actions to meet demand to be similar in widely different systems (GIS) are currently very popular. Some of he locations. The most accessible water for human use is the practical problems encountered in the use of such systems cheapest to develop, the next most accessible costs a little should be examined. For instance, many of the current more, the next yet a little bit more, and so forth. Very soon 10 y _,.*_ _ _ - --- ***__in* *** l N__I

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