I’m in Islamabad for the launch of the Australian Government’s Water Program. Pakistan faces enormous challenges around water scarcity, with concerns about declining surface water and groundwater supplies combined with increasing demands associated with rapid population growth. In response, there is keen interest in measuring and increasing water productivity. Water productivity is typically defined as kilograms of output per cubic metre of irrigation water (or sometimes in dollars of output). While the intentions are admirable, the pursuit of water productivity could worsen the lives of people who are already desperately poor.
Consider the following example. Bashir grows wheat on his small property near Faisalabad. In a typical season, Bashir is able to produce 0.4 kilograms per cubic metre of irrigation water. Suppose that there is another irrigation technology that will produce the same output with half the water, thereby increasing his water productivity to 0.8 kilograms per cubic metre. If the objective is to increase water productivity, Bashir should adopt this irrigation technology. But will Bashir (and other water users) actually be better off?
This depends on other considerations, such as the upfront and ongoing costs of the irrigation technology and what the water savings are worth. If the costs exceed the benefits, as they frequently do in practice, Bashir (and other water users) could be worse off. This highlights why economists generally do not use water productivity. It is a partial measure, and more complete and defensible measures are readily applicable.
An alternative is to use cost benefit analysis when evaluating changes to irrigation technology and management practices in Pakistan, or Australia. In which case, the question is: taking all of the costs and benefits into account, does the change improve the livelihoods of farmers (and the community more broadly)? This is the question that Bashir asks when making decisions on the farm, and the question we should ask when developing policies and programs to support him.