Economies of Scale and Scope in River Basin Management

New approaches to water planning, like Integrated Water Resources Management, are growing in popularity, but have often gotten bogged down, or even been abandoned, because stakeholders don’t feel they are getting enough out of these efforts.

Economies of scale and scope are the payoff for the tedious, time-consuming work of multi-stakeholder processes and our new report, “Economies of Scale and Scope in River Basin Management,” provides pragmatic guidance for more effective water management. It argues that the river basin management component of an effective management system should identify specifically how and when collaboration between specialized organizations will be socially beneficial, and then mobilize sufficient political will to ensure specialized organizations collaborate when they should.

The economic insight this paper offers is that collaboration between specialized agencies is socially desirable when economies of scale or scope exist that cannot be captured by any one specialized organization. Successful integration occurs when these economies are identified and captured, and when more specialized organizations are allowed to manage projects that do not involve such economies.

This paper defines economies of scale and scope, describes economies of scope in more detail since this is a phrase that non-economists are unfamiliar with, provides a few examples of each in the US setting, and provides some concluding remarks on implementation challenges.