[BLANK_AUDIO] I'd like to begin with a discussion of six facts about water. Fact number one, building and managing water infrastructure is a huge societal enterprise. This images shows the three Gorges Dam in China. It cost over 20 billion US dollars to build. In the United States we have over 50,000 water utilities and over 30,000 wastewater, utilities. And we have many dams, irrigation schemes, flood levies and other water infrastructure. If we thought of water as an industrial sector it'd be one of the largest sectors in the economy. The world bank has estimated that a child born today in Ethiopia has capital assets, both man-made and natural capital, worth about $2,000. This is her endowment to build upon and get ahead in life. A child born in the United States or Europe arrives in the world with a share of the nation's capital that's worth, about $500,000. That's, 250 times more, than an Ethiopian child. And a substantial portion of a US child's capital endowment is infrastructure. And a major portion of this. Is in the water and sanitation sector, fact number two, pipe water networks, are very capital intensive, we think of capital intensity in terms of the amount of capital needed to produce a unit of output or revenue. The water industry is not only one of the largest sectors, but also one of the most capital intensive. Only petrochemicals and power generation have comparable levels of capital intensity, to the water and sanitation sector. The high capital intensity of the water sector means that financing becomes extremely important. A community may want a new piped water and sewer system and people, or gov-government may be willing to pay the full cost of these services as they're rendered. But this is not sufficient. The community must find the financing to pay the upfront capital cost for the construction of the project. When China started building its industrial infrastructure, in the 1970s and 80s, it partially solved its financing problem with barter deals with foreign partners. China promised to repay loans from Japanese and Western companies it, with the output of these industrial and natural resource projects, in which the investments were made. But these kinds of barter deals were difficult in the water sector, because water itself is not easily traded. This made construction of water infrastructure more challenging, because the financing was harder to arrange. Fact number three, household demand for small quantities of water. Is, pricing elastic? Economists as far back as Adam Smith have puzzled over the economic value of water. They compared the value of water, a necessity of life, and its price, which was typically very low to diamonds, a luxury good with a very high price. And they puzzled why the price of water did not reflect its value to life. This diamond water paradox was resolved, by the concept of diminishing marginal utility. Small amounts of water essential for life, but these quantities, for these quantities demand is very pricey and elastic. This means people will pay almost anything for small quantities of water if they have to do so. I've seen situations where poor households spend 10 to 20% of their income for small quantities of water and I've been to places where a liter of water cost more than a liter of gasoline. However, the fact that household demand for small quantities is pricing elastic, does not necessarily imply that demand for improved water quality. Is price inelastic. And we're going to come back to this, in the course. Fact number four, storage is easy, transport can be very expensive. Note that this is just the opposite of electricity. Storage of electricity is hard, but transport is easy. Reservoirs can be used to store water. Households can store relatively, water relatively cheaply in storage tanks and systerns. But water's very heavy. And this makes transport difficult. When water must be lifted or pumped, transporting it often become prohibitively expensive. This image, is the Roman Aqueduct at Pont Du Gard in France. Aqueducts, were possible because water ran downhill from mountainous regions to cities at lower elevations. But these civil engineering projects were still extremely capital intensive and expensive. One of the important implications of the fact that transporting water is difficult, is that water problems are largely local. Long distance transport of water is not likely to be an economically efficient solution to local, water scarcity problems, in most situations. Well this doesn't mean that there are no linkages between the water problems in the micro economy, or the global economy. The 20-level, 2011 floods in Bangkok distributed global supply chains. Professor Tony Allen at Kings College is introduced us to the concept of virtual water. The quantity of water embedded in products. Cereal crops require water as an input, for their production. And countries that import cereal are effectively importing water embedded in the cereal, but it is much cheaper to ship cereal than it is, to ship water to grow cereal. [BLANK_AUDIO] Fact number five, water is a renewable resource. We use water, but we don't actually consume water. Water is not like oil or coal, which are non-renewable resources. We can change the quality and location of water as it moves through the hydrological cycle, but we can't, can't destroy it. Sometimes we speak of ground water, aqua versus being non-renewable. This means that water is withdrawn from the aqua for it's not recharged, but that doesn't mean the water obstructive from su, such aqua versus remove from the hydrological cycle. [BLANK_AUDIO]. Fact number six. Water is not just an economic good. This image shows the baptism of Christ by John the Baptist. Water plays a spiritual role in the traditions of all the great, world religions. Water is also important for cultural, social, and environmental reasons, not just for economic uses. So when we work in the water sector, we need to be aware that water elicits powerful passions and emotions. [BLANK_AUDIO]. Thank you for watching this video. In the next video, we're going to look at global statistics about, who has improved water and sanitation services. In different parts of the world. [BLANK_AUDIO]
