Article published on http://www.worldbank.org.
Most people agree that water is an extremely valuable resource—for farmers who depend on it to grow crops, for factories that need it to cool machines and spin turbines and, of course for life itself. But. The very fact that water is so important to people, economies, and the environment means that it is tough to even agree on a common way of valuing it.
No less an economic mind than Adam Smith was stumped by this challenge. As he famously observed, “Nothing is more useful than water: but it will purchase scarcely anything. A diamond, on the contrary, has scarcely any use-value; but a very great quantity of other goods may frequently be had in exchange for it.”