Planet Water: Investing in the World's Most Valuable Resource Steven Hoffmann

A resource economist, Steven Hoffmann twenty years ago believed that the markets could regulate the governance of water. Subsequently, his attitude has changed, given current resource challenges. As he stated in his introduction, "the inflection point is upon us. Water will be the resource that defines the twenty-first century driven by a substantial increase in its value. This value will inevitably be unlocked as the global population adjusts to the linkages between human health, economic development, and resource sustainability" (p. xii). Directing his discussion to investors, Hoffmann then explains various economic concepts, such as value, marginal utility, supply and demand and non economic factors, such as quality and quantity. He concludes that he cannot divorce the economics of natural resources from their ecology, "we must fuse the human economy with nature's economy" (p. xiv). This translates into a sensitivity of the carrying capacity on which the business rests.

He voiced four principles for investors.  "First, there are no substitutes for water. Second, prices set at the margin should include the marginal cost of water. Third, value in exchange requires a measure of value and the ability to exchange. And fourth, total utility is relevant to ecology" (p. xiv).

The book has three parts, Water, Investing in Water, and Water beyond the twenty-first Century. The topics of Part one range from the science of water to water regulation, a subject of particular interest to investors in judging whether regulation dampens or encourages market growth. According to Hoffmann, regulatory agencies within the United States, the country with the most advanced regulatory framework, apply the "best available technology (BAT) that is economically achievable to meet the goals" (p. 23).  This results in cost-benefit optimization, driven by innovations in technology to meet a governmental agency's policy goals. However, the projected increase in population and the actual degradation of current water supplies puts humankind at the inflection point.

Within any conversation about the water, the question arises of whether it constitutes a public or private good. Hoffmann reframed the question by asking whether it constituted a "public good, commodity, or resource?" (p. 29). In response, the author assumed the perspective of one advocating wise management. Therefore, sustainability overrides a blind human right and commodization.

Despite the lack of conformity to economic principles in setting water rates--marginal cost pricing or other policies--the author predicted that water rates will rise, due to four factors. "First, water is still a highly regulated industry, which imposes significant costs. Second, traditional rate structures that were set artificially low will require a catch-up in rates to adequately replace existing facilities. Third, the scarcity factor inherent in water resources is being incorporated into the supply component of the (p. 37) price of water. And, finally, the increasing importance of water-related technology as a response to water problems will require economic incentives to encourage their adoption" (p.38). After articulating his basic assumptions, Hoffmann proceeded to explain the economic, social, medical, institutional, political, and other forces that impact the water industry and the companies that contribute to water and wastewater markets.


Hoffmann, S. (2009). Planet Water: Investing in the world's most valuable resource. New York: John Wiley & Sons.