| Sumario: | This article presents a discussion on water resource policy. Economist A. Allan Schmid while discussing nonmarket values and efficiency of public investment in water resources extends far beyond questions of water resource policy. In treating each of the major market failure phenomena--intangibles, public goods, externalities, and indivisibilities--he operates out of no rigid set of presuppositions and attaches himself to no doctrinaire position, except, perhaps, one of shrewd pragmatism. This discussion attempts to filter out the essence of Schmid's position and, for better or for worse, to relate this position to that of standard or orthodox economic analysis. Schmid correctly argues that existing prices no longer serve as guides to investment decision making and no unique social welfare optimum emerges. While Schmid's analysis of intangibles is not unique, neither is it traditional. Whereas much standard analysis views these phenomena as immeasurable in dollar terms, Schmid, reflecting the tone of recent discussions on this problem, urges that all such phenomena be at least conceptualized in the economist's framework of commodities, demand functions, and prices.
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