Talk is cheap, or is it? The cost of consulting about uncertain reallocation of water in the Murray-Darling Basin, Australia

In this paper we reflect on the challenge of reallocating water resources from agricultural interests to environmental uses. The area of interest is the Murray-Darling Basin, Australia, although the evidence presented provides salient lessons for a range of settings. We draw on the transaction cost literature where the tasks of re-designing and using institutions can help conceptualise the costs associated with policy change. A framework for improving ex ante assessment of transaction costs and its relationship to transformation or abatement costs is elaborated, especially as it relates to community consultation exercises. Against the background of the water reforms of the past three decades we conclude that policy makers and administrators could limit increases in transformation costs and contain transaction costs by giving greater attention to the form of community consultation, by taking account of the sources of uncertainty that attend policy choices and recognising the potential for consultation fatigue.

► A review of the processes of water reform in Australia is offered. ► The role of community consultation and the resulting costs of change are described. ► We recommend expanded ex ante analysis of the impact of consultation on the transaction costs of change.