A recent report by the Morrison Institute ("Watering the Sun Corridor") is in part reassuring: We're not in danger of running out of water anytime soon, even with reasonably robust growth.

That said, the report also indirectly underscores a defect in Arizona's approach to allocating water as we move forward.

The report's principal author was Grady Gammage, one of the state's most astute urbanologists. It provides an excellent overview of the current water situation, somewhat clumsily rendered because of its adoption of a useless abstraction promoted by some national demographers.

The abstraction is that the country is coalescing into regional "megapolitan" areas that transcend and supersede the conventional metropolitan boundaries pedestrian analysts employ.

The uselessness of this abstraction is best illustrated by Southern California, which has already grown together. Yet Los Angeles County, Orange County and San Diego County are all distinct economic regions.

The Morrison water report treats Maricopa, Pinal and Pima counties as one megapolitan area - the "Sun Corridor." Yet, in terms of water, they are very distinct, with different sources of supply and different issues. Phoenix still uses a third more water per capita than Tucson. Agriculture is still the primary water user in Pinal. Tucson has an allergy to the direct use of Central Arizona Project water.

Setting aside this crotchet, the report inventories likely supplies and demand for water and finds them in balance for several more decades.

The current population of the Sun Corridor is 5.2 million. According to the report, likely future water supplies would support a population of 8 million to 13 million. The latest population projection is that, by 2040, the Sun Corridor is likely to have a population of 9 million.

Those projections, however, are subject to rather broad variabilities. Climate change may diminish future surface-water supplies. Arizona's Colorado River rights are subordinate to those of other states. Population projections for Arizona right now are built on sandy soil. We don't really understand what happened in the last five years, much less what will happen over the next 30.

What we do know is this: There is not really a market for water in Arizona in which price reflects future scarcity and uncertainty.

In a market, price reflects not just current scarcity but anticipated future scarcity as well. And there is a price premium for uncertainty. The greater the uncertainty, the greater the risk premium.

The ability to buy and sell water in Arizona is sharply limited. Water is not owned. Instead, to oversimplify, there is a right to use water generally tied to land.

Water is a public good, either delivered directly by government or by private water utilities subject to rate regulation by the Arizona Corporation Commission.

The price of water is based upon its cost of delivery. That underprices it, probably significantly, since there is no reflection of future scarcity or uncertainty.

The Groundwater Management Act of 1980, which took primarily a regulatory approach, has gotten the state to a good place, in which the overdraft of groundwater in Maricopa and Pima counties has been largely eliminated.

From this point forward, however, market pricing for water would do a better job of managing the allocation issues than a regulatory approach. There should be a wider ability to buy, sell and transport water. Prices should reflect more than just the cost of delivery.

The Morrison report acknowledges that price does more than exhortation or regulation to induce conservation. University of Arizona law professor Robert Glennon calls for more of a market price for water in his book "Unquenchable."

Developing more of a water market in Arizona wouldn't be easy, intellectually or politically. Nevertheless, bright minds who want a better and more certain future for Arizona should be working on it.

Reach Robb at robert.robb@arizonarepublic.com or 602-444-8472.