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 unlike most other valuable resources, it’s hard to place a price on water. 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.” The problem of valuing water is far from academic. Societies around the globe are increasingly facing the task of difficult tradeoffs between different uses of water. While in most countries the majority of human water use goes to growing crops, cities and ecosystems are getting thirstier as a result of growing populations, economic development, and climate change. Water quality, too, is deteriorating in many areas because of pollution, and far too many people still lack access to safe and dependable sources of clean water. Without a…