Resource allocation for the two situations is described in Table 5.1. Higher 

 levels of economic activity, more industrial, farm and forest production, and 

 more recreation activity occurred when net benefits were maximized than when 

 public and private cost was minimized. The economic activity expanded to 

 about the maximum under presently known technology. Such expansion is 

 particularly evident, under median- and low-flow conditions, in shadow price 

 per pound of BOD. Under median-flow conditions and current status of the 

 river classification, the C-level of quality was reached at a marginal cost of 

 about 56 cents per pound of BOD treated and increased to $7.08 per pound of 

 BOD under low river-flow conditions. The low flow pretty much reflects the 

 maximum level of development from the basin-wide point of view and opti- 

 mization under perfect competition. The $7.08 per pound of BOD removed 

 starts to become prohibitive. At median flow and with B-class quahty, the 

 cost per pound of BOD was $4.15. 



These situations are the bounds for analyzing resource, cost, and benefit 

 allocations. 



5.2 Discharge of Raw Sewage is Economic Optimal 



The discharge of raw sewage from rural households and small towns into open 

 streams is often economically the best of alternatives open to the household 

 units, communities, and basin. It is less expensive for industry and larger urban 

 areas to treat waste water for meeting quality standards and improving river 

 quahty than it is for the smaller units of rural households and small towns. 



If the criteria were based solely on public and private cost minimization in 

 the basin, income -generating activity would be reduced to permit rural house- 

 holds to discharge raw sewage into the environment, even under low-flow con- 

 ditions. The incentive for all rural households to install waste-water treatment 

 faciUties (septic tank) occurred only under extreme conditions (low flow, and 

 maximizing net benefits). 



Discharge of household waste water directly and indirectly into streams and 

 rivers can frequently be found. There is little social pressure to change this 

 practice. The houses so involved often were built before health restriction pre- 

 venting this practice became effective. In rural areas, no pressing reason is felt 

 for changing what has been done over time. The practice will survive most 

 blanket measures for improving water quality as stream classification and penalty 

 payments based on damages. 



5.3 Influence of River-Flow Level on Resource Use 



The river-flow level, reflecting precipitation and runoff rates, had a major 

 influence on optimal waste-water treatment facihties. The effect is complicated 

 and, in analysis, may give rise to what appears to be erratic behavior as flow levels 

 vary from high to low. Small communities appeared to be most involved in 

 change in optimal waste-water treatment. At high river-flow levels, the optimal 

 treatment was no treatment. At the median-flow level, public treatment with the 

 activated sludge process (90 percent effective) became optimal. At low-flow 

 levels, private septic tank treatment (assumed to be 100 percent effective) be- 

 came optimal. The change at each river-flow level is consistent with change in 

 BOD discharged into the river. 



34 



