By: Yue Hu, Dingwen Wu, Jin Huang
Have you ever paused to consider the economic metaphors hidden in everyday language? Phrases like “cash flow,” “groundwater banking,” and “stock” may hint at deep-rooted links between water and money. These are not merely metaphors – they could reflect a long-standing conceptual overlap between ecological and economic systems.
Early Economic Models and Their Connection to Water
Interestingly, early economists used the behavior of water as a framework to model the flow of money. In 1948, economist Paul Samuelson introduced the circular flow diagram, a foundational model of modern economics that visually mimicked water flowing through pipes to illustrate the circulation of money.
Building on this logic, New Zealander Bill Phillips created the Monetary National Income Analog Computer (MONIAC) in 1949, a physical economic simulator that used water to represent money. With tanks, pipes, and pumps, the MONIAC modeled complex variables such as bank rates, taxation, and government spending.
The MONIAC’s components bore striking similarities to the natural water cycle. When economic terms are replaced with hydrological ones, the same circular logic applies: active monetary balances might be seen as surface water, government reserves correspond to aquifer storage, and foreign exchange balances are analogous to atmospheric water. Just as water moves through the natural system via precipitation, discharge, pumping, and evapotranspiration, income, investment, taxation, and spending regulate the flow of money within an economy, each acting as a force that helps keep the cycle in motion. These analogies weren’t mere gimmicks—they reflected an intuitive understanding that stable economies and stable ecosystems both likely depend on continuous, balanced flows.
The Dust Bowl: When Ecology Met Economy
While early economists used water to explain financial systems, the Dust Bowl of the 1930s showed what happens when that flow is disrupted in reality. Triggered by prolonged drought, unsustainable farming, and soil erosion, the Dust Bowl devastated the U.S. Midwest. Fertile farmland turned to dust, crops failed, livestock perished, and entire communities were displaced.
As agricultural output collapsed, unemployment soared, banks foreclosed on farms, and mass migration began. The economic fallout compounded the Great Depression, highlighting how environmental mismanagement and water scarcity can directly undermine economic stability. The Dust Bowl remains a powerful historical lesson in the inseparable link between ecological resilience and economic prosperity.
Virtual Water: A Prelude to Nature’s Economic Valuation
In more recent decades, the concept of virtual water has sharpened our understanding of water’s economic role. Coined by Tony Allan in 1993, virtual water refers to the hidden water used to produce goods, the water embedded in everything we consume. Allan was later awarded the Stockholm Water Prize for this influential idea.
The numbers are striking: about 600 gallons of water are needed to grow enough hay to produce just one gallon of milk. A single apple requires roughly 6 liters of water. Producing one hamburger may consume over 600 gallons. These examples expose the vast, often invisible, water footprint behind everyday products.
As the world’s largest exporter of virtual water, the United States plays a key role in supplying water-intensive goods to water-scarce nations. This hidden exchange suggests how water already functions as a form of global currency, silently shaping economic dependencies across borders.
Toward a New Order: Revaluing Natural Capital
To meet the escalating threats of climate change, perhaps the effective strategy is to reframe natural resources like water as monetary assets, as forms of capital.
Water, after all, is the silent currency underpinning life itself. From the birth of ancient river civilizations to the complexities of modern global trade, it has always been central to survival, growth, and power. Just as the MONIAC once used water to simulate monetary flow, today’s economists and policymakers are encouraged to recognize water as real capital with market influence.
The cycle continues. The question is: will we come to recognize its worth before it runs dry?
Authors’ Bio
Yue Hu: Yue is a landscape designer at WRT Design, an interdisciplinary firm based in the United States. She holds a Master’s degree in Landscape Architecture from the University of Pennsylvania and a Bachelor’s degree in Urban Planning. Her work spans diverse contexts, including projects in the United States, China, Denmark, Saudi Arabia, and Japan. Yue is deeply fascinated by the complexity of urban environments and how culture, economics, history, and human interaction shape the life of cities.
Dingwen Wu: Dingwen is a landscape and urban designer with a multi-disciplinary background, driven by a passion for crafting vibrant public spaces that evoke a strong sense of place and materiality. His design centers on uncovering moments of surprise in everyday life, aiming to create environments that are both lively and contextually resonant.
Jin Huang: Jin is a landscape architect with experience researching coastal resilience facing global climate change. He is passionate about creating sustainable spaces that address ongoing climate change.
Disclaimer: This article explores conceptual and historical perspectives on the economic value of natural resources, particularly water. It does not constitute financial or environmental advice. Readers should consult experts before making decisions related to natural resource management or economic policy. The views expressed are for informational purposes and do not necessarily reflect those of any affiliated institutions.
Published by Jeremy S.
