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Economic analyses of the internal costs and benefits of irrigation projects are nothing new. Investors want to know if a particular project is likely to generate enough revenue to pay off its initial investment costs, sustain operations, and generate a profit, and they routinely commission studies that attempt to predict the answers to these questions. Analyses of the opportunity costs of irrigation, such as are undertaken in this paper, are less common but are in some ways more meaningful.

Almost all areas that are incorporated into large-scale irrigation schemes are already inhabited and are agriculturally productive. For regional planning purposes, one needs to know not only that a development scheme is economically viable, but that it produces economic benefits that will exceed those that were already being obtained from the pre-existing production systems that it will displace. This study undertakes these calculations with regards to grazing lands on the banks of the Awash River in north-eastern Ethiopia. Beginning in the 1960s, these traditional pastoral grazing areas were converted into large-scale cotton and sugar plantations.

This paper quantifies the economic benefits generated by three alternative agricultural systems – pastoral livestock production versus cotton and sugar cane estates. Some would argue that the results of this comparison are a foregone conclusion. Pastoralism is often viewed as a primitive, unproductive way of life - an economic dead end that poses no credible alternative to modern, technologically advanced and input-dependent forms of irrigated agriculture. The results presented in this paper call these presumptions into question.