In the context of arid and semi-arid climates, where water resources are scarce and where multiple uses of water have to co-exist to support a variety of life systems, competition for the products and functions of water resources (see Box 1) is likely to be intense and to involve problems of opportunity costs and externalities (Hodge & Adams 1997). Opportunity costs may be defined by the ‘sacrifice’ made, and its related forgone income, in allocating a scarce resource to a particular purpose rather than another (Pearce & Turner 1990; Lipsey & Harbury 1992). For example, at the farm level, integrating aquaculture within irrigation systems may lead the farmer to face two different ‘dilemmas’ during the dry season when water scarcity is felt more strongly: – Either use pond water to irrigate vegetables/fruits/rice crops OR keep it to stock fish for later consumption. – Either use feed or some sort of fertilisation to enhance pond culture OR use ‘untreated’ pond water for livestock and household use. (Pant & Demaine 1998 with reference to Thailand).