Worse, much abstracted water is used in inefficient irrigation; compounding that, underpricing means it is often used for watering low-value crops.
The firewalls between businesses are being fortified, too, so that managers have a clearer idea of the standalone profitability of each division.UBS was especially guilty of underpricing its internal funding, letting its investment bank take advantage of the bank's cheap overall cost of funds without paying an appropriate premium for the risks it was taking.
As Jeremy Grantham, a veteran investor, has remarked: "After 20 years of more or less permanent overpricing of the S&P, we get five months of underpricing.
The credit-card act passed in America last year leaves providers with a choice between underpricing for some products, which is bad for them, or restricting their offerings, which is bad for consumers.Most would agree, however, that markets need both tighter rules and better enforcement.
Berkshire Hathaway has beaten the market over the long run by investing in relatively low-risk stocks the market was underpricing, according to "Buffett's Alpha", a study by three economists, Andrea Frazzini, David Kabiller and Lasse Pedersen.
But some people, such as Peter Thiel, a big early investor in Facebook and LinkedIn, have accused the banks involved in the LinkedIn transaction of drastically underpricing the shares.Bankers have sometimes been accused of underpricing deals so that their investment clients can make a swift killing on a firm's shares.
History is replete with brilliant people who made calamitous mistakes.Some of the finest minds on Wall Street and in academia were behind Long-Term Capital Management (LTCM), a hedge fund that collapsed in 1998, after following a strategy that believed the market was underpricing illiquid assets and overpricing liquid ones, using squillions of borrowed money.
Financial regulators did little to restrain banks when the boom was under way, bar the odd comment that the industry was underpricing risk.
First, they have become much less prone to underpricing risks and more willing to cut borrowers off, despite protests from customers and business associations.
Nearly three decades ago, Michael Porter, the renowned business strategist at Harvard Business School, posited that companies must compete either on differentiation, by offering something unique to the market, or by underpricing the competition through cost leadership.
