Many opportunities exist to take advantage of integrated surface water–groundwater management with consequent resource and investment savings. In inappropriate legal and administrative settings, groundwater becomes an open-access resource leading to excessive contemporary and inter-temporal externalities. Several policy instruments have been used to correct these externalities: limits in well spacing and capacities, pumping taxes and tradable pumping permits. Urban–agricultural competition for limited groundwater need not result in crises for either sector if these instruments are used to mediate the competition. In the case of non-renewable stocks of groundwater, rates of economic and demographic development should be planned in keeping with long-term criteria to avoid overly rapid exploitation of the resource, non-sustainable population levels and inappropriate investment in infrastructure. Island states and coastal areas have special problems related to saltwater intrusion and coastal subsidence that can be mitigated if not eliminated through the use of economic and physical measures. Five brief case studies illustrate these points.