An economist’s view of California’s water problems

David Zetland:

[W]e see a total lack of vision or action to address the REAL drivers of scarcity — retail prices too low to notice, permissive overuse of groundwater, failing water-as-charity policies, and the blinders of a historic pretension that water rights are properly allocated (nope) in the correct volumes (NOPE).

Taken together, the excess of demand over supply and failure to address that fact means that California is heading the way of Sao Paolo, with twice the population at risk.

Much more, worth clicking and reading in full.


  1. The principal problem with David’s rant is that he’s not in charge. Elected officials are, who happen to be responsive to their constituents’ concerns. We can all solve problems instantaneously if we happen to be tsar, but that’s not our system of government.

    In particular, David believes that water rights are not “properly allocated”. That’s a fine belief, shared by many people. So far, however, not enough people hold that belief to change the California constitution or to start whacking away at all the decisions of the SWRCB. (One reason that there isn’t a lot of support for changing the water rights system may be that water managers are deeply conservative. There is billions of dollars invested in the infrastructure that is supported by the existing water rights system. Even if San Diego suddenly bought a major percentage of IID’s water rights, they’d still have to get the water there.)

    In the interim, however, we can note that Gov. Brown is interested in facilitating changes in points of diversion at the SWRCB, and also note that, as an example of that policy, MWD is going shopping right now for rice farmers’ SWP allocation for this year. So if you look behind the curtain, you can see that there are actual legal mechanisms in place for shifting around how water rights are exercised, if not shifting the rights themselves.

    David also believes that water is too cheap. This is another common argument and one that I find particularly aggravating. Since when is government supposed to make a profit off its constituents? The City of Long Beach could charge me pretty much whatever it wants, because it’s a monopoly provider, as is every water provider in the state from the biggest wholesaler to the smallest mutual water company. But I and millions of other Californians vote, and we consistently vote for our elected officials to deliver water that is affordable. Why would anyone expect anything else?

    California law actually prohibits the state from pricing services above cost. The way that cities create water demand reduction programs — like lawn buybacks — is to establish separate programs for demand reduction and get the required approvals (usually including voters) to finance the program. Sounds like good public policy to me.

    Yes, there is a very significant risk that Central Valley farmers will so over-pump the groundwater table as to cause permanent subsidence and significant harm to the potable water supplies in those communities. But that’s a very different issue from 38 million people suddenly having dry taps.

    At the end of the day, water is local. Prescribing sweeping state-wide solutions makes for a good rant but terrible policy.

  2. I’m in complete agreement with Francis. However, in David’s defense, he did make a comedic reference to his being in charge. It’s funny. Things look different in the trenches verses looking at it from a distance.


  3. Well Francis, I am sure glad that you’re not in charge b/c the status quo is certainly NOT working
    (1) Rights are overallocated and under-traded. How about we cut junior rights and make it easier to market existing rights. As you may (not) know, Australians who sell rights out of the system pay severance fees, so there goes your stranded assets objection. (Oh, and don’t forget that CVP is only 20-30% paid off, so it’s not like the money is coming!)
    (2) I have said/written/blogged that revenues from higher urban prices can be refunded. I suggest you look a little deeper, e.g., the links in that post that JF recommended.
    (3) Demand>Supply means too cheap. Got a better explanation for why people have lawns all over arid California?

    @Delbert — The trenches are filled with naysayers. I’d like to see a little more of that famous “California optimism.” (PPIC is pretty good tho 🙂

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