This is where the economists tell me that the way to do it is price. You could do this whole thing using demand curves and raising the cost of water up to where people use 20% less, dust off your hands and go home.
Here are my objections, and then my further thoughts:
1. That sucks for people. They don’t like paying that much more for water.
I myself am fairly unsympathetic to that; I’m not particularly interested in supporting lifestyles dependent on cheap water. Besides, we’re all paying for the un-internalized costs of water in the form of giant-ass bond measures. But, here’s the thing. People FLIP OUT. They moan and whine and turn over boards of directors when water prices go up. They drag out the 218 process indefinitely. Raising water rates isn’t an easy administrative solution. It is a big political hassle at the district level.
2. The standard objections to market-based allocations are true and relevant for water.
People don’t start with equal amounts of money, so they don’t get to express their preferences for water use evenly. That’s fine for luxury goods, but feels pretty unjust when you’re talking about water to satiate thirst, and daily conveniences, like washing things and landscaping.
Exclusion is inhumane, and for that matter, can’t be enforced. People will find a way to get what they desperately need.
3. Here’s the heart of my objection. I think that raising prices (or using a market to set prices, which is not exactly the same) is a very powerful technique that goes to strongly toward the end of an economically efficient use of water. No one has yet convinced me that I want an economically efficient use of water. Actually, no one tries to make the case. The assumption that the economically efficient outcome is self-evidently better (because it is economically EFFICIENT!) is so overpowering that no one tells me what it will look like and whether it will match my values. I suspect it will not, so I’m real leary of very powerful mechanisms that will create that outcome. I think there are positive externalities to some (but certainly not all) inefficiencies, so I don’t want them erased. I’m thinking of inadvertant habitat on farms, of public goods like parks and urban forests, of farming communities that stay populated because they aren’t on the industrialization treadmill.
Next economists tell me that with the gains from economically efficient water uses, we can afford to support those things I value. Maybe we could, but that doesn’t mean we will. So I am skeptical about the whole business, and not yet ready to support water markets.