A rough answer by region and sector would go a long way.

I do read the pro-water market pieces and I consistently have the same reaction.  What would California look like after?  What would it feel like, on a daily basis, after a water market is up and running?  I live here and I want it to be nice.  How would a water market transform us?  I never get an answer with any specificity.  This lengthy piece gives the following list of good things that would happen, after the water market gets going:

  • prices would go up, creating an incentive to conserve
  • new technologies for affordable water generation would be spurred
  • consumers and businesses would make adjustments slowly

This piece isn’t even that explicit.  The good result of a water market is:

  • water will flow to its highest and best use, and (if I interpret a bit) more desal.

This piece implies that you’d reverse the problems caused by no-market, so presumably you’d no longer have weak pricing signals.

Again, you have to read for the implications in RAND’s proposal.  With a good new market, the results would be that the price for water would represent its true value and that valuable trades would happen.

None of those is in any way helpful or precise.  Before we put a market into action in California, what would the results look like?  Here, I’ll make some up, for examples.  (Truly, I have no real notion.)

  • Irrigation districts in the south valley would sell to Bakersfield and local oil fields.
  • Irrigation districts in Coachella would sell to San Diego, enough that San Diego could even grow avocados again.
  • The only farmland left in California would be 2 million acres of sugar beets.
  • California would produce nothing but solar cells and silicon chips for the next thirty years.

See, those are made-up examples of water market outcomes that I can ponder.  Would I like living alongside that?  Do I want that for my state?  Telling me what would happen after a market is put in place allows me to decide: do I want to support putting a market in place?  Water market advocates never do that, and certainly never with even regional-level or sector-level precision.

I don’t want to put words into others’ mouths, but I believe some water market advocates are advocating a process (a market is a process, not the result) specifically because they do not want to choose an outcome or make “winners and losers” explicit.  Maybe they think that enough of people’s happiness is captured in purchasing behavior that they can assume a water market leads to the best outcome, whatever it produces.  In that case, I would ask: is there any water market outcome that you wouldn’t want?  Could there be an extreme water market outcome that wouldn’t be pleasant to live amidst?  If the reductio ad adsurdum came to pass and a flexible fast water market meant that all of California’s agriculture became a 3 million acre monoculture of tree nuts, farmed by neo-feudal agribusiness, would you like driving past that on the 5 and 99?  From that answer, I’d establish whether the market advocate felt there is any role for values in making water allocation decisions.

If there is any role for values in establishing the bounds of a water market, then we shouldn’t be mucking around with an incredibly powerful process without first establishing to some rough accuracy what we’d get when the process is done.  I’m not asking for details at the zip code level, but I do want far more than the vague bullshit in the pro-market reform papers.  A water market would transform the state I love, so I want to know what this market would transform it into.


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4 responses to “A rough answer by region and sector would go a long way.

  1. jrfleck

    I’d like to answer this in a slightly different way than you’ve posed the question, because what’s most important is the process by which questions of community values get incorporated into the creation of “markets”.

    There’s a very robust discussion of this question in the Colorado River Basin, with some good examples of how it plays out. The things that result don’t look like the “markets” the purists talk about – you need to get beyond the work of the market fantasists you’re linking to. The resulting examples reflect attempts to incorporate the sort of community values boundaries that you’re looking for.

    So in Palo Verde Irrigation District, water moves to Met for a price, with restrictions placed on the amount of land that can be fallowed to preserve the community of origin.

    Imperial Valley governance hates fallowing, so it’s shifting toward financing by San Diego of on-farm conservation measures that keep land in production by funding all manner of creative stuff done by farmers to save the water that San Diego is buying.

    Out on the Arkansas in eastern Colorado, old-style market-based buy-and-dry killed some communities, and folks have learned a hard lesson. The “Big Ditch” experiment is the result, where water rights are pooled and cities can buy a fraction, with money flowing into rural communities, but it’s moved around so you’re not permanently drying any one community or area and lots of water remains.

    The important characteristic in all these cases is that communities of origin are doing the exercise you suggest – what are our values, what do we want to be and look like – and then building things that have some of the characteristics of a “market” in ways that try to carry out those goals.

    • dzetland

      Fleck’s right that these are NOT markets but that they ARE politically and socially acceptable. In the short run, those are better. In the medium run, I’d like to see the SWP put its water up for sale. Surely the State can make more for taxpayers than it is selling to folks who signed contracts in 1960. /my 2 cents

  2. dzetland

    You’re right that “we” would never discuss outcomes as much as process, since markets (for water, cars, avocadoes) represent the outcomes of many values. I *always* recommend that new markets for water start with, say, 5 percent of the water and perhaps grow by 5 percent per year (or 5), so people can see what’s happening and perhaps adjust.

    Want social flows? Set those aside from the market (as I do in my books). Want to preserve some farmers? Don’t allow them to sell in the market? Want to protect cities? Do nothing, as they can outbid farmers 99% of the time. Want to protect groundwater? Make sure it’s regulated BEFORE markets get going, in case people try to pump and export.

    Water markets are nothing voodoo. We have markets in many many commodities. The key is to make sure we know who has water, where (limiting and defining rights) before markets get going… but that’s kinda common sense.

    Anyone is invited to contact me if they want to know more.

  3. Lance Johnson

    California has had a very active water market since the early 1990s. During that time I was supervisor of water resources for a large ag agency and my staff and I were routinely buying, exchanging and banking 250,000 to over 400,000 acre-feet per year depending on demands. Then I was a private sector water broker for10 years buying and selling water all over the central valley and south bay area. So voluntary market based water marketing is anything but new. Further, Austrlia’s water market is often hyped as the panacea to California’s water problem. In fact for many years during the late 90s and erly 2000s Australia sent many water managers and farm interests to California to learn about our water system, rights, laws and management, I know hainvg spent many days with those folks every year. All they did was taylor their water marketing system to their particular conditions which in fact do not exist here.And recent reports are that the Australian system is failing, badly.