Unbundling Water Rights, Introduction, pgs 7-10

Hello, friends.  Let’s start with the Introduction, starting on page 7, going through page 10, stopping at the header Building Blocks.  We can go back to the summaries once we understand the material, if we still want to.

Professor Young writes clearly and well.  I can’t improve on his text by summarizing or explaining it.  I hope you’ll read it yourself and come back to give your own impressions.

My impressions:

It is feels almost circular to point this out, but this work is all about capitalism and markets.

The primary insight of that experience is that progress comes from building the institutional conditions that enable markets to flourish. In Australia, the gains came from implementation of a sequence of reforms that simplified the system and gave users every incentive to consider selling their water to someone else. As the systems used to define water rights were improved, the value of the rights increased. Water trading became the norm, and profits increased. In the first decade of water reforms, the internal rate of return from holding a water right averaged well over 15% per year (Figure 1).

Success is increased GDP and profits to people who were lucky enough to hold rights at the beginning.  This work takes those goals as self-evidently good; it doesn’t build a case for them.  If you are interested in other goals (human flourishing, consistent food production, deep ecology) you won’t see them included here.  This is a proposal very rooted in capitalist trade: historic instruments of trade, turning water use decisions into economic decisions, pricing risk, incentivizing investment.  Nothing wrong with that, but I’ll hold the bias in my mind as I read along.

***

We’ll go through the six core concepts in detail later.  After that came four characteristics, pg 9.  I liked the first two characteristic of robustness and hydrologic integrity.  Our current system doesn’t have those, so they’d be an improvement.

The third characteristic favors the already rich:

  • Efficient management of supply risks so that those who need access to a very reliable water supply have the opportunity, at an appropriate cost, to secure it.

The fourth characteristic again commodifies water.  This is the very goal of this proposed process, so of course it does.  I keep noting it so that I remember to think critically about it, rather than uncritically accept this characteristic as a good thing.

  • Incentives that encourage people to search for more efficient ways to save and use water and also, to invest in resources that use water.

***

Another concept directly applicable to water is the idea of double-entry book keeping, which requires everyone to operate under a simple rule: if one account is to be credited, another account has to be debited.

Dude.  You have got to be a hardcore economist to attribute conservation of mass to double-entry book keeping.

Your turn, y’all.  What did you see in the first couple pages of the introduction?

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6 Comments

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6 responses to “Unbundling Water Rights, Introduction, pgs 7-10

  1. Dave W.

    Interesting paper – I’ve just read the executive summary and the intro so far. Thanks for hosting the discussion.

    Following your comments about implicit commodification, I wondered how “those who need access to a very reliable water supply have the opportunity, at an appropriate cost, to secure it” applies to fish. It does seem that “those” is restricted to human agents.

  2. onthepublicrecord

    The fish can get water two ways:

    Instream flows are set aside before the yearly allocation is given out to shareholders. So that fish supply is assured.

    People could buy water for fish. In Australia, it looks like the government buys water for fish. Now, me, I don’t get why we should pay people for water for fish. But those kinds of transfers of wealth to existing rights holders are probably the reason Australia was able to do this at all.

  3. Steve Bloom

    Two questions:

    Is the 1978 commission report available on line?

    Is there a good analysis of the extent to which it might be possible to simply nuke the whole system and design a new one?

    • onthepublicrecord

      Here.

      Not that I know of. I think everyone assumes it is so insurmountable that it doesn’t get analyzed. That’s part of why I am so impressed with Unbundling Water Rights, which breaks down the transition process into distinct steps. Several of the steps would be ambitious all by themselves. I don’t want to go down this route, because I don’t want the outcome. But having it all laid out so clearly helps think about what it would take to do another form of wholesale rights reform.

    • Steve Bloom

      Hmm, a quick search finds this. Not exactly nuking the system, but it does point to redefining beneficial use consistent with the new drier climate, which the constitutional language quoted below seems to allow for. Note the interesting author.

  4. Steve Bloom

    Pasted below are the relevant portions of the Constitution, which I had never looked at.

    It seems to me that in a climate change context Article 10 lends itself to an entirely different interpretation of beneficial use. Section 5 is especially interesting.

    I’m sure there’s a vast body of legal scholarship on this.

    ARTICLE 10 WATER

    SEC. 2. It is hereby declared that because of the conditions
    prevailing in this State the general welfare requires that the water
    resources of the State be put to beneficial use to the fullest extent
    of which they are capable, and that the waste or unreasonable use or
    unreasonable method of use of water be prevented, and that the
    conservation of such waters is to be exercised with a view to the
    reasonable and beneficial use thereof in the interest of the people
    and for the public welfare. The right to water or to the use or flow
    of water in or from any natural stream or water course in this State
    is and shall be limited to such water as shall be reasonably
    required for the beneficial use to be served, and such right does not
    and shall not extend to the waste or unreasonable use or
    unreasonable method of use or unreasonable method of diversion of
    water. Riparian rights in a stream or water course attach to, but to
    no more than so much of the flow thereof as may be required or used
    consistently with this section, for the purposes for which such lands
    are, or may be made adaptable, in view of such reasonable and
    beneficial uses; provided, however, that nothing herein contained
    shall be construed as depriving any riparian owner of the reasonable
    use of water of the stream to which the owner’s land is riparian
    under reasonable methods of diversion and use, or as depriving any
    appropriator of water to which the appropriator is lawfully entitled.
    This section shall be self-executing, and the Legislature may also
    enact laws in the furtherance of the policy in this section
    contained.

    SEC. 5. The use of all water now appropriated, or that may
    hereafter be appropriated, for sale, rental, or distribution, is
    hereby declared to be a public use, and subject to the regulation and
    control of the State, in the manner to be prescribed by law.

    ARTICLE 10A Water Resources Development

    SEC. 2. No statute amending or repealing, or adding to, the
    provisions of the statute enacted by Senate Bill No. 200 of the
    1979-80 Regular Session of the Legislature which specify (1) the
    manner in which the State will protect fish and wildlife resources in
    the Sacramento-San Joaquin Delta, Suisun Marsh, and San Francisco
    Bay system westerly of the delta; (2) the manner in which the State
    will protect existing water rights in the Sacramento-San Joaquin
    Delta; and (3) the manner in which the State will operate the State
    Water Resources Development System to comply with water quality
    standards and water quality control plans, shall become effective
    unless approved by the electors in the same manner as statutes
    amending initiative statutes are approved; except that the
    Legislature may, by statute passed in each house by roll call vote
    entered in the journal, two-thirds of the membership concurring,
    amend or repeal, or add to, these provisions if the statute does not
    in any manner reduce the protection of the delta or fish and
    wildlife.