Blogging is an up-to-the-minute affair, second only to the Twitter. Which is why I’m bringing you a quick observation about works published in 2000 and 2005. I don’t mean global criticism by this; both works are very impressive, as well as clear and readable. But since I just read one and started on the next, I can’t help notice a commonality. The authors do not mention disadvantages of a market system.
“But On!” you say. Right there on page four of the McCann paper, there is a heading that says “Advantages and Disadvantages of Water Rights Markets“. Right! That was what got me all excited for a listing of the disadvantages of water rights markets. But two of the three items are obstacles to instituting a market (1, transaction costs and 3, third-party objections) and the second is a risk of poorly designed markets. I am willing to grant market advocates well-designed markets, since I would like to be granted the possibility of well-designed regulation.
Haddad’s Rivers of Gold did the same thing to me (so far. I haven’t finished it.). There, on page 25, I read the header Arguments in Favor of Market-Based Water Reallocation. Sure, no problem. I read them and turned the page for arguments against market-based water reallocation. Nothing!
There are genuine drawbacks inherent in the market model, even good, well designed markets intended to achieve a larger societal goal. I will list them here so I can stop reciting them in my head.
- Water uses can have social values very different from the economic values that a market uses to allocate it. When wealth inequality is as high as it is now in California, water will be bought by people whose uses will differ strongly from the social value for water. An example might be Resnick purchasing his 150,000th acre of almonds before the city of Fairmead can afford drinking water. If wealth were substantially more equal, the economic values of water and the social values of water would coincide more. But that’s not where we are now.
- Individuals operating in a market are the wrong scale for decisions about selling water and retiring land. Piecemeal land retirement imposes the fixed cost of conveyance on the remaining farmers. Piecemeal land retirement also doesn’t select for preserving and maintaining the best engineered projects for future conveyance. There are advantages of scale for planned ag land retirement (conversion to power generation or creating flood bypasses) that individual farm-based decisions to sell cannot create.
- People make terrible financial decisions that hurt themselves greatly all the fucking time. Pervasive denial and innumeracy are widespread human traits. Every market advocate I have ever seen has been a policy elite, trained to think abstractly and manage information. Regular people get fucked over in markets. At the CDFA Board meeting two times ago, a board member said that Australian farmers were told to sell their shares (the whole right) because they’d be able to buy yearly allocations. They were never able to afford yearly allocations again. They didn’t have the sophistication to evaluate that, followed the advice and feel robbed. Americans have been trained to be callous and blame losers, but a system that doesn’t allow for denial and innumeracy is a bad system for humans.
- The flow of wealth from current water-needers to current water-havers is unjust. There is no difference in moral worth between the people who do not have water rights now and people who were lucky enough that their great-grandparents claimed water. People who have water rights now did not make that water by labor, or cleverly negotiate the water rights system with their smarts, or do anything that merits gaining wealth from non-rights holders. Moving wealth from us to them for access to water is bullshit.
I have other different important objections. The ones I listed are inherent to the market system. We could combine a market system with other policies to ameliorate some of them. But they are there and are worth spelling out.