Well, this is embarrassing. Not a couple pages past where I left off, Dr. Haddad goes into some inherent problems of water markets. His third chapter describes some problems inherent to markets, although not exactly the same list I gave. He describes the crux of the issue neatly on page 34:
With respect to natural systems, there is a critical variable that could turn potential environmental benefits associated with efficiency … into potential environmental disasters. It is the rate of growth in the use of the resources. Is the quantity of an economy’s resource use … stationary or growing? If it is stationary … and the issue is one of selecting a resource-allocation mechanism to utilized a fixed amount of available resource, than an efficient system (such as a market) probably would be neutral or perhaps would even benefit the ecosystem that supplies the resource. But if the level of the resource use is not fixed but instead is growing … then an efficient system could simply accelerate the consumption of a natural resource well beyond its sustainable yield. That is, assuming that no regulations limit the exploitation of natural resources, an efficient system will identify opportunities for profitable exchange involving natural resources more quickly than will an inefficient system, thereby accelerating the throughput of natural resources through the economy.
I have three main thoughts about this.
A. I am so mad that I haven’t read Dr. Haddad’s book before. I did myself a great disservice and inadvertently forced myself to derive my versions of similar thoughts by reading the news and thinking. I wouldn’t wish that on anyone, so I hope you will all read Dr. Haddad’s Rivers of Gold soonest.
II. I believe this is where the wave of Reisner water enviros is going down a different path than my own water environmentalism. I believe they had some unconscious assumption of a fixed pool of water in ag, and evidence of substantial irrigation inefficiency. They figured that with way better irrigation efficiency, there was plenty of water. Enough for ag to do what it had done before (the same amount, done more efficiently, because of market incentives!) and the cities to purchase some. Conserve and market, as a win-win! But that hasn’t been what happened. Better irrigation efficiencies have sometimes lead to using more water on the same land (and getting even more crop yield per unit water), but it is also leading to an expansion in irrigated acres. I am a couple decades younger and spent some time in the Valley, and I never saw any evidence that irrigation efficiency improvements led to taking less water out of rivers (although it does other good things and I am for it). That’s how I came to the conclusion that I’d rather fix the irrigated acreage by rules because I am Stalin.
3. That leads to my third thought, which gets back to almonds. Water is the limiting material for almond growth. Relative to water, both arable land and market demand are infinite. Nothing will push back against the drive to expand water availability for almonds except a decision to do that. Certainly a water market without regulations to keep the rate of use of water stationary will lead to more of what we’re seeing in this drought: non-stop luxury crop expansion, efforts to weaken or destroy the Endangered Species Act, drilling two thousand foot wells that collapse the ground surface, and demands to draw water from anywhere, the Trinity, the Columbia, from unicorns.
FOUR. Australia’s water markets have this fixed availability of water built in to them. They’re one basin, with one river, well gauged. The official yearly allocation from the single source really is all the water involved in the market. California’s water sources are way the hell more mixed, unmonitored and indeterminate. Unbundling Water Rights didn’t mention making sure that the market was only dealing with a fixed amount of water because they’ve never had to create that condition. (Just like I didn’t rightly appreciate carriage water.) The new PPIC recommendations don’t explicitly mention ensuring that markets are only working with a fixed supply, although perhaps they back into it by making sure of instream flows first.