Wednesday, August 20, 2014

Government vs. Markets

According to a study published yesterday by Theodore E. Grantham and Joshua H. Viers, both of the University of California and the U.S. Geological Survey,   "California has allocated five times more surface water than the state actually has...."

Grantham and Viers "verified that water-rights allocations exceed the state's actual surface water supply by about 300 million acre-feet, enough to fill Lake Tahoe about 2.5 times.

"The state has allocated a total maximum allowable use of 370 million acre-feet of surface water — more than five times the 70 million acre-feet available in a year of good precipitation, according to the researchers’ review of active water rights on record. The analysis was published ... in the journal Environmental Research Letters."

The study shows that "in most water basins and in most years, far more people hold water rights than there is water. In the San Joaquin River basin, for example, water-rights allocations exceed the river’s average annual flow by eightfold."

"Better information might enable state regulators to better target water cutbacks in times of drought, Grantham said."

That, of course, is what markets' pricing mechanisms have a propensity to generate: better information in regard to allocation of resources.  However, having given so many constituents "rights" that will be asserted in the face of physical reality, the regulators and politicians in the State will have a very hard time converting to a regime that will suddenly convey accurate information to those constituents, when the information is that they don't have what they think they have. It reminds me of the joke Woody Allen tells at the end of Annie Hall: "a guy walks into a psychiatrist's office and says, hey doc, my brother's crazy! He thinks he's a chicken. Then the doc says, why don't you turn him in? Then the guy says, I would but I need the eggs."

All other quotes in the article, and a link to the study, can be found at this UC Davis webpage.