Richard Posner comments on water rights. As one of the top legal minds in the country, he does an excellent job on rights (and their perversities), but he misses two points:
First, water does not require private management but community oversight. The firm can be private or public; the problems begin when the firm starts behaving like a bureaucratic monopoly and wastes water and/or money on bad management practices, underinvestment, plush offices, etc.
Second, he states that "prices fluctuate with supply and demand." That would be nice, but regulation, caution, average cost accounting, and a public allergy to charging more when water is scarce means that price fluctuations are more the exception than the rule.
Bottom Line: Water rights are one thing, but they will only work when complemented by good institutions. As we have learned (again!) with bonds for sub-prime mortgages, mere possession of a bond is useless if the bond is composed of fraud and disinformation and no market exists for its trade.