27 March 2008

Water and Public Trust

California courts are debating one way to fix the water mess: Take the water back, in the name of the Public, and redistribute it to maximize its benefits:
The public trust doctrine derived from Roman law that said, "By the law of nature these things are common to mankind -- the air, running water, the sea and consequently the shores of the sea."

The public trust was referenced by high courts more than 100 years ago to halt hydraulic mining in California because the siltation that resulted in the Sacramento River impeded the public right to navigate the river.

Several months ago, an independent panel appointed to make recommendations on water policy and the Delta concluded public trust and a related constitutional doctrine should become the foundation of decision-making about California water.

The chairman of that panel, former legislative leader Phil Isenberg, told the State Water Resources Control Board this week that the status quo must change, but he added that proposed changes will face stiff opposition.

"Most people want to be assured that what they're doing now, they can continue to do it, and it will be cheap," Isenberg said.

The idea is prompting fierce opposition from some of the state's largest water agencies, who fear water will be taken away from them for environmental benefits.
In economics, the primary objective is the maximization of surplus from any activity -- to produce "efficient results." It is politics that determines how that "pie" will be shared among people. In the tension between efficiency and bargaining, there are often welfare losses (from lawsuits, bribes, power-plays, etc.) that reduce and skew the distribution of surplus.

A return to public trust promises to break the Gordian Knot that entangles water all over the State, but it is also scary -- creating uncertainty over the new distribution and the "rights" that many people believe they have. (Complications may render those rights useless.)

One way to transition between one regime and another is to recognize property rights as such and then allow bargaining over redistribution. It is important that players be prevented from vetoing trading and bargaining, as this "tragedy of the anti-commons" will result in the system freezing up.

Bottom Line: My prediction is that this bold idea will fail because there are too many parties devoted to the status quo -- and arguing over it. Sad for us.

2 comments:

Anonymous said...

I've missed something and am confused. Generally, I get your point that private property good, commons=tragedy. But then there was the article about california wanting to take their water rights back al la the romans and make it a public good, and you seemed to like that except that it probably won't happen because of entrenched interests.

So what am I not getting? Is this an exception or not really a commons situation, or what? I'm thinking maybe its like air and air pollution, no one really has a title to the air, but govt can make rules so that it doesn't get overrun by all users?

Sorry I am such a dolt on economics.

David Zetland said...

You are right, but my point with public trust is that the current "owners" are not those who are maximizing value.

By taking back the water, the State could reallocate it to better uses (in markets even), which does not imply the tragedy of the commons :)