30 June 2008

How to Fix the Delta

Much of California's water supply passes through the Sacramento-San Joaquin River Delta before flowing to San Francisco or getting pumped to the Central Valley and Southern California for agricultural and urban use. This pumping is not sustainable, however, because it leaves too little water for the local and downstream ecosystems -- threatening fish and wildlife species.

Everyone (urban, enviro, farmers) claims rights to that water. Since there is not enough to go around, they all sue each other. These lawsuits have been happening for over 25 years and are not going anywhere. (Yesterday's post on how bureaucrats will not solve the problem.)

Here's how I would "fix" the Delta:
  1. Assign property rights to all those who claim them. Some claims are spurious, but many are valid. Rights are awarded in order of seniority.
  2. Establish minimum environmental flows for the Delta
  3. Allocate "rights" to water above the minimum according to property rights, e.g., if "excess water" is found to equal 80 percent of rights, holders of the weakest (most recent) 20 percent of rights get no allocation.
  4. Allow all holders of rights to sell to all comers -- urban, agricultural or environmental -- in auctions.
This market solution is obvious to anyone conversant with economics and auction theory. Can it be used? Of course! Will it be used? Perhaps. Why wouldn't it? Because one group or another thinks it has the political and legal power to defeat others and get their way. Bold and unrealistic.

Bottom Line: The easiest way to "fix" a dispute over a private good* (e.g., water) is by using markets to reconcile claims.

* The economic definition of a private good is a good that no two people can use simultaneously and a good from which others can be excluded from using. Although some may argue that Delta water is a common pool good (nobody can be excluded from use), I don't think anyone can pull substantial amount of water without others noticing...

6 comments:

  1. What you describe for the Delta already exists. It's a bit more complicated than your 4 bullets in translation, but basically (1) property rights in water are already assigned by California law to users of the Delta, (2) minimum environmental flows are established by the Basin Plan and D-1641 and other laws/decrees/regulations, (3) in times of scarcity which is most of the time the junior users have to forego pumping, and (4) water is transferable under the Water Code where no injury to 3rd parties or the environment exists. So the problem is really one of enforcement, not legal construct.

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  2. I think that 4 falls apart on the qualifications.

    I am working on a soft paternalistic way of increasing "liquidity" so that this structure actually works -- instead of failing to meet its promise...

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  3. There are serious "hardware' issues that need addressing, too. A peripheral canal to make delivery to the pumps more flexible and efficient, and reinforcement of critical levees, to name two.

    An earthquake, especially during a flood, would leave many millions without water in short order. The public hysteria and economic consequences of such a disaster would toss concerns for the little fishies right out the window. Those opposing a peripheral canal (properly implemented and operated) are playing a very high stakes game, with little or no upside.

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  4. I dunno. The no-harm principle is pretty well embedded in California common law. It'll be interesting to read what proposals you come up with that improves transferability of water / water rights.

    I'd love to know who anonymous is. Not many people can cite to the key documents of the SWRCB and jurisdictional RWQCB.

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  5. @Philip: I am taking hardware for granted. The problems are not problems of levees or canals (they are different problems), but how to move water between constituencies.

    @Francis: Anon is a well-informed reader, much like yourself and others :)

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  6. Anonymous posts are a bit gutless but I suppose they are a way of getting around the phenomenon observed by Upton Sinclair whereby "...[i]t is difficult to get a man to understand something when his salary depends upon him not understanding it.” That said, I represented a component of the regulated community which would probably not ask for additional enforcement.

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