25 Aug 2008

800 Pound Gorilla

JWT sent me an editorial published in a local paper in January. Here's a nice excerpt:
The 800 lb. gorilla is the absolute fact that there is NO WATER SHORTAGE IN CALIFORNIA!! I can hear you saying that must be wrong because we constantly hear about the need to take three minute showers with friends to save water. While three minute showers may be wonderful, as well as maybe a yard full of cactus, all of that change in behavior will not affect the water situation in California in any significant way.

The actual fact is that there is an abundant supply of water in California, but that water is being incredibly badly used. The reason for this extraordinary miss-use of water in California is that water is priced very badly. The reasons for this inappropriate pricing go back a century, or more. While that pricing was right for its time, it is flat wrong now 100+ years later and is the primary cause of California’s “Water Problem”. Appropriate pricing is the complete and total solution to California’s “Water Problem”.
He goes on to offer seven "facts" that everyone should know about water use in California (paraphrased):
  1. Ag uses 80 percent of water.
  2. Farmers grow low-value crops with it. (Alfalfa uses 20 15 percent of ag water. The alfalfa goes to cows, true, but cow shit pollutes groundwater.)
  3. Farmers pay very little for water ($17/AF in Imperial Valley) while urbanites pay $1,200/AF.
  4. Farmers will adjust to expensive water by using less -- just as they adjusted to expensive corn by growing more.
  5. If the price of ag water rose, farmers' costs would rise, but they could be compensated with grants or loans to improve irrigation efficiencies.
  6. This point is worth quoting in full:
    This proposal will be greeted with cries of outrage that we are forcing the little guy off the farm. And that is, of course, utter and absolute nonsense. The overwhelming majority of agriculture in California is produced by a handful of gigantic agricultural corporations. In fact, the 2002 Census of Agriculture shows that about 6% of all California farms produced 78% of the total value of California agriculture. And all of those farms were $1,000,000 businesses, or larger.

    The cries of outrage won’t come from farmers; they will come from corporate lawyers and lobbyists! Ignore them.
  7. Long-term contracts can be bought out. (They will have to be bought out eventually anyway.)
Bottom Line: These recommendations are reasonable to me (raise prices!). Although I prefer that farmers market their water (My all-in auction allows them to buy water from themselves; market forces -- and sales revenue -- will lead to fast improvements in efficiency and productivity), almost anything is preferable to the current system of too cheap water.


  1. More of the anti-ag jeremiad in the water context. So much easier than dealing with a real solution: bringing new supplies to the table to service all the newcomers.

    Correct that there is no water shortage in California if you open it up to free-market pricing, not easy given the infrastructure problems (i.e., conveyance) and legal difficulties (environmental and third-party impacts of cross-state transfers). But you have to be willing to up-end a lot of lives; compensation helps, but does not avoid the overall problem that the displaced ag production will just be shifted to the third world, where the same fundamental problems arise - scarcity of the resources, species problems, water and air quality, etcetera.

  2. CF -- I disagree that new supplies are a real solution. Where are they coming from?

    Pricing (which would NOT be free market -- Francis' favorite point) WILL up-end many lives, but so has $4 gas, and that's here to stay.

    Don't worry about what MIGHT happen; address the problems that ARE happening...


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