15 Sep 2008

More on Dumb Farmers

This weekend, there were more op/eds on the Pacific Institute's report "Stupid Farmers Are Leaving Money on the Table" (my title -- see prior post), which claims that farmers could save oodles of water if they would just shift crops, install drip irrigation, etc. The flaw in the report is that it fails to highlight the fact that farmers will only make such moves (and save such water) when it's profitable. Economics strikes again.

Anyway, the SF Chronicle's op/ed rather naively repeats PI's claims. The Modesto Bee op/ed offers a more-useful perspective -- mentioning, e.g., how flood irrigation replenishes groundwater (something I've discussed before). Even better, the Bee mentions this blog and promoted me to "Professor." (Won't my advisers be proud!)

Bottom Line: Don't judge a book by its cover or an argument by its conclusion. Think through the implications!

BIG hattip to JC


  1. The Fresno Bee had an op-ed with a pretty good lead-in on this, too.

  2. It is always interesting and disturbing to read blogs on our reports, especially from people who have not read the report, or who intentionally mis-interpret the report, or who post straw-man arguments that they then shoot down. As I note below, you criticize us for making suggestions you yourself have made. You criticize us for NOT making suggestions that we DO make. You quote critics of our report who have misread or failed to read our report. [And it's available to read for free -- so no excuse: www.pacinst.org.]

    Here are some responses to the many misleading comments in your original post, and to the ad hominem nature of those comments. First, however, let me remind you of the classic joke that perfectly exemplifies the problem with your purely academic discussion:

    An economist is walking down the street with his young daughter. "Look, Daddy," she says, "there's a $100 bill on the ground." "Don't be silly," says her economist father, "if there was money on the ground, someone would have found it already."

    Apropos of this joke, the argument that you make at the outset, that if farmers could make more money by changing crop type, or irrigating more efficiently, they would already have done so – therefore water efficiency improvements don’t exist, is astoundingly naïve. Do you really believe there is a perfect market out there and that farmers respond immediately and perfectly to market signals, and that all water use in California agriculture is economically perfect? If so, we are just too far apart in our perceptions of reality and are not likely to have a fruitful discussion. In addition to market imperfections, however, money is not the only factor in decision making by growers. As we say in the report, “Farmers also make choices independent of profit maximization: experience, family traditions, and community values all factor into their decisions.”

    Second, your very title, and first line of your blog, are ad hominem, straw man arguments. “Are Farmers Dumb…That’s what a new report from the Pacific Institute implies…” ?? We imply nothing of the sort – indeed, we believe farmers are smart innovators who are often stymied by institutional and financial barriers to efficient water use. As we say on page 21: “Farmers have long shown themselves to be flexible, dynamic, and innovative." Your misrepresentation of our report may be a catchy title and draw readers, but it does nothing to advance water policy in California. All four of the scenarios we evaluate are explicitly designed to be extensions of what smart farmers are doing around the state: changing irrigation methods, shifting crop types, and improving monitoring and irrigation practices.

    Third, to strip this down to its bare bones, please let me know if you believe there is NO potential for farmers to use water more efficiently – i.e, to produce as much (or more) food and fiber with less water – in California. Again, if this is what you believe, then we have nothing to discuss. Our analysis shows very clear the answer to this question is that there IS such potential. Your blog suggests you don’t think so. And if there IS such potential, then our effort to analyze it must be appropriate and important from a water policy perspective. The only legitimate criticism therefore, is whether or not our quantitative analysis is appropriate, and whether or not the policy suggestions we make might move in the right direction. And those suggestions (extensive and detailed) are not “prescriptive” but suggestive. Many of them come from the agricultural community itself.

    Fourth, we also believe (and the evidence supports) that there are bad economic signals, policy decisions, inappropriate subsidies and a lack of information that has kept California agriculture from implementing a wide range of strategies that would improve agricultural water use efficiency, and this report quantifies the potential for such improvements. Do you really believe that the sector couldn’t save 5 to 15 percent of the water now being used? And the analysis we did was very conservative. The savings could be more extensive.

    Fifth, you quote Mike Wade, agricultural lobbyist: "'The idea that farmers are not seeking more efficient ways to do business is an insult to California agriculture,' said Mike Wade." Well, your parroting of this quote suggests that neither you NOR Mike Wade bothered to read our report. Our scenarios are fundamentally based on the actions farmers are taking already to seek “more efficient ways to do business.” We simply extend those efforts broadly. Unlike you, if I understand your argument, we don’t believe the market is perfect already and that there are no more improvements to be made. We DO believe the evidence shows there is “money on the table.”

    Sixth, you say that our call for a realignment of subsidies makes no sense. Odd. You have, yourself, called for more rational subsidy structures, or even the complete elimination of agricultural subsidies, to give the right signals on water use. You then say “If you want farmers to use less water, raise prices” as though this is a radical idea unknown to us. Why, then, do you ignore our recommendation to do just this (two below our call to “reduce or realign subsidies”) to “Implement new water rate structures that encourage efficient use of water”? You can’t criticize us for not recommending something that we DO recommend, unless you want to intentionally mislead your readers.

    If you want to challenge our analysis on the facts, numbers, and assumptions, do so. But spouting economic theory or misrepresenting our analysis does nothing to help farmers or to address the serious water management challenges that we all face. These are issues that deserve real debate and analysis.

  3. Peter,

    Thanks for the long comment on my post. I'll respond to some of your points:

    1) I found $5 on the street at this year's ASSA (economics) meetings in New Orleans. A good sign that there were many economists around!

    Do you really believe there is a perfect market out there and that farmers respond immediately and perfectly to market signals, and that all water use in California agriculture is economically perfect? No, of course not (talk about straw men!) -- what I have said (and you have said) is that farmers respond to market incentives. If there was an incentive to implement conservation to the level you would recommend, farmers would have done so already. The fact that they have not says (to me) that the signals are just not right.

    2) ad hominem, straw man arguments The title was catchy, but your report -- "an extension of what farmers are already doing" -- has been presented in a misleading way. Your site says "California farmers can grow more food and fiber with less water" Oh really -- so why aren't they then? Because there are many barriers in the way. I'd title the report "Farmers stifled from best practices by regulatory restrictions, lack of demand for expensive food, and high conservation costs."

    3) please let me know if you believe there is NO potential for farmers to use water more efficiently Of course there's potential for farmers to use water more efficiently. There's also potential for me to grow food in my backyard. I don't because it doesn't pay, and farmers don't either.

    4) there are bad economic signals We completely agree on this. I'm all for markets, and I'd love to work with you on implementation and design. (I even say that the environment should get some water for free...)

    5) I think your "extension of what farmers are already doing" is not a good idea. As you are well aware, there are decreasing returns to any technology. Farmers would have already implemented the MOST efficient (most cost-saving) stuff. What's left to do (your extrapolation) may not give the same returns compared to what's already been done. That said, I'd say that farmers could easily use 25 percent less water -- if they could get a good price for it.

    BTW -- I certainly do NOT think that the "market" for water is perfect. I doubt any market even exists.

    6) our call for a realignment of subsidies makes no sense Good point on prices. I think that subsidies are always a bad idea. I'd drop them and go strictly for prices. The way I'd raise prices, of course, is through markets. Farmers who faced higher prices and/or opportunity costs would use less water. No need to subsidize. (Not like we need to subsidize fuel-efficient cars with $4 gas, right?)

    So -- I challenge your numbers in terms of decreasing marginal returns, I challenge your analysis in terms of implementing more subsidies and assuming that farmers would/should just shift crops and I challenge your assumptions that the best way to save water is through conservation.

    I'd say that the best way to save water is by making it more expensive.

  4. The way I'd raise prices, of course, is through markets.

    But David, this is a meaningless sentence, unless you believe that California voters will approve major amendments to the California constitution and water code. To be fair and honest, you should be saying that you'd establish a market, by voter initiative, then let the market establish its own equilibrium.

    Alternatively, you can get on your soapbox about the incredible backlog at the SWRCB, that DWR has huge conflicts of interest that tend to pop up when parties want to use the California Aqueduct to transfer rights, or the effort needed to educate the public that conservation-based rate structures and recycled water projects are good ideas.

  5. Holy cow, I can’t believe you’ve goaded me into spending more time responding to your misrepresentations:

    You said:
    [If there was an incentive to implement conservation to the level you would recommend, farmers would have done so already. The fact that they have not says (to me) that the signals are just not right.]
    Yes, that’s what our report says even though you imply we don’t. What seems to bug some is that we had the nerve to do some analysis to try to actually quantify the potential as well as offer policy options.

    You said:
    [Your site says "California farmers can grow more food and fiber with less water" Oh really -- so why aren't they then? Because there are many barriers in the way.]
    Yes, that’s again what our report says, even though you, again, imply we don’t. Let me quote from our report (which again, it seems you aren’t bothering to read): “Yet challenges also exist that act as barriers to implementation…We provide specific recommendations for overcoming these financial, legal, institutional, educational, and scientific barriers.” (Page 41).

    You said:
    [Of course there's potential for farmers to use water more efficiently. There's also potential for me to grow food in my backyard. I don't because it doesn't pay, and farmers don't either.]
    First of all, I DO grow food in my yard. The decision to do so is not purely economic. So while you may make decisions on a purely economic basis, not everyone does. This is a bad argument – to assume that only economics drives decisions. As we note in our report and as I mentioned in my first response, we say: ““Farmers also make choices independent of profit maximization: experience, family traditions, and community values all factor into their decisions.” There is a value to me to go into my yard and pick tomatoes without figuring out if the store is open, having to drive, or worrying about E.Coli.
    Secondly, however, you are acknowledging that there IS potential to use water more efficiently. Fine. Our report quantifies this potential and talks about ways to capture it. You might quibble with our quantitative analysis, or priorities about policy, but that’s not what your blog did. It misrepresented our conclusions and our recommendations.

    You said:
    [What's left to do (your extrapolation) may not give the same returns compared to what's already been done. That said, I'd say that farmers could easily use 25 percent less water -- if they could get a good price for it.]
    So? This is an irrelevant argument. Even if some or much of the lowest hanging fruit is gone, we think there is still more (and so, now, apparently do you). More importantly, however, is whether whatever is left is less costly than other alternatives, such as building new reservoirs. It doesn’t matter if what’s left doesn’t give the same returns as what’s already been done. As for your 25% number – you made that up. It is your opinion, based on no analysis, isn’t it? How on earth then can you criticize our far more detailed and carefully considered analysis, which suggests 5 to 15% savings potential?

    You said:
    [I think that subsidies are always a bad idea. I'd drop them and go strictly for prices. The way I'd raise prices, of course, is through markets. Farmers who faced higher prices and/or opportunity costs would use less water. No need to subsidize.]
    Spoken like a classical economist (no insult intended). Prices good. Subsidies bad. Well, sorry, in the real world some prices are good; some subsidies are bad. Not all. You acknowledged just earlier that markets aren’t perfect. Fine, that’s why prices alone are not enough to address water problems and why higher prices was not the only thing we called for. Markets in water in California are not only imperfect, they are grossly imperfect. Hence our call for a complex set of policies, not the silver bullet of academic economics.

  6. This comment has been removed by a blog administrator.

  7. @Francis -- I agree.


    What seems to bug some is that we had the nerve to do some analysis to try to actually quantify the potential as well as offer policy options. That doesn't bug me, but PI's PR and the press reports made it seem that there's no need for dams because farmers can JUST conserve.

    As I pointed out in my original comment, changing the rules (subsidies, etc.) can obviously encourage conservation, but -- if that's such a good idea -- why hasn't that happened already? It's because there are other factors affecting water use (and regulations).

    what our report says...
    The report, in fact, says everything about everything, and -- while I admire that encyclopedic scope -- I think that the report's EMPHASIS (or Bottom Line :) was different, e.g., your PR says: "agricultural water-use efficiency can be improved through careful planning, adopting existing, cost-effective technologies and management practices, and implementing feasible policy changes." when perhaps it should have said "agricultural water-use efficiency can be improved by implementing feasible policy changes."

    Planning is bunk and farmers will ONLY adopt those EXISTING technologies when those changes are made...

    I DO grow food Yeah -- but you have a salary. Farmers are growing food for a living.

    your blog ... misrepresented our conclusions and our recommendations. I'm sorry that you feel that way, but I calls 'em like I sees 'em, and ALL the press, PR and statements made by you implied that farmers can conserve far more water than we would get from dams, if they would just stop "wasting" water. The report may offer a detailed plan for stopping that waste, but such complexity was hardly emphasized.

    I could write a one sentence report that would deliver water savings through policy changes. It would say "raise prices" (one way or another, Francis :).

    How on earth then can you criticize our far more detailed and carefully considered analysis Because complicated analysis (and recommendations) does not always lead to simulated results. I threw out 25% because I know I could GET 25%. The way to do it is through higher prices.

    The only law we economists have is the law of demand, and -- assuming -0.5 price elasticity -- a 50% increase in prices would cut ag water demand by 25%. I don't worry about whether the reduction comes from fallowing, drip, crop rotation, whatever, because I leave THAT decision to the farmer. This same "hubris" is what makes me sure that the Soviets were bound to crash and that the baker will always have bread for me [Adam Smith ref.]

    [Sorry -- this is getting a little philosophical, but we seem to be approaching this topic from different perspectives.

    Let me also repeat my interest in working with you guys on areas of common agreement. At least we're engaged!]

    Hence our call for a complex set of policies Shudder.

  8. Planning is bunk.

    I'm baffled by this statement. How do instream flows get protected? How do groundwater rights get adjudicated? How does infrastructure needed to transfer water from willing sellers to willing buyers get built? How do urban managers know how much to buy?

    Delivering 100% reliability through aging infrastructure requires a lot more than logging on to the daily water exchange.

  9. Francis -- planning "works" at the household and firm level but rarely at the regional or government level. Yes, roads get build, housing projects house people, and aircraft take off/land, but many of these "planned" operations are less-efficient than alternatives...

    (One harsh example is the positive influence of planning on sprawl...)

  10. Not to get in the way of this fine discussion, but I'm curious - and betraying that I have not yet burned through the policy piece by Gleick - does the paper talk as if California is the universe, or are externalities considered?

    What I mean by that, and you have heard me ask this before, is if we "dry up" certain areas of California ag that grow "inefficient" crops from the water perspective, are we considering the implications as far as displaced production?

    I have to believe that "reforming" California ag through "conservation" is going to, to some degree, just result in the offshoring of certain crops. And offshoring crops is going to run contrary to the principle that food should be grown locally - even if it's just forage for cattle, for example - as well as invoke a host of third-party environmental impacts, principally because few locales require farmers to operate under the system of environmental regulation that California does - in terms of water quality, air quality, species protections, etcetera.

    It's a relevant question, I think, because the Gleick deal seems to aim a huge bullet at the supply side when the demand side is equally the problem. The Gleick piece does not address the fact that Californians (and others) like to zoom down the freeways in their SUV's toward bountiful grocery stores, does it?

    Just askin'.

  11. Captain -- I saw no sign of the impacts you speak of, i.e., neither general equilibrium effects on broader markets/larger areas, nor on demand-side policies for water elsewhere in the state/region.

    I just skimmed the report and see no signs. OTOH, remember that the report is meant to bolster opposition to dams elsewhere in the State, so presumably PI intends that conserved water will be used in areas that are clamoring for dams (which I do not support).

  12. Philip: who are you? Do you have a real name and are you willing to give it in public? Because when you say:
    Oh, well. And if he is going to go about spouting unhelpful bilge about "farmers raping the environment for a century",

    you open yourself to a real lawsuit for libel. Can you explain why you put this in quotes and attribute it to me? It is precisely this kind of malignant lie that makes for such pleasant conversations with a small number of ideologues in the agricultural community. How dare you put this in quotes? If you can provide evidence that I've ever said (or even thought) this, provide it here immediately. If not, I expect you to write a retraction and publish it on this blog, or I will insist that Zetland remove it.

    You lament my not responding to some letter you sent about alfalfa? Now you wonder why?

    Zetland: Francis is right to be astounded at your comment "All planning is bunk." I am too.

    And you say we implied that farmers can conserve far more water than we would get from dams. We "implied" no such thing -- we show it to be true in our analysis. You are wrong, however, in saying we are anti-dam. Again, read what we write. We're pretty consistent. We're anti bad, expensive, environmentally damaging dams, when there are cheaper, cleaner, and faster alternatives. Especially when farmers want the dams but aren't willing to pay for them --how does that fit into your economic theory?

  13. less efficient than what alternative? Dude, until you have drafted an initiative and started gathering signatures you don't have an alternative; you have some hand-waving.

    Here in California, zoning laws are popular. So is CEQA. So is cheap, healthy food. So is 100% reliable potable water at fire-flow pressures. That means someone has to have plans to meet that demand in a variety of supply conditions.

    Last I checked, there was a vast literature about rational ignorance. And if there's any area more suitable to being delegated to technocrats than ensuring urban water is safe, affordable and reliable, I can't think of it off the cuff.

    I'm a professional in this business and I have no particular desire to figure out how to keep the water on in my house. That's the job of the City of Long Beach. Imagine how an ordinary voter feels.

    And frankly, LB does a pretty good job. WRD has been, allegedly, pretty corrupt, but they're still bringing water into the West and Central Basins for recharge. The City is working on preventing saltwater intrusion and is taking a lead in researching low-cost desal.

    Mark Kleiman frequently posts about public policy and cost-benefit analyses. Deciding the appropriate level of investment in barrier wells needed to protect the LA groundwater basin is precisely the kind of thing only a public agency can do. Planning bunk? Planning is critical!

  14. I've removed Philip's comment (16 September, 2008 08:06) at the request of Peter Gleick, who claimed it was libelous.

  15. @Peter: We agree in our opposition to "bad" dams (as in the ones under consideration now...)

    @Francis: When I said "planning is bunk," I meant planning how people should act. Planning and executing an agreed upon function (e.g., injection wells) is completely different, but apparently you do not see the distinction (in the same way that you think markets only exist when there are numerous players on the supply and demand side).

    As to your other observation (planners are the ones who must keep water in my taps), I think you are missing the big picture. "Planning ahead of demand" is exactly what got us into the current mess of "hardened demand" that exceeds supply. Water managers need to go to the shop and buy "demand-side" hats to replace their supply-side caps...

  16. Well, this has been a fairly contentious string, but hey, I guess that's the internet. And certainly nothing worse than the county board of supervisors meeting I was at yesterday. Public discourse gets a little rough.

    Anyway, just wanted to respond to Mr. Gleick's quote about farmers "wanting" dams but not being "willing" to pay for them. That's an incomplete understanding of political reality.

    Farm organizations are pushing for increased surface storage. The reason is that it's the only way out for ag in what is a zero-sum game; ag realizes that the enviros and the urbs are on a steady march of eroding the agricultural water entitlement base, broadly speaking.

    The new storage is not FOR ag, however, in any direct sense. Generally speaking, when the current system was built out, ag had the water it needed. What has happened in the meantime, however, is that we've gone to 3 (unentitled) Californians for every 1 Californian that existed at the time the infrastructure stopped expanding, and that we've also implemented the vast majority of (unentitled) environmental requirements, through the ESA, CWA, etcetera, etecetera.

    So what the surface storage will do is catch up to the burgeoning urban and environmental demand. That's who it's for, and that's who should pay for it. Farmers are out front supporting it as purely a prophylactic measure.

  17. I am trying to get an attribution for the supposed crack about farmers. It was told to me by someone else. If you did not make it, I certainly apologize.

    There is nothing else in my post that could possibly be considered libelous, and David, if he wishes, has permission to repost it without reference to the crack.

    As to the letter I sent you, I will re-send it, and if it offends you in some way you might say so.

  18. Here's Philip's earlier comment, less the objectionable bit:

    "Glieck deigned to respond to you twice! I guess the blogosphere gets his attention. This summer, before the report came out, I wrote him a letter on behalf of the statewide alfalfa and forage grower organization, offering to meet with him and his staff, to explain why many of the things they were saying were unrealistic, impractical, or downright wrong. I never earned the courtesy of a reply. But the problem with their report is not a few silly statements that a Cal Poly freshman could have pointed out. It is that its entire worldview is rooted in sclerotic agency oversight of a dynamic and adaptive system. Here is what I wrote to that sad husk of a paper, the Chronicle:

    Your endorsement of The Pacific Institute's ham-fisted and expensive scheme to reallocate water resources in our state makes me wonder if you ever studied the history of centrally planned economies. There is a much better solution, already in progress, and it does not cost the taxpayers a dime. A transparent, free, and assured market in water will make sure that it flows to the places where it is most valued. At present, many agricultural users are reluctant to participate in these markets, because under archaic laws, their water rights would be threatened by doing so. Money received from the sale of water could be used for installing better irrigation systems, improving delivery and storage facilities, or trips to Disneyland. Individuals, not huge bureaucracies handing out tax incentives with one hand and penalties with the other, would make these decisions. A market based solution is also far more nimble in adapting to changes in environmental conditions or food demands.

    Oh, well. And if he is going to go about ... tut-tutting over Mike Wade, because he is is paid by members of his volunteer organization, he ought to pipe down about what he sees as ad hominem criticism."

  19. That's probably fair. No reason to let an undisciplined litigation threat totally eviscerate someone's First Amendment rights.

  20. Aw, Cap, he's right. I should have double checked my source before attributing the quote to Gleick. It was careless and unfair on my part. He does seem a bit tetchy, however....

  21. Michael Hagman19 Sep 2008, 00:03:00

    OK, using the “economist joke” I would like to give you an accountant’s perspective. Thirty years ago I found $100 on the ground and picked it up. I then invested it at 8% and today it has grown to a value (in today's dollar) of $1,093.57. Had I spent it then, I could have bought 400 loaves of bread. Today I can buy about the same number of loaves – why?

    Back in the early 1900's farming and urban consumption of water had outstripped the available water supply in California's Central Valley. The free market did not provide an alternative to water as a farming input nor did it control the price of the water, nor did it provide other economic incentives to the grower to continuing growing their products putting farming at risk. There was plenty of water some times but some times there wasn't. Groundwater was over-drafted and in many cases entirely depleted. Farmers were leaving the industry because of the low returns of planting row crops in wet seasons and wheat in dry seasons. However, there was little free market economic incentive to invest in permanent crops because if there is a year without water, such crops and the investment die. With the resulting scarcity of the primary input, and no substitute for that input, the grower had choices to make: work on irrigation efficiencies to lower the amount of consumption to the point of efficiency in the supply, turn to growing higher value crops that could result in enough discretionary income to build needed facilities, take land out of production or some combination of the above. However, because farming is not a monopolized industry, banding farmers together to build large capital projects would likely not happen without some form of mandate from a higher power.

    Enter Stage Right - The US Government and the Central Valley Project. The US Congress at that time reasoned that a food supply that was homegrown and inexpensive protected our nation and its citizens from dependency on foreign nations (side note: sort of the opposite has been true with regard to our energy supply and the mess we are in there). The USBR was then directed by Congress to build the Central Valley Project (CVP). By building the CVP the water again became available and at a price that made growing crops of all sorts possible. Now the only mandate to farming particular crops would be the soil type and the regional climate. The agriculture market and economy boomed. The CVP's original cost was about $2 billion. The amount of agricultural product grown by water from this project each year pays for the entire project every single year. The American consumer benefits from the CVP every time they consume a myriad of agricultural products grown here in California. Therefore to reiterate, the CVP provided a low cost input to growers and in turn that cost was paid back through lower cost food to our nations citizens and at the same time helped to keep our food/fiber supply in our nation.

    Today farmers in the Central Valley are experiencing a reduced supply of water and an increase in the cost of that input. There is water to be had flowing out of the Sierra Nevadas. In each year of 2005 and 2006 there was enough water that went down the SJR alone to fill up Pine Flat Reservoir (about 1 million acre feet). Yet in 2007 and 2008 we couldn't fill the reservoirs we had and supply was reduced to 50% - 75% of normal. Many growers then turned to groundwater, some fallowed their lands, others got out of farming and sold off prime agricultural land to developers. This year heavily capitalized crops are at risk due to court action to limit the supply of water. A direct result of a lawsuit by the same folks who have won their day in court on the San Joaquin River (NRDC vs. USBR, FWUA). I think folks need to determine what the impacts of such court decisions are to sustaining our low cost plentiful food supply.

    I believe it is disingenuous of Ivory Tower analysts to sit in their office in any one of our State's Coastal Cities, flushing their toilets, drinking water, washing cars and watering lawns and golf courses with water imported, primarily from the Sierra Nevada runoff, and then preaching to and suing farmers to either grow different crops, change their practices, etc. These same folks spent $6-$7 at Subway on a foot long roasted chicken sandwich (with all the usual vegetables – lettuce, tomatoes, cucumbers, bell peppers, and whatever else was available) and a glass of milk, all of which can be and are produced here in the Central Valley. The quality of life one enjoys in the city (and outside the city) is a result of a farsighted Federal and State Government legislators back in the early 1900's and the hard work of farmers, farm laborers, transporters, packers and suppliers. If the city dwellers (I say that because the vast majority of our population exists there) want low priced plentiful food grown in our country then they need to be willing to protect and enhance our states water supply. I agree that farmers need to be innovative with regard to managing the public resource (water) and I believe great strides have been made in that regard specifically with permanent crops (such as tree or vine crops). It is difficult to find ways to grow tomatoes, cucumbers, lettuce (and other row/seasonally planted crops) at a low enough cost to make it profitable. Without federal or state projects such as the CVP or other price incentives such row crops would not be grown. We can buy all these products from growers in other nations who can grow them for a lot less than we do here (a world economy and an economic virtue). However, these products will likely be from a less regulated nation and one that might not always be so kind as to work for little to nothing all for our benefit.

    Conservation is essential, but it takes care of only a small portion of what is needed. We need an increase of available water supply. This can be accomplished by further harnessing the rivers with dams. Building a proposed Temperance Flat Dam alone would increase the supply enough to offset much of what will go down the river to meet much of the demands of the SJR Settlement, instead of coming from growers. Sites Reservoir can be used to store an additional 1.8 million acre feet. These reservoirs regulate the water supply and serve to capture in times of plenty and give in times of shortage.

    We have choices. Sustain our farming economy, pay higher prices, or import our basic food and fiber needs.

  22. Michael -- nice story, but you miss two important points:

    1) The Feds were not the ONLY way to get the CVP done. Although the farmers were beggering each other (by competing to pump groundwater), they might have been able to coordinate to build a CVP-like project without Federal subsidies -- and the restrictions that restrict farmers today.

    2) You say that we benefit from cheap food. I disagree, first, because much of California's produce is sent elsewhere in the States (which we?) and, second, because we can afford to pay more for food. Cheap is not interesting if it comes at the price of sustainable. (Just ask any farmer about topsoil).

    Now, as an ivory-tower academic with little time on the soil. perhaps I do not qualify to offer an opinion, but you will have to take my word for it that I think farmers will be here for a LONG time, growing food. The way that they will be here for so long (I think) is by adjusting to reduced supplies, not asking for more dams.

  23. Michael Hagman22 Sep 2008, 17:10:00

    David-I appreciate your analysis and your comments. Although I don't agree with them and what I provided was not just a story.

    Farmers are only certain of one thing, and that is that there is no certainty in their business. They control no aspect of their main inputs. As well, they do not control any aspect of their product market. As a result farmers are averse to economic risk. Government (vis a vis the CVP) came in and took away some of the water certainty risk.

    My point, which it seems you may have missed, was that the Government wanted the masses to provide plentiful and inexpensive food as well as provide a sustainable agricultural economy. It was not in the long term interests of the many small farmers to band together to build a dam, because it harbored to much risk for the mass farmer. You are right that at some point, farming could have built the CVP, but it would not have been the many small farmers. A myriad of water laws and a massive capital outlay would've required substantial risk to the small farmer. The CVP was built to secure small farms a water source that was sustainable.

    Secondly, I must reiterate that the notion that the Central Valley Project is a "subsidized" project truly under represents the project purpose. I admit that the agricultural water user does not pay interest on the project and in that sense one may assume that ag water is subsidized but every other cost of that water is born by the farmer. The cost of that subsidy to the government is in the range of about $40,000,000 per year or about $8 per acre foot ($1,000,000,000 current balance on the Ag books @4.0% spread out over approximately 5,000,000 AF) or approximately 1.4% of 1% of the current years federal expenditures. The 8$ per acre foot, from my perspective and I believe the intent of Federal Government, was to provide certainty of water to the the small farm owner to reduce their water risk and provide them an incentive to farm and that cost would be nationalized. Again, thinking back to the time when the CVP was adopted, the population feered the monopolization of industries. Today, I don't think that virtue has changed much. Given that, if there is too much risk in the market and the return is not sufficient to entice the farmer to farm, then farmers go out of business. Since the food still needs to be grown the small farm economy (which has exited or is exiting the market) would be replaced either by imported foods or large corporate farming entities (and I am not specifically speaking against that notion I am simply pointing out the conflict with the purpose of the CVP).

    I also would like to clarify the notion that most of the food grown in the CVP is exported outside of California. Californian's eat food grown here. We also export the balance of it. Hence the purpose of the CVP and the nationalization of the "subsidy" and capitalization of the project. It was a national project, with the intent to provide US grown, low cost foods grown on small farms. At the CVP's development the US was in a war economy. We did not want to search the world to find our food and fiber, we wanted it here. There is a direct correlation of this industry to the energy industry. We have relied for so long on imported energy we are now suffering tremendous amounts of capital transfer to foreign nations just to provide the energy. Therefore, in retrospect, the decision to ensure our food supply would be a national product was not only a wise decision by the US government then it was and continues to be a wise decision now.

  24. Michael -- thanks for the elaboration. I think that we disagree on a fundamental level vis a vis energy, etc. (I am more of a free trader), but let's put that aside.

    Re: "The CVP was built to secure small farms a water source that was sustainable.", I think that you agree that SMALL farms have not benefited from the CVP as much as larger farmers.

    Re: subsidies, you need to include "opportunity costs" as well as direct costs, i.e., CVP water is NOT being used in other places (other farms, cities, or for environment) -- and those places may put a value that's far higher than $8/AF. That subsidy would NOT have arisen if the CVP was not build and/or the CVP was built out in smaller sections.

    Re: Cheap food (an implicit point) -- I do not think that cheap food has served us well in the end. Besides problems with obesity, cheap food has also undermined local ag production in other places (e.g., Wisconsin dairy) and lowered average quality of food (i.e., cheap at all costs).

    Yes, the CVP may have made sense in the past. I don't think it makes sens now.

  25. Michael Hagman23 Sep 2008, 01:30:00


    The legislation, CVP and its other RRA projects, were intended to secure low cost food and to sustain a highly speculative market. The current cost to do that is about $8per AF. You mention opportunity costs but neglect to offset such costs with the intent of the legislation (what benefit does one ascribe to that) and the agricultural support economy resulting from sustained small farms.

    As for the CVP benefitting the small farmer less than the larger corporate type farms, I fully disagree. The use of the water for, other than small farms (as designed in RRA legislation - limited to 240 acres) would require full payment of the water. This water is called full cost water which then pays not only the current O&M cost of the water and the capital cost of the water, but also all associated interest. In this case the water is not subsidized at all.

    Secondly, the application of "lost opportunity costs" is never fully characterized in governmental programs. As you know such programs are developed at the hand of a represented government, able to tax its citizenry at the stroke of a pen. However, the free market, which I subscribe to in nearly every sense, may need, at times, governance from the public as a whole. As an example, roads would not be built unless the free market found a need. The use of the roads would likely be limited to payers and thus the economic impact would likely be concentratred solely on those users of that road. An army would not be gathered until at such time critical mass was attained or a very wealthy monopoly/oligarchy provided one. Absent such items several of our luxuries today would only be a pipe dream.

    Might I add, that today's small farm has found other input stressors such as harmful legislation, high priced land resulting from expanding urban populations, reduced water supplies, environmentalism unchecked, etc. These increase the cost of inputs and thus the cost of doing business. Fifty years ago a family lived well on 10-15 acres of oranges. Now the same living is achieved at 10 times that acreage.

  26. Michael,

    As you are well aware, many farms >240 acres benefit from subsidized CVP water (see Cadillac Desert). As for the "small family farm" being pushed out of business, I'd say that government programs are responsible.

    I'm all in favor of small (probably organic) farms, but USDA is not :(

  27. Michael Hagman23 Sep 2008, 22:29:00


    Yes you are right (corporations taking advantage of RRA), but only to the point of 240 acres. As for Cadillac Desert, that is not typically regarded as the gospel of the Reclamation Reform Act or the CVP. I would also agree that the Federal Govt is culpable to the extent that they have created legislation to meet the discontent and discord that might exist in its citizenry. As an example, the CVPIA clearly was harmful to the small farm as it pushed more water from the farmer to the environment (right or wrong). This reduced the supply of that input and the market for the balance of water increased its cost. CVPIA added costs for "restoration" with the intent to improve the waterways back to pre-cvp" existence. The USBR has been saddled with complying with a whole host of things that were not of concern when the project was built. Additionally, there have been a host of regulations placed upon (right or wrong) farms that have raised the cost of doing business. This drives the small segmented grower to either co-op's or some form of larger collective and eventually to corporations to take advantage of economies of scale. I would say that CVPIA harms the market of agricultural produce. What would the market do to adjust for this intrusion by the government into the market of inputs that farms relied upon. The market simply says good bye.


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