10 Apr 2009

Man-made Drought

That's what the pundits and politicians from the Central Valley are claiming. The trouble is that they are claiming the Fish and Game are responsible for the water "shortage" that is having big harsh impacts on south of Delta agriculture.

In this video, Representative Nunes asks for the pumps to be turned on, to prevent the water from being wasted going under the Golden Gate, so that the water is used for fish, not families. (Yes, he does show photos of children, and yes, he does enter smelt onto the record -- "we don't want them.")

He doesn't ask for "money" -- just for the pumps to be turned on, to allow "historic" Delta exports to continue. "We're finished," he says.

I don't know about that.

First, water DOES have a cost, even if it's not a dollar cost. It's an opportunity cost.

Second, the only reason we have a "shortage" is because water is not priced or traded like another precious commodity subject to political, environmental and natural whims. Ever notice how the only time we have OIL SHORTAGES is when the government gets involved? (Photo from 1979, when Maryland implemented rationing.)

Right. So we have less water due to drought (Nature) and environmental "needs" (law and politics). We have "more" demand for water because most people in SoCal grow lawns (absorbing 50-70% of residential demand) and farmers assumed that their subsidized water would flow forever (so farmers planted orchards).

The result is shortage, and turning on the pumps at the Delta will NOT fix the "supply-demand imbalance" (the euphemism for WRONG PRICING in use at IID). What it will do is give temporarily relief to farmers who are unwilling to accept that business as usual is over.

The fact that they continue to overdraft their aquifers at record rates signals their belief that their political leaders are going to turn on the pumps (crazy-impossible), that they expect divine intervention (hmmm...), or that they want to bring forward their day of reckoning (hmmm...). Tough choices.

Sorry -- it's over.

Bottom Line: The days of abundance (free water!) are over. Now let's use prices and markets to minimize the harm as we adjust to reality.

hattips to CM and JF for sending many examples of political grandstanding. I couldn't get them all in!


  1. Sucking more water through the delta will not solve anything. What it will do is continue to cause the decline of fish species such as chinook Salmon. We are seeing the 2nd consecutive year of salmon fishing shutdown on the west coast this year. What about the livelihood of all the fishermen? They are working people just like everyone else. The impact of poor water management on this fishery can not be ignored. Building a peripheral canal will exacerbate this problem and we'll end up with the extinction of this critical species. I want to see higher prices and permanent outdoor watering restrictions in all of southern California before more water is exported south.

  2. He wants it to go back to HISTORICAL levels. This is a failure to understand the nature of consumption in a changing environment.

  3. Oh my gosh, this analysis is faulty and completely inverted for a free-market economist. I think it is edged with a bit of bias in terms of environmental flows, which I have accused you of in the past. I´m sorry to have to do that.

    If Westlands´water is subsidized, that is an imperfection in its pricing. But it is notable that those farmers are willing to pay contracted prices for the water. That is wholly different than what the water now bypassing the pumps (instead of going to Westlands) and going out through the Golden Gate is. That water has been forced from a market actor´s hands (Westlands, an imperfect market actor, but at least one paying SOMETHING for the water) by the ESA, which is an unfunded policy choice. In other words, the ESA is a complete PUNT on the idea of a market altogether - no MONEY backs it up, other than the third-party costs that unwilling folks (like the Central Valley farmers, this year) shoulder.

    And yes, the folks dependent upon the pumps (Westlands, exclusively, and many others like the Met, to a lesser degree) are not looking to suddenly draw "more" from the system, they are just looking for contracted deliveries with some semblance of reliability. It should be notable to you that the south-of-Delta folks are willing to shoulder the entire costs of a peripheral canal to get out of this quagmire - that is precisely the sort of market-based action I thought you were in favor of.

    There may be compelling reasons not to send water to Westlands, but they are not economic. And there may be compelling reasons to send more water through the Delta, but again, they are not economic. You need to get honest about this.

    Until the ESA can compete for its needs on an economic footing with other actors - even a "subsidized" actor like Westlands, who is willing to pay for water and not just rip it out of someone´s hands through the court system - a free-market economist like you needs to stay about a million miles away from endorsing actions mandated by the ESA.

    Your aspersions about "subsidy" in the case of Westlands really fall on deaf ears when you defend what happened in Judge Wanger´s court last year.

  4. And I hope I wasn´t too much of a flamer there, but come on. I guess a nicer way to say it in the economist´s lexicon is to challenge you to not treat law and policy as an exogenous variable in your market solution to water problems, because we all know that the best economic solution has the fewest exogenous variables, right?

  5. @CF -- neither the ESA and CVP/SWP are "market" decisions, regardless of paying "a price" for the water. They are political projects.

    That's what I mean about "opportunity costs" when ANY political decision moves water from highest and best use (which may very well be Westlands) to some other use...

    I know it's hard to have a market with fish as buyers, but any market is better than what we are seeing now...(political grandstanding from ALL sides)

    I am favoring markets to reallocate water AFTER the pols stop messing around with property rights (for fish or farmers). They've got to stop the limbo...

    @Ryan -- 100% agree with who?


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