The Problem with Water Markets

Parting the Waters

The historic drought in California has brought much welcome attention to the problems of water allocation in the American West. I can’t even count the number of articles explaining the “wasteful” water use by California’s almond and alfalfa farmers, or the ones laying out a better way forward.

Two days ago, an international affairs fellow at the Council on Foreign Relations, a think-tank in Washington, DC, wrote an op-ed in the New York Times entitled “Water Pricing, Not Engineering, Will Ease Looming Water Shortages.” The gist of the piece is that we need to stop relying on “engineering” like more pipelines, dams and canals in times of water shortage, and instead move water through market mechanisms. Water markets appear throughout the academic literature and, supposedly, have not developed on the ground, which means that water continues to be allocated according to “outdated” water laws instead of going to…

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