What point are you trying to make with this? Yes, it is obvious. I was not denying that. I was pointing out that raising the prices too much (10% in California) in response to that increase in value is illegal.
I don't know what states you consider smart, but Texas is generally the polar opposite of California and they have laws on price gouging too. They just don't put a percentage on it and instead prevent "exorbitant or excessive" pricing.
If I'm considering a pricing strategy for my business, want to stay on the good side of the law, and am given a choice between a set percentage and two vague words in which there is no exact definition, give me California's stupidity any day.
You're free to be stupid. The probability that there will be less water available than there could be will be higher there than places that are less idiotic.