[Straw]

This causes major market distortions and worse outcomes than the econ 101 solution.

The problem is that water isn't traded on a normal market at all. Lots of people have historical water rights and pay nearly nothing for their water use. There's byzantine regulation and many have the right to use for some purpose on their land but not to resell, so the market cannot allocate to more efficient use.

If you just let the 101 level solution actually work, water prices will rise until inefficient uses like water-intensive agriculture (not even all crops!) are pushed out. Urban users easily outbid almost all agricultural use, even at what any person would consider dirt cheap prices. For example, desalinated water, which is considered expensive for agriculture, can be 40 cents per cubic meter of water. That's a lot of water! Usually the last mile of urban water delivery costs more than that.

The amount required to satisfy all urban use, including water hungry lawns etc, and datacenters, corresponds to a very minor reduction in agriculture. Perhaps even just changing which crop is grown or switching irrigation techniques.

Charging more to higher users, price discrimination, causes several problems. First, it creates an incentive to cheat. I'm not using all this water myself, its for this whole group of people who "live" here. Don't allow this kind of spreading (somehow...)? Now you actually screw any business or institution that serves a lot of people. A farm produces food for thousands- do they count as one user? A park uses much more water than a garden but serves many more people. Whatever framework you create will require another bureaucracy to run. Lobbyists will find or insert loopholes for their friends.

The heavy users actually improve the system robustness, in both electricity and water. Their higher demand pays for more supply infrastructure, which itself often benefits from economies of scale, and in a shortage they may even be more responsive to price increases due to their high use.

[eesmith]

The 101 level solution means that Native Americans who were granted water rights by the Spanish, and guaranteed those rights by US treaties, would have to outbid urban users in order to grow subsistence crops.

The heavy users have more influence over the laws which govern the infrastructure, as the history of water rights in the West clearly shows. We see it now when secretive organizations negotiate with water companies under NDA to get water for new data centers - something a smaller water user couldn't do.

The riparian doctrine of the East, with its high rainfall, don't work so well in the dry West, which is why it generally uses the prior appropriation doctrine. Water management was traditionally under a communal system. Some of these still exist as acequia associations, which include equity and fairness in their decisions, which doesn't follow the prior appropriation doctrine.

Econ 101 doesn't handle these issues.

[Straw]

These all seem fine in a normal market?

If the Native Americans have water rights, they can also sell them. They can choose to use it inefficiently on subsistence farming, or they could sell at the going rate. A normal market itself doesn't imply any particular allocation of water rights, just that they should be as fungible and transferable as possible.

Why are the laws that govern the infrastructure particularly important? It only matters now because its a tangle of regulation. Yes, big users can often get bulk discounts or other special arrangements by committing to use. This happens in many areas.

There's no law governing what products my grocery store must carry. Yet, I can still choose a store with many things I like, at affordable prices. My store may (and frequently does) exclude all products containing some chemical considered harmful even if it isn't banned. Of course, water has more of a natural monopoly problem, but that's more for last mile infrastructure and not broader supply.

I don't understand the details of the riparian vs prior appropriation doctrine. How does this create an issue? If the water rights are defined somehow, in a usage-independent way, only in terms of the net water removal, to account for runoff from local use, and the water from them can be traded, then a market can work regardless of the specific nature of the right.

Any association holding the rights could allocate its water internally as it sees fit. Just like any other asset? Or it could decide to sell it and distribute the money instead- perhaps even better for fairness to it's members!

[eesmith]

> If the Native Americans have water rights, they can also sell them.

You've just described the standard practice for taking over Native American lands by economic coercion instead of direct force. Take away land and water using market forces, and a culture based on land and water shatters.

That's precisely why the Native Americans protected their rights by treaty, not market forces.

Econ 101 was created to justify British colonial expansionism. Econ 101 justifies indentured servitude. Econ 101 justifies vote selling. Econ 101 justifies rule by the rich.

We've collectively decided that some part of life are off-limits to Econ 101.

Water is not simply a commodity. Water is life. Water is culture.

> How does this create an issue?

Water rights in the West are at least a Econ 400 level course, if not graduate school.

[Straw]

The land and any associated rights was taken from the Native Americans by coercive force. Not a market. Not that they have any particular claim to it; states own land, not ethnicities. The particular state that controls land sometimes changes. This has little to do with any discussion of water rights.

I am suggesting expanding their water right- instead of only the right to do X, Y, Z with the water, take whatever right to the water they do have, in terms of amount of water, and say "you can do whatever you want with this much water". How to allocate resource rents doesn't have much effect on the market structure itself.

A lot of vitriol against supply and demand without any evidence.

Food is life. Food is culture. Just as much as water. Which countries have had famine, those that allocate via some system of food rights, or those that had a free market in food? The largest examples of famine I am aware of, in the USSR and Maoist China, were driven by some central allocation of food rather than a market. Not a good record.

One of the great features of markets is that things don't need to be decided collectively. Perhaps 90% of people want to wear blue T shirts, but I want a red one. If we collectively decide, I get a blue T shirt. In the market, I buy a red T shirt- perhaps at a very slightly higher price due to less economy of scale.

We certainly know of areas where vanilla markets can fail- externalities etc, but these do not apply to the situation here. The existing system of water rights doesn't feel like a collective decision, but rather entrenched special interests and lobbyists.

[eesmith]

I can see you don't recognize native sovereignty. Tribal nations are domestic dependent nations, and count as a "state". The water rights were not taken by coercive force but remain with the nation, and at least nominally protected by treaty rights.

It's very odd that you talk about a decentralized market when water allocation in the US Southwest was decided by the Colorado River Compact in 1922. This is central allocation and, famously, based on over-estimated flow numbers.

Most large famines were caused by flooding or drought. More people died in the Chinese famine of 1906–1907 than the Russian famine of 1921–1922 and the Soviet famine of 1932–1933 combined.

> The existing system of water rights doesn't feel like a collective decision, but rather entrenched special interests and lobbyists.

That is absolutely correct, and would covered in the first week of any water rights class. In the West, "water flows uphill toward money", as I learned from reading "Cadillac Desert".

Or if you want a novel, read "The Milagro Beanfield War." The small farmers (mostly Hispanic) were drafted for WWII and couldn't farm, so lost their water rights, while the large farmers (mostly Anglo) could hire help.

And who got to set up the water law? https://en.wikipedia.org/wiki/Santa_Fe_Ring

"The Santa Fe Ring was an informal group of powerful politicians, attorneys, and land speculators in territorial New Mexico from 1865 until 1912. The Ring was composed of newly-arrived Anglo Americans and opportunistic Hispanics from long-resident and prominent families in New Mexico. Acquiring wealth, both groups realized, lay in owning or controlling the millions of acres of land which the Spanish and Mexican governments of New Mexico had granted to individuals and communities. The acquisition of grant lands by members of the Santa Fe Ring was facilitated by U.S. courts who had no allegiance to Mexican claims and land practices which featured allocating most of the land in grants to the common ownership of the first settlers and their descendants vs. legal private ownership."

What exists is a patchwork of economic systems, there is no cohesive whole, and you clearly prefer the US one which prioritizes the private ownership model of Econ 101.

That's why you can't view it simply through an Econ 101 lens.

[Straw]

A state is an entity with a monopoly on coercion. The tribal nations do not have this- while they have some carve-outs, ultimately federal law trumps theirs. So its not a matter of recognition, they simply do not meet my definition of a state.

Nominally is exactly right! The treaties have been violated many times.

You're missing the 1959-61 famine in China! Sure, famines have happened for other causes. Typically 100+ years ago before technology advanced. Now, famines largely come from poor governance.

Thanks for the background info!

Yes, I agree it is a patchwork system- and its probably quite difficulty to analyze! I'm arguing that a private ownership model with trading would lead to better outcomes, and basically end for all practical purposes water shortages.

For example, the smaller mostly Hispanic farmers you described above wouldn't lose their water rights in a rights ownership system- they could hold them, rent them out, sell them etc. But they wouldn't lose them merely for being unable to farm. Of course, water rights are a resource rent and it might be desirable to tax them as well- effectively economically partially public ownership- but this doesn't change the core argument about the efficiency of tradable rights.