Author’s note:
This series of blogposts will be my paraphrased notes on a lecture given by Murray Rothbard called “The American Economy and the End of Laissez Faire“. This means the post will contain some word for word transcriptions of Rothbard’s words and some editorializing and rephrasing of my own. I will not distinguish between the two.
Who owns water?
In Europe, water is considered generally abundant. The way the common law ownership of water developed in Europe was called the “Riparian system”, where if you have land on a river, you own the chunk that extends into the River next to you. In those days they didn’t worry about much about ownership of water beyond that (aside from polluting upstream) because it was never viewed as a scarce resource. The same Riparian water ownership system extended to the eastern United States. These laws essentially meant that one was able to do very little to the actual rivers themselves.
In the West there are often large water shortages. The new water ownership system developed in the Western United States, was called “appropriations”, which was much like a homesteading system. Unfortunately it was not pure private ownership. For example, if you owned the first 5% of a river and you weren’t actively using it, the rights to that river could be revoked by the government and sold to a 3rd party.
As a result of this, homesteaders could not actually sell their rights to a particular portion of the river as they did not have true ownership over it. This makes for a difficult economic environment for any entrepreneurial activity, particularly when that activity might require a capital investment to change uses of the river.
For example, there are constant wars in west coast politics over who gets the water coming out of the Colorado River. Los Angeles is essentially built on a desert and requires lots of water from the river which causes constant fights. But it doesn’t need to work this way.
If individuals were allowed to own a portion of the river flow based on adjacent land ownership, and if they were allowed to buy and sell those rights, magically the water management problems would disappear. Rather than letting the market address the problem it becomes a “political football” that gets punted whenever possible.
Central Arizona Project
The Central Arizona Project was a recent and very expensive water pumping project. It consists of a 336 miles of aqueducts that divert water from the Colorado river into Central and Southern Arizona. Rather than charging a market price for this diverted water, it is highly subsidized (by the taxpayer) and given mostly to farmers.
The Farmers are given this subsidized water on a “use it or lose it” basis and at artificially cheap rates, which ends up being extremely wasteful. The farmers are encouraged to grow crops, which they often cannot sell at a profit, in which case the government will also simultaneously pays them not to produce anything to help fix prices.
The State & Federal government then pays these farmers twice, once to water their crops and a second time not to grow them or to grows less of them. Ask any farmer about this, they love it (wouldn’t you also love it if someone paid you extra for not doing your job?).
The other group that really loves these types of projects are bureaucrats. They get to expand the department of agriculture, expand the department of the interior, and expand their own self importance. They get to create overpaid, unnecessary government jobs at the tax payers expense. In fact, the only people who don’t love this deal with the devil, are the tax payers and dollar savers who are getting beat up by inflation and taxes (and quite often are none the wiser).
