Some of the smartest people on the planet reside in California, but unfortunately, for most of the population and its duly elected officials, the grip on logic becomes ever more ephemeral. Ryan McMaken explores the Twilight Zone known as California water policy, from mises.org:
California Governor Jerry Brown has announced that private citizens and small businesses — among others — will have their water usage restricted, monitored, and subject to heavy fines if state agents determine that too much water has been used. Noticeably absent from the list of those subject to restrictions are the largest users of water, the farmers.
Agriculture accounts for 80 percent of the state’s water consumption, but 2 percent of the state’s economy. To spell it out a little more clearly: Under Jerry’s Brown water plan, it’s fine to use a gallon of subsidized water to grow a single almond in a desert, but if you take a shower that’s too long, prepare to be fined up to $500 per day.
There Is No Market Price for Water
The fact that the growers, who remain a powerful interest group in California, happen to be exempt from water restrictions reminds us that water is not allocated according to any functional market system, but is allocated through political means by politicians and government agents.
When pressed as to why the farmers got a free pass, Jerry Brown was quick to fall back on the old standbys: California farms are important to the economy, and California farms produce a lot of food. Thus, the rules don’t apply to them. If translated from politico-speak, however, what Brown really said was this: “I have unilaterally decided that agriculture is more important than other industries and consumers in California, including industries and households that may use water much more efficiently, and which may be willing to pay much more for water.”
In California, those who control the political system have ensured that water will not go to those who value it most highly. Instead, water will be allocated in purely arbitrary fashion based on who has the most lobbyists and the most political power.
Numerous economists at mises.org and elsewhere (see here and here and here) have already pointed out that the true solution to water shortages lies in allowing a market price to determine allocation — and in allowing there to be a market in water — just as there is a market in energy, food, and other goods essential to life and health. Supporters of government-controlled water claim that billionaires will hoard all the water if this is allowed, although it remains unclear why the billionaires haven’t also hoarded all the oil, coal, natural gas, clothing, food, and shoes for themselves, since all of these daily essentials are traded using market prices, and all are used daily by people of ordinary means.
http://mises.org/library/drought-and-failure-big-government-california
To continue reading: Drought and the Failure of Big Government in California
