Quit growing stuff in a desert, idiots!
(or: markets allocate all things better than politics, even water)
We’ve had a rainy year, thankfully. So talk about how empty Lake Mead has been getting over the last few decades has died down… a bit.
But prior to that, all we heard here in Las Vegas is how Lake Mead is emptying and it’s all our fault! The blame would shift from greedy home owners to evil capitalism to humanity’s ultimate sin, “climate change”.
Nonsense. The cause of our receding rivers and lakes is a very old one. It’s called “the tragedy of the commons”. We suffer because of the political allocation of precious resources. It’s not just that the political method is “inefficient”. It’s downright destructive.
The horrifying “emptying” of Lake Mead is entirely the result of socialism when applied to water. Rather than property rights and free markets allocating water usage, it is allocated politically.
Of course there are shortages. Of course there is cronyism. Of course politically connected special interest groups get the lion's share. Of course the average citizen suffers. What else should we expect?
The amount of Colorado River water used by the various states involved was established politically in 1922, a century ago. The water allocation plan has been revised many many times since then — always politically.
Political solutions are notoriously corrupt and wasteful. Political solutions lack free market prices. Consumers don’t have the proper incentive to economize. Producers (remember, desalination plants are a thing) don’t have the incentive to increase production. There are no resource “owners” to create a sensible market price with their usage choices and their bid/ask decisions. It’s a mess.
So, how much water is used by whom and how empty or full Lake Mead is, is decided politically. What could go wrong?
It doesn’t have to be this way. Property rights in water used to be a well-understood legal concept and modern technology makes demarcation and exchange of riparian and other water rights a perfectly sensible practice. All we have to want is to embrace free markets in water rather than socialism.
Haven’t we learned by now that socialism doesn’t work?
Every MAF (million acre foot) of water can and should be owned by a private entity. Exactly how we get from fully government-owned to fully private-owned is tricky, but as Ronald Coase famously observed, once property rights and liabilities are clearly defined, the affected parties will adopt policies to “internalize the externality”. Resource use and price will match up with the realities of supply and demand. Equilibrium can be achieved. Reason and planning can take place.
If we keep allocating water politically, we will constantly face bewildering shortages and misuses of this precious, life-sustaining resource.
California recently scrapped a proposal to build a water desalination plant. Of course. Why should they? They get “free” water (or at least priced far below what a market would set) from upstream. Why spend the money? Why make any unnecessary trade-offs? Why bother?
That’s the worst part about socialism. Resources are wasted due to the tragedy of the commons. Our natural incentives to economize, create, and innovate — our natural incentives to be good stewards of resources — are muted (disastrously so) by socialism.
You want water shortages? Allocate water politically.
The bulk of the water use from the Colorado River happens south of the Hoover Dam (Arizona and California). That is where the bulk of the political allocation lowering must happen as well. Due to the arrangements made 100 years ago, California has a “superior” position to Arizona. This seems to be causing California to be less willing to renegotiate the terms of this Frankenstein deal. Pretty soon, the federal government will step in and force a new political solution.
The bright side of all this for Las Vegas? Our new “third straw” allows us to use water from Lake Mead past the point at which water no longer flows south to Arizona and California through the dam.
We will be okay. Also, we hardly use any water to speak of, thanks to the efficient reclamation system that returns the runoff from our residential water system back into the lake after purifying it.
That bears repeating. Las Vegas citizens are constantly browbeat about how we need to “conserve water use” and we are being greedy, short-sighted stewards of a critical resource.
Ridiculous. Because of reclamation, Las Vegas uses less than 0.5% of the Colorado River’s flow. The entire state of Nevada is only allocated 2%. In fact, all residential use of the Colorado River amounts to only 12% of it’s flow. 79% goes to agricultural, growing cotton, corn, soybeans, rice, and almonds in arid deserts ill-suited for it.
But who cares how dumb it is to grow stuff in the desert when the water is “free”?
We know about the tragedy of the commons. We all study it in school. We know about cronyism and how political schemes reward bad actors — yet we stand by and allow it. We shrug our shoulders and say, “Government knows best.”
It doesn’t. Allocating critical resources politically is insane, or corrupt, or both. We should wake the hell up before we all start getting really really thirsty.
Naturally,
Adam
Wanna learn more fun stuff about economics and law and political theory? Look here!
A few articles about the issue:
How the Subsidy Straw Is Sucking The Colorado River Dry | AIER
Wastewater Treatment - Lake Mead National Recreation Area (U.S. National Park Service) (nps.gov)
New agreement will leave more water in Lake Mead - Las Vegas Sun Newspaper
Up here at the other end of The Grand River, we're actually starting to use all of "our" allocation. Unfortunately the lower basin states got used to the northern states leaving extra water in the river. The compact states are in the middle of another negotiation. Both upper and lower basin groups have made proposals that neither side likes, so it looks like the new allocation plan will fall to the federal government to figure out. Also, because of the compact the rule of using water on your land no longer applies. Water rights fall under complex definitions of senior and junior rights, most of which are attached to land that are not transferable. So there are ranches that are potentially worth millions because they have a senior water right, but if the property is sold will be far less valuable because the rights can't be sold. A few families are basically stuck with land that cannot be sold.
A really good overview of the river and construction of the Hoover Dam can be found in the book "Colossus: The Turbulent, Thrilling Saga of the Building of the Hoover Dam." Michael Hiltzik gives a good account of the history, ecology and justification for the Hoover Dam in context with the Colorado River Compact and early 20th century politics.