ILTE of the Day Darrell Durrett of Boulder has a letter published Sunday the 7th in the Boulder Camera. He doesn't like John Caldara's idea to privatize water ownership and delivery in order to alleviate the effects of the drought. Writes he:
I would then like him to explain how initial ownership of a given drop is to be determined, how water works would have to be changed to support his vision, and how much the average user would then expect to pay for water.
Appearently Durrett has never heard of Ronald Coase, the Nobel Prize-winning economist, who explained all this years ago. I'll defer to David Friedman's explanation of the relevant application of the Coase Theorem.
"The argument underlying the Coase Theorem comes into play. If we assign the right initially to the wrong person, the right person, the one to whom it is of most value, can still buy it. So one of the considerations in the initial definition of property rights is doing it in such a way as to minimize the transaction costs associated with fixing, via private contracts, any initially inefficient definition."
Minimizing transaction costs in this case means keeping the political process well away from the water market. If the Coase Theorem sounds like Greek to you then do yourself a favor and catch up here.
I call upon the Camera to encourage Caldara to explore this issue in the intricate detail that it richly deserves.... I realize that the effort involved will require Caldara to delve intimately into the study of hydrology and will be formidable. I certainly don't expect him to produce a complete response to this challenge in anything under a year, since this is, no doubt, work equivalent to a master's degree in something (geography?). Nevertheless, I hope his formidable intellect is up to the challenge. What I don't believe is that any of us will want to live in a world of privatized water, no matter how much money we might have.
Durrett suffers from the delusion that many statists seem to share, that nothing good can happen unless some elite group do a lot of thinking, and then when they're done make a pronouncement telling us commoners how we should conduct our affairs.
I see things quite differently; there's no one out there who can predict and adaquately plan for something as complicated as water use in a place like Colorado. That's precisely why we need an efficient and flowing free market to react and account for rapidly shifting supply and demand.