Introducing the Next Governor of the Great State of Colorado Gubernatorial candidate Ralph Shnelvar (L) responds to an earlier post on this site concerning water rights. Here are a few edited portions:
In regards to www.colorado.blogspot.com, I read it all and found all of it
So far so good.
What I found most interesting was your reporting on Coase's theorem. Your
analysis was incisive and correct, but, unfortunately, missed the point.
I have spoken to various experts in the field and I always ask them to
consider how to make this current collection of water rights into a market
system for water.
As yet I have come up empty handed.
Let's go back to your correct analysis that once the (water) rights are
legally well defined and transaction costs are low, the economic system will
allocate water in the most efficient manner. As you can well imagine, right
now there are perverse incentives (e.g. "use it or lose it") for those with
water rights to waste unbelievable amounts of water.
Our first problem is that we could initially allocate those rights in a
totally inequitable manner. Perhaps, we allocate all water rights to Walter
Schlomer. Walter Schlomer is now richer than Bill Gates.
Congratulations, Walter, I always knew you'd make it.
Cool! But that's no problem. Assuming I'm a rational actor in the market, everyone will get the water they need, provided that they are the best users of that water.
This reductio ad absurdum result indicates that we first need to equitably
convert the current system of water rights into their cash equivalent.
Damned if I know how to do that.
No, as in my original post, there's no need for the governor or any government body to convert anything, save bad laws. Your job, should you chose to accept it, (cue Mission Impossible theme music) is to identify laws that have the following effects:
-Prevent water owners from selling their water
-Prevent water users from buying water
-Allow local water boards or communities or anyone else to seize water rights through eminent domain or similar processes
-Prevent water from being transported via pipelines or other methods
-Give the State or other government ownership of the water
And then crush those laws into oblivion.
Let's think about this: every person with usufructuary rights in this state
has exercised a right to a certain amount of water each year. Let's say
that we agree that Farmer X's ditch rights average out to an acre-foot of
water per year.
That's the same as 250,253,900 teaspoons of water. Really. I counted it
last night. My tomato garden is now a ruined mess.
Some BIG questions:
(1) What is the fair market value for that acre foot of water? I don't know
and I don't know how to determine it. For argument's sake, let's call it
(2) The State pays $1,000 per year to Farmer X for the water rights he has
given up. Where does the State get that $1,000? Clearly, from selling that
water to anyone ... including Farmer X.
(3) Water now runs through your property. Do you pay the water owner
upstream of you for the water? What if you don't want to pay?
Now I KNOW you know there's no need for the Governor to determine the market value of water! Once you get the state out of the equation the rest of your problems start to disappear.
The net result of the government taking the actions described above is that the consumers who need the water most urgently (read; 'are willing to pay the most') will wind up with the water. Most likely, some people, such as developers wanting to build in arid regions, will not get the water they want.
I'm not naive. Politically, we likely can't get there from here. As a Libertarian Governor, you'll see plenty of similar dilemmas.
:: Walter 5:59 PM [+] ::