By "monetary" I meant pricing in cash or equivalents, generally between individual economic agents. I don't know what the correct terminology might be.
I was alluding to the fact that politics is also a kind of market for price signaling. Regulatory schemes are a signal to either reduce supply (literally, as in the Federal regulatory scheme for the wholesale electricity market) or to otherwise stop externalizing some cost. Economists quantify that in terms of the effect on market pricing because it's a much more useful and mature model for analytical purposes, but fundamentally that's just semantics. Political power is subject to the dynamic forces of economic laws like anything else, we just lack the ability to quantify it as well.
I like to think of government as just another large firm, and its product is legitimacy. Government does have the power of violence, but from a regulatory perspective (as opposed to criminal law perspective) that's often irrelevant in the aggregate. For example, in San Francisco there are many thousands of illegal in-law units. But never would the government go around house-to-house to enforce the law, and rarely do so even when given notice. The politicians would be voted out of office the moment anybody caught wind of such a thing.
The problem with water is the externalities, some of which are extremely difficult to price. So it's irrelevant that we can use e.g. futures markets to mitigate volatility.
Imagine that overnight somebody said that Silicon Valley is unsuitable for technology firms. Everybody needs to get up and go somewhere else. We could probably price the immediate effect fairly easily--cost of relocation, for example. But now consider that the economy of the entire Bay Area and indeed of all of California depends heavily on the technology economy. What's the cost of all the unemployed engineers who didn't get relocated? The cost to the companies and people serving the tech industry? The cost to the state of not only lost revenue, but of past and present budget allocations. Of unemployment? Of crime? Of the path-dependent evolution of economies, generally? Some of that is impossible to know given our current understanding.
And how do we internalize some of the benefit that will accrue to where ever those companies migrate to? Theoretically that should be possible, and ideally that would be done to minimize disruption.
Now imagine somebody told you that if the government intervened and did X, Y, and Z, then the tech industry was viable and could stay, at least for the time being. At best everything will continue as before, at worst there'll be a moderately slow wind down. But in any event things will be much more stable.
What do you think is going to happen? Are we (society) going to choose to develop a futures market for pricing the volatility, or are we going to turn to government?
Whatever we do, the environmental forces against the tech firms will remain, it's the mechanisms we employ to manage the direct and especially indirect costs that is different.
That's water in a nutshell for many areas of the world. For example, the entire economy of the Central Valley of California is dependent on agriculture. In total dollars the immediate benefit of agriculture to the California economy is surprisingly small. But there's a reason California bends over backwards to sustain the industry. It's not just about corporate campaign money. Again, the industry is small by dollar amount. And if the costs of sustaining agriculture were so inefficient you can be sure other corporations would be using their political donations to fight such laws.
After all, it's _easy_ to import water. We don't need futures markets for water, or even to build desalination plants. Certainly not in California where there's more than enough water for residential use. The most efficient solution to drought is to import industrial and agricultural products which rely on water. But for various reasons there's a limit to how far countries wish to go down that track, or at least how quickly they want to.