Worse, the owners of those fields are often foreign companies. That means they use tremendous amounts of water in one of the driest regions on earth, in the middle of a multiple decade drought, and the wealth these farms generate disappears overseas.
The 101-level "solution" is to just raise the price to account for demand. The problem with that is that it treats all usage the same, whether it's a residence's first gallon or an alfalfa field's last gallon. But the former is something we need to protect.
It makes sense to price water, and electricity, in a fashion where the first X costs a certain amount, and the next X has a higher rate, and above some percentile of usage it has a much higher rate, and at some percentile of usage, customers should be very nearly paying for new required utility infrastructure themselves. That allows using pricing to solve supply problems, without penalizing normal levels of usage.
Some utilities already do this. But if there are actual issues with having enough supply for both datacenters/farms/smelters/etc and residential usage, then they're not doing this well enough, or don't have the pricing correct.
We don't do this for gasoline (in most countries), even though it is also vital for life. And yet people can still drive, afford to eat food grown with fertilizers, use plastic, and so on.
Turns out markets are pretty good when you leave them alone. But when they're not left alone (as is the case with water today!!) you get some weird shit.
No, but commercial trucks use diesel, which carries about 25% higher taxes per gallon. And vehicle registration on semi-trailer trucks is significantly higher as well. They pay, on average, between $25,000 and $30,000 in taxes and fees each year.
> Turns out markets are pretty good when you leave them alone.
No, they aren't. They're ridiculously bad when you leave them alone because someone captures the market, ramps up anti-competitive practices, and immediately begins rent-seeking as hard as possible.
Free markets are pretty good at finding good prices. Markets that are left alone do not remain free. That lauded "self-interest" encourages businesses that have reached nearly 100% market share to increase profit in other ways.
The better argument is that diesel is worse for air quality and then it's a pigouvian tax in proportion to how much you burn.
The realpolitik argument is that fewer people have diesel vehicles and democracy is two wolves and a sheep voting on what's for dinner. But taxing commercial trucks is also a pretty sneaky way of taxing ~everything while pretending to not, so it's also the principal/agent problem. Legislators want to spend money while pretending not to take it from you.
It is taxed less than gas in lots of Europe where that is more common. You also need to factor in mpg vs gas, where it is higher, so more road-wear pCO2 was part of the debate in Europe, even though it is longer carbon chain so worse co2 ratio per calorie, the engines are more efficient. Diesel is worse for local air, better for long term co2.
There are a mixture of factors and lobbying behind the differencs, road wear is one. Farm fuel with no road wear isn't taxed much at all in lots of places and is more often diesel.
But then it's even worse at recovering the cost of road maintenance from heavy trucks.
> You also need to factor in mpg vs gas, where it is higher
Passat TDI (diesel), ~3500 pounds, ~45MPG. Toyota Camry Hybrid (gas), ~3500 pounds, ~50MPG.
In theory diesel hybrids would be even more efficient but diesel engines and hybrid transmissions both add up-front cost and further efficiency improvements have diminishing returns because reducing a $100 fuel cost by 30% isn't as much money as reducing a $70 fuel cost by 30%.
> There are a mixture of factors and lobbying behind the differencs, road wear is one.
Road wear is the irrelevant one in terms of fuel. Because of the fourth power law, essentially all road wear is from full-size buses and semi trucks. The contribution from passenger cars and even the likes of diesel pickup trucks rounds to zero. Meanwhile the largest vehicles use a minority of the fuel because there are several times more passenger cars than semi trucks.
OK but the market intervention being discussed here does not create a free(er) market. Its intent and effect is the literal opposite.
When hurricanes come to South Florida, the well off migrate North to wait out the storm while the poor suffer the dangerous conditions. Part of this is due to the price spikes of gasoline in the local market as supplies dwindle due to fewer truck shipments and refineries shutting down for the storm.
Water is similar. Both water rights and water utilities are gamed by people who have resources. The people that are hurt are usually poor utilities bill payers, rural residents who are the first to lose service when wells dry up, and anyone who thinks they have water rights until an upstream user exhausts their expected supply.
The “markets work” heuristic is frequently wrong if you don’t glaze over the very many counterexamples.
Rationing is an inevitable response. But to say that is like saying witch hunts are inevitable - they are. They're still bad ideas. People who can maintain access to their higher reasoning should resist them.
Sure, but OP is advocating that we should "systematically [use] a pricing structure that charges disproportionately more for usage above high thresholds." They're not arguing that this is something to be applied only in emergencies.
Similarly in your post, you use the need to ration gas after a hurricane to argue that we should ration water all the time. This does not follow.
> Both water rights and water utilities are gamed by people who have resources. The people that are hurt are usually poor utilities bill payers, rural residents who are the first to lose service when wells dry up, and anyone who thinks they have water rights until an upstream user exhausts their expected supply.
The logical extension of your argument here is that the world would be better if we subsidized gasoline for "poor utilities bill payers" and "rural residents".
But why gasoline and water specifically? Why not also healthcare, food, childcare, and other necessities?
Then consider, if we have a budget of $X per family to subsidize necessities, surely the government is not best suited to decide how to split up those dollars between water, gas, healthcare, food, and childcare? There's no right answer universally, some people need food more than they need gas, and vice versa. Surely an individual family would be better equipped to decide for themselves?
We have now invented "giving money to poor people instead of subsidizing demand", which I wholeheartedly support.
As with many things, markets do work, but people don’t make rational choices for their well-being.
> systematically [use] a pricing structure that charges disproportionately more for usage above high thresholds.
This is what I'm arguing is a bad idea, by using gasoline as an example.
If you want to argue that imposing this pricing structure systematically is good because it would help prevent a bad monopoly like Standard Oil, you'd need to explain (a) how this market intervention would prevent monopolies and (b) how it's a "better" way (according to however we decide to measure "better") to prevent monopolies than the alternatives. I don't see how this is true, though.
> Turns out markets are pretty good when you leave them alone. But when they're not left alone (as is the case with water today!!) you get some weird shit.
The problem is that water isn't traded on a normal market at all. Lots of people have historical water rights and pay nearly nothing for their water use. There's byzantine regulation and many have the right to use for some purpose on their land but not to resell, so the market cannot allocate to more efficient use.
If you just let the 101 level solution actually work, water prices will rise until inefficient uses like water-intensive agriculture (not even all crops!) are pushed out. Urban users easily outbid almost all agricultural use, even at what any person would consider dirt cheap prices. For example, desalinated water, which is considered expensive for agriculture, can be 40 cents per cubic meter of water. That's a lot of water! Usually the last mile of urban water delivery costs more than that.
The amount required to satisfy all urban use, including water hungry lawns etc, and datacenters, corresponds to a very minor reduction in agriculture. Perhaps even just changing which crop is grown or switching irrigation techniques.
Charging more to higher users, price discrimination, causes several problems. First, it creates an incentive to cheat. I'm not using all this water myself, its for this whole group of people who "live" here. Don't allow this kind of spreading (somehow...)? Now you actually screw any business or institution that serves a lot of people. A farm produces food for thousands- do they count as one user? A park uses much more water than a garden but serves many more people. Whatever framework you create will require another bureaucracy to run. Lobbyists will find or insert loopholes for their friends.
The heavy users actually improve the system robustness, in both electricity and water. Their higher demand pays for more supply infrastructure, which itself often benefits from economies of scale, and in a shortage they may even be more responsive to price increases due to their high use.
The heavy users have more influence over the laws which govern the infrastructure, as the history of water rights in the West clearly shows. We see it now when secretive organizations negotiate with water companies under NDA to get water for new data centers - something a smaller water user couldn't do.
The riparian doctrine of the East, with its high rainfall, don't work so well in the dry West, which is why it generally uses the prior appropriation doctrine. Water management was traditionally under a communal system. Some of these still exist as acequia associations, which include equity and fairness in their decisions, which doesn't follow the prior appropriation doctrine.
Econ 101 doesn't handle these issues.
If the Native Americans have water rights, they can also sell them. They can choose to use it inefficiently on subsistence farming, or they could sell at the going rate. A normal market itself doesn't imply any particular allocation of water rights, just that they should be as fungible and transferable as possible.
Why are the laws that govern the infrastructure particularly important? It only matters now because its a tangle of regulation. Yes, big users can often get bulk discounts or other special arrangements by committing to use. This happens in many areas.
There's no law governing what products my grocery store must carry. Yet, I can still choose a store with many things I like, at affordable prices. My store may (and frequently does) exclude all products containing some chemical considered harmful even if it isn't banned. Of course, water has more of a natural monopoly problem, but that's more for last mile infrastructure and not broader supply.
I don't understand the details of the riparian vs prior appropriation doctrine. How does this create an issue? If the water rights are defined somehow, in a usage-independent way, only in terms of the net water removal, to account for runoff from local use, and the water from them can be traded, then a market can work regardless of the specific nature of the right.
Any association holding the rights could allocate its water internally as it sees fit. Just like any other asset? Or it could decide to sell it and distribute the money instead- perhaps even better for fairness to it's members!
You've just described the standard practice for taking over Native American lands by economic coercion instead of direct force. Take away land and water using market forces, and a culture based on land and water shatters.
That's precisely why the Native Americans protected their rights by treaty, not market forces.
Econ 101 was created to justify British colonial expansionism. Econ 101 justifies indentured servitude. Econ 101 justifies vote selling. Econ 101 justifies rule by the rich.
We've collectively decided that some part of life are off-limits to Econ 101.
Water is not simply a commodity. Water is life. Water is culture.
> How does this create an issue?
Water rights in the West are at least a Econ 400 level course, if not graduate school.
I am suggesting expanding their water right- instead of only the right to do X, Y, Z with the water, take whatever right to the water they do have, in terms of amount of water, and say "you can do whatever you want with this much water". How to allocate resource rents doesn't have much effect on the market structure itself.
A lot of vitriol against supply and demand without any evidence.
Food is life. Food is culture. Just as much as water. Which countries have had famine, those that allocate via some system of food rights, or those that had a free market in food? The largest examples of famine I am aware of, in the USSR and Maoist China, were driven by some central allocation of food rather than a market. Not a good record.
One of the great features of markets is that things don't need to be decided collectively. Perhaps 90% of people want to wear blue T shirts, but I want a red one. If we collectively decide, I get a blue T shirt. In the market, I buy a red T shirt- perhaps at a very slightly higher price due to less economy of scale.
We certainly know of areas where vanilla markets can fail- externalities etc, but these do not apply to the situation here. The existing system of water rights doesn't feel like a collective decision, but rather entrenched special interests and lobbyists.
It's very odd that you talk about a decentralized market when water allocation in the US Southwest was decided by the Colorado River Compact in 1922. This is central allocation and, famously, based on over-estimated flow numbers.
Most large famines were caused by flooding or drought. More people died in the Chinese famine of 1906–1907 than the Russian famine of 1921–1922 and the Soviet famine of 1932–1933 combined.
> The existing system of water rights doesn't feel like a collective decision, but rather entrenched special interests and lobbyists.
That is absolutely correct, and would covered in the first week of any water rights class. In the West, "water flows uphill toward money", as I learned from reading "Cadillac Desert".
Or if you want a novel, read "The Milagro Beanfield War." The small farmers (mostly Hispanic) were drafted for WWII and couldn't farm, so lost their water rights, while the large farmers (mostly Anglo) could hire help.
And who got to set up the water law? https://en.wikipedia.org/wiki/Santa_Fe_Ring
"The Santa Fe Ring was an informal group of powerful politicians, attorneys, and land speculators in territorial New Mexico from 1865 until 1912. The Ring was composed of newly-arrived Anglo Americans and opportunistic Hispanics from long-resident and prominent families in New Mexico. Acquiring wealth, both groups realized, lay in owning or controlling the millions of acres of land which the Spanish and Mexican governments of New Mexico had granted to individuals and communities. The acquisition of grant lands by members of the Santa Fe Ring was facilitated by U.S. courts who had no allegiance to Mexican claims and land practices which featured allocating most of the land in grants to the common ownership of the first settlers and their descendants vs. legal private ownership."
What exists is a patchwork of economic systems, there is no cohesive whole, and you clearly prefer the US one which prioritizes the private ownership model of Econ 101.
That's why you can't view it simply through an Econ 101 lens.
Nominally is exactly right! The treaties have been violated many times.
You're missing the 1959-61 famine in China! Sure, famines have happened for other causes. Typically 100+ years ago before technology advanced. Now, famines largely come from poor governance.
Thanks for the background info!
Yes, I agree it is a patchwork system- and its probably quite difficulty to analyze! I'm arguing that a private ownership model with trading would lead to better outcomes, and basically end for all practical purposes water shortages.
For example, the smaller mostly Hispanic farmers you described above wouldn't lose their water rights in a rights ownership system- they could hold them, rent them out, sell them etc. But they wouldn't lose them merely for being unable to farm. Of course, water rights are a resource rent and it might be desirable to tax them as well- effectively economically partially public ownership- but this doesn't change the core argument about the efficiency of tradable rights.
1. You're thirsty and need a sip of water? That should be free
2. You're an household and use water? That should cost progressively more the more you use if you use more than typically needed
3. Your business model requires you to evaporate every last drop of water in a desert region? That should be so prohibitively expensive that your business model does not work
This is basically just a low amount threshold and a exponential function. You just need to select the exponent.
Of course, the farmers pay almost nothing for the absolutely gigantic amounts of water, and meanwhile they pester me to use a low flow shower head and charge me $400/month for a few gallons.
That have _themselves_ banned Alfalfa farming; because, of the water impact.
Well, if you want to think about it that way (perfectly reasonable), you'd also want to consider the production of new alfalfa. Figure that at any given time, the world contains X amount of alfalfa, and that amount determines how much carbon is absorbed by the alfalfa industry.
You should probably also consider inputs to growing that alfalfa too. Even single order inputs like transportation, fertilizer, water, etc would likely have more carbon release than the carbon mass of the alfalfa.
Is alfalfa even one of the plants that will nitrogen fix from the air? Or is it all pulled from the growing medium?
The main thing is, we are not making any new carbon that was not already here billions of years ago.
:)
They indeed are treated as sacred, it's enshrined in the Takings Clause of the US Constitution. The big problem in the American West it that the model of property rights in water sources makes it very difficult as a technical matter to put a price on a specific claim and to adjudicate disputes, without triggering a cascade of pricing and rights dilemmas upstream and downstream (figuratively and literally). Western states could in theory exercise eminent domain to take back water rights, and I think they occasionally do, but it's just very fraught from countless legal angles even before getting into the politics of it, which compound the headaches a hundredfold (partly because of the interdependent nature of everybody's rights). Most of the time Western states try to hack around the issues with complicated regulatory and taxing schemes to try to claw back some semblance of control over water resources. But it's very inefficient and ineffective. Property rights are useful because you don't need to centralize all pricing and usage decisions, or when you do--e.g. regulation, taxation, eminent domain--the mechanisms for applying those decisions are simpler and more mechanical; but Western water rights are just a different kind of beast. What's needed is comprehensive reform that tries to shift the American West to a better water rights model, specifically a better model for how property rights inhere in water resources, to drastically improve transactional efficiency, both from a legal and market perspective. But there's no simple way, and in particular no cheap way from a budgetary perspective, to get there even if the motivation existed to get around the monumental collective action problem, which it doesn't.
It seems like maybe there is though.
The first problem is the "use it or lose it" provisions where someone has the rights to use water but not sell it, thereby encouraging waste. That one has a solid solution: If they have the right to use it, they get the right to sell it. Make sale inalienable from use. Then you don't have to pay them anything because you're giving them something instead of taking it. But you get higher water availability as now all these people wasting "free" water start selling it because the opportunity cost of not selling it is now worth more than the wasteful use. The only "problem" here is that they get a windfall, but we can solve that in the same way as the second "problem".
Which is the takings clause. The purpose of that is to prevent unequal takings. If the government needs your land to build a railroad, they have to pay you for it, because they're taking yours but not anyone else's. Whereas when they take everyone's property at the same rate it's called property tax, and that's allowed. So if you just got a windfall of water rights in a dry place, congrats, you now have a valuable property right which is subject to property tax. Not using the water and don't want to pay the tax? Then sell the water. Since the buyer values it at more than you do, and the tax is less than 100% of the value, everyone comes out ahead compared to the status quo. The previous inefficient user gets $100 in money instead of $10 worth of inefficient use, the government gets some proportion of that in new tax revenue (variously property tax on the rights and income tax on the sale), the buyer gets water it values at >$100.
And the wettest places tend to have the least-regulated water.
(Nobody talks about it because shortages make bigger headlines than surpluses do, but there's a ton of agricultural areas in the US that have too much water and where providing drainage for farm fields is much more commonplace than irrigating them is.
It doesn't really matter in this context, though, because folks hate datacenters in these water-rich areas just the same as they do everywhere else.)