4 ms·

It’s a good point, about almond trees. I’m not doubting that it made the “most” sense in the moment. I guess I’m more distressed by how we ended up specializing

by gen220 6y ago

It’s a good point, about almond trees. I’m not doubting that it made the “most” sense in the moment. I guess I’m more distressed by how we ended up specializing in such water intensive crops, in a valley with a severe and worsening, decades-long water shortage! Within a few decades, there won’t be water left to grow anything... I’m not generally interventionist, but I think the markets have failed us here (unless I’m severely misunderstanding things, please correct me). I‘m all for almonds and rice, but we really should be taxing the externalities. I’m pessimistic we’ll ever get to that equilibrium. But yeah. All this focusing on consumer water use is a distraction. We need to have an honest discussion about how the agriculture water system should be architected, so the state can continue to be productive for generations to come.

fennecfoxen 6y ago
Markets have failed you because (1) they are not active in a key part of the process. Specifically, the Central Valley water supply, which is a key input, is not operated by a market. It's operated as a government giveaway. and (2) because property rights (to aquifer water) do not exist and are not enforced. This is one of the Big Three Things that Kill Market Efficiency (the other two being barriers to entry and high transaction costs). If you want to intervene, intervene to restore market order. Convert water allocation rights into to property, allow them to be bought and sold, and give somebody title to the local groundwater, somehow. Make things cost the right amount of money. If that means almonds are too expensive to grow anymore, then that will happen. If that means almonds are worth it long term and they should get the water instead of the alfalfa in the short term, that will happen too.
- gen220 6y ago
  I’m inclined to agree with you, but let me think through this out loud... If people could buy and sell water rights, those with property on an aquifer would get harvesting rights proportional to their land. They could sell it to the almond farmers, and ask for a price that’s more or less equal to the farmer’s expected profit, which cuts into the farmers’ margin. This is kind of analogous to selling crude oil to refineries (petroleum is like almonds!). I’d expect big companies to buy up land to secure water rights. Probably the same companies that own massive almond plantations, because vertical integration. I don’t think that this system would reverse aquifer depletion? Unless we artificially restrict the supply of water in the water rights contract?
  - fennecfoxen 6y ago
    When I spoke of buying and selling water rights, I was primarily referring to water rights from the massive California irrigation system, not the aquifer. But let's talk aquifer. If I want to be uncreative and say that the aquifer is owned by some specific bigcorp, instead of by nobody, the incentives for Bigcorp would be to restrict the supply to maximize the long-run monopoly profits (discounted for time). I don't know that this is the best arrangement, as Bigcorp managers may see fit to put short-term profit ahead of that long term goal... but I guarantee you it's better than the current incentive structure, which is basically "pump like crazy — or someone else will and you'll be left dry!" But besides "bigcorp" ownership, there are some resource trust structures, I think, and existing landowners could be given some ownership in one of those, which they could buy and sell? They're mostly used in oil or gas today.
    - Wowfunhappy 6y ago
      I think you'd want some sort of "cap and trade"-esque system. Give farmers the right to pump X gallons of water from the aquifer per year. If they really need more, they can buy it from others; if their crops don't need much water, they can sell their rights.
      - gen220 6y ago
        I think this is probably the most reasonable step from where we are today (this is what I meant by regulate the supply side in my sibling comment). I think the right should be proportional to land size, and the X number should aspire to be Y% above replacement rate, to account for water poaching, measurement inaccuracies, etc. X would be set once per year, and announced well before planting season to allow time for planning. It wouldn’t eliminate almonds and pistachios, but it would dramatically reduce them. I think such a move would face huge opposition from farmers with large plantations, rightly. I wonder how much it would cost to “bail” them out, so they can start over with a more sustainable crop.
    - gen220 6y ago
      Yeah, I could see that, I guess I just struggle to see how today, when water intensive crops are so profitable and entrenched, a market-based system would make an impact. I struggle to believe that the incentives would prevent BigCorp from selling an equivalent amount of water that’s being pumped out today, given the already-planted acreages of these crops. The cost benefit of depletion vs hoarding isn’t convincing enough, IMO, because the owners could always delude themselves into thinking that the next big wet season is next year. The fact that water is renewable on human time scales (unlike oil) complicates the calculus. That said, I agree that this system would be better. It’s better for markets to exist. But I do think it should be regulated to limit the supply side, because I think we’re too short term-ist to make the right decisions here. These are generally the only situations where I’m comfortable with advocating for intervention.
- Brian_K_White 6y ago
  The market would have sold all the water to Nestle.

by gen220 6y ago

fennecfoxen 6y ago

Markets have failed you because (1) they are not active in a key part of the process. Specifically, the Central Valley water supply, which is a key input, is not operated by a market. It's operated as a government giveaway. and (2) because property rights (to aquifer water) do not exist and are not enforced. This is one of the Big Three Things that Kill Market Efficiency (the other two being barriers to entry and high transaction costs). If you want to intervene, intervene to restore market order. Convert water allocation rights into to property, allow them to be bought and sold, and give somebody title to the local groundwater, somehow. Make things cost the right amount of money. If that means almonds are too expensive to grow anymore, then that will happen. If that means almonds are worth it long term and they should get the water instead of the alfalfa in the short term, that will happen too.

gen220 6y ago
I’m inclined to agree with you, but let me think through this out loud... If people could buy and sell water rights, those with property on an aquifer would get harvesting rights proportional to their land. They could sell it to the almond farmers, and ask for a price that’s more or less equal to the farmer’s expected profit, which cuts into the farmers’ margin. This is kind of analogous to selling crude oil to refineries (petroleum is like almonds!). I’d expect big companies to buy up land to secure water rights. Probably the same companies that own massive almond plantations, because vertical integration. I don’t think that this system would reverse aquifer depletion? Unless we artificially restrict the supply of water in the water rights contract?
- fennecfoxen 6y ago
  When I spoke of buying and selling water rights, I was primarily referring to water rights from the massive California irrigation system, not the aquifer. But let's talk aquifer. If I want to be uncreative and say that the aquifer is owned by some specific bigcorp, instead of by nobody, the incentives for Bigcorp would be to restrict the supply to maximize the long-run monopoly profits (discounted for time). I don't know that this is the best arrangement, as Bigcorp managers may see fit to put short-term profit ahead of that long term goal... but I guarantee you it's better than the current incentive structure, which is basically "pump like crazy — or someone else will and you'll be left dry!" But besides "bigcorp" ownership, there are some resource trust structures, I think, and existing landowners could be given some ownership in one of those, which they could buy and sell? They're mostly used in oil or gas today.
  - Wowfunhappy 6y ago
    I think you'd want some sort of "cap and trade"-esque system. Give farmers the right to pump X gallons of water from the aquifer per year. If they really need more, they can buy it from others; if their crops don't need much water, they can sell their rights.
    - gen220 6y ago
      I think this is probably the most reasonable step from where we are today (this is what I meant by regulate the supply side in my sibling comment). I think the right should be proportional to land size, and the X number should aspire to be Y% above replacement rate, to account for water poaching, measurement inaccuracies, etc. X would be set once per year, and announced well before planting season to allow time for planning. It wouldn’t eliminate almonds and pistachios, but it would dramatically reduce them. I think such a move would face huge opposition from farmers with large plantations, rightly. I wonder how much it would cost to “bail” them out, so they can start over with a more sustainable crop.
  - gen220 6y ago
    Yeah, I could see that, I guess I just struggle to see how today, when water intensive crops are so profitable and entrenched, a market-based system would make an impact. I struggle to believe that the incentives would prevent BigCorp from selling an equivalent amount of water that’s being pumped out today, given the already-planted acreages of these crops. The cost benefit of depletion vs hoarding isn’t convincing enough, IMO, because the owners could always delude themselves into thinking that the next big wet season is next year. The fact that water is renewable on human time scales (unlike oil) complicates the calculus. That said, I agree that this system would be better. It’s better for markets to exist. But I do think it should be regulated to limit the supply side, because I think we’re too short term-ist to make the right decisions here. These are generally the only situations where I’m comfortable with advocating for intervention.
Brian_K_White 6y ago
The market would have sold all the water to Nestle.