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If a perfect market existed in water in western states, the cost of a gallon of water would be the same whether directed to urban or agricultural uses. It clear
by scarmig 4y ago
If a perfect market existed in water in western states, the cost of a gallon of water would be the same whether directed to urban or agricultural uses. It clearly isn't, which is a pretty clear sign that there are high frictions facing people who want to purchase the water they need.
A fix to this requires a change in policy.
- s1artibartfast 4y agoIt is not the price of a gallon that is being paid, but the right to use a gallon for all time. There are indeed high frictions, mostly in the form of upfront capital costs. If you want to buy a farmers water, they want to be compensated for sunk capital and future earnings. They bought land, planted it, drilled wells, and have 30+ years of future earnings, after which, they could sell their rights. In short, the relevant market is for the water rights, not the water itself.