Water is too valuable a resource to entrust it to bureaucratic allocation, according to a new book by Cato Institute analysts Terry L. Anderson and Pamela Snyder. In "Water Markets: Priming the Invisible Pump," they contend that allowing users to buy, trade and lease rights to water will encourage conservation and improve water quality.

They say that such water markets will prevent the wasteful practices that arise from centralized decision-making.

• For instance, Santa Barbara, Ca., is building a desalinization plant to produce potable water at a cost of $1,600 per acre-foot -- while farmers are paying less than $100 per acre-foot for water to irrigate crops.

• On the other hand, water markets would motivate agricultural consumers to reduce consumption through improved irrigation techniques and modified planting patterns -- with higher prices freeing up irrigation water for municipal and other uses.

• The researchers estimate that if 5 percent of agricultural water were transferred to municipal uses, the needs of urban areas in the Western states would be met for the next 25 years.

The energy crises of the 1970s demonstrated that when prices are kept artificially low, shortages inevitably occur -- as is now the case with water. But despite current limits on water transfers, trades between agricultural users and cities are increasingly common; environmentalists are searching for ways to lease agricultural water for in-stream uses such as salmon and steelhead spawning habitat; and Indian tribes that have settled water rights disputes are leasing their water.

Source: Terry L. Anderson and Pamela Snyder, "'Water Markets,' Not Bureaucracy, Will Best Preserve Our Resources," July 16, 1997, Cato Institute, 1000 Massachusetts Avenue, N.W., Washington, D.C. 2001, (202) 842-0200.

For a Cato summary http://www.CATO.ORG/pubs/policy_report/cpr-19n3-8.html