NCPA - National Center for Policy Analysis

Will the West's "Water Woes" Lead to More Flows?

November 3, 2010

For those living in the West, it's a no-brainer that water is more valuable than gold.  But if it's so valuable then why isn't it trading in a similar fashion to gold?  Short answer: a maze of institutional barriers, says the Property and Environment Research Center (PERC).

In his new study, "Water Woes," Gary Libecap, a fellow with the Property and Environment Research Center and the Hoover Institution, says, "The West's water policy is a minefield in which policymakers and politicians are inclined to step gingerly -- or not at all."  But because the demand for water is growing at an extraordinary rate, and because supply is short for a number of reasons, "the path of least resistance is no longer an option."

Eventually, the value of water will bear fruit through well-functioning water markets.  Libecap offers a few ideas to help speed up the process:

  • Surface-water rights must be better definedand quantified, and recorded in stateregistries.
  • Private water rights need to be endorsed asa basis for use and exchange by state legislatures.
  • Private water banks need to be encouraged.
  • The no-injury harm rule for assessing watertrades should be defined precisely and therange of objectors limited to those with a directstake in the process.
  • The public-trust doctrine should be invokedonly as a last resort.
  • Retail urban water pricing needs to be reformedto promote efficiency.

The region's fabled quality of life turns on easy access to water, and only well functioning markets can offer the prospect of delivering that water at reasonable cost, says PERC.

Source: Laura Huggins, "Will the West's 'Water Woes' Lead to More Flows?" Property and Environment Research Center, November 1, 2010.

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