Anyone who reads the blog knows I’m not a Trump fan, so it might seem a bit odd that I’m in full agreement with Tim Worstall that Trump is actually right about fixing California’s chronic water shortages:
Much amusement around and about the place as Donald Trump tells California that there is no drought and that when he’s President then there will be plenty of water for everyone. The amusement being that of course, how could anyone spout such nonsense, everyone knows that California’s had a drought for years now!?! Except, of course, that Trump is actually correct here. There is no existential shortage of water in the state, not at all. What there is is misallocation of water and that misallocation is because water is incorrectly priced there. The solution therefore is to get the pricing right: then the allocation will be. We also know something more about this: it doesn’t matter what the current or original allocations are. Getting the price right will solve the problem.
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The answer is, as any passing economist would tell you, that water has to be priced and priced properly. Those activities that do not cover the cost of water will not be done. That frees up water to do the things that add more value than the cost of the water. And that’s it, that’s all that needs to be done. Yes, it will mean radical changes in farming practices for some people: almost certainly a reallocation of water away from alfalfa, rice and almonds over to higher value added crops like vegetables and other fruits. More importantly, water pricing that actually bites will free up vast amounts of water for both industry and domestic use.
Changing the price system will mean that people stop doing the things which are worth less to do than the value of the water needed to do them. Thus, by definition, there’s enough water to do everything that people want to do with the amount of water that is available. It’s a cute system, it works really well. So, obviously, that is what should be done. Whoever owns water rights now (and I’m aware that water rights out West can be a nightmare) should be allowed to sell it to whoever at whatever price anyone offers. That’s all we need do.
