Monday, January 28, 2008

ECON 260: Re-selling Subsidized Water

This doesn't strike me a particularly efficient:

With water becoming increasingly precious in California, a rising number of farmers figure they can make more money by selling their water than by actually growing something.

Because farmers get their water at subsidized rates, some of them see financial opportunity this year in selling their allotments to Los Angeles and other desperately thirsty cities across Southern California, as well as to other farms.

Wouldn't efficient pricing of water do better than providing farmers a subsidy to get more water and then allowing them to resell it to others at a higher price?

The subsidized rate is the problem here; without it, we'd expect market forces to sort out the distribution of drinking and agricultural water. The agricultural welfare system in this country is sickening.
Its not only subsidies to farmers but the legal framework which encompasses every waterway in the west. Even with subsidies in place, water would be used much more efficiently if water rights were redistributed to newer more efficient users or even to users who produce a larger economic gain. Farmers are able to sell the water because of the First in Time, First in Right, prior appropriation, attitude that dominates the courts. First find a way to reform water law.
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