The Cadillac Desert: California's "Dramatic Overkill" on Water Policy

One quarter-century ago, Marc Reisner published Cadillac Desert, a book that documents the historical struggle to tame the arid Western U.S. For anyone who is even remotely interested in the history, economics, or policy of water resource management, this book is an absolute must-read. The book talks at length about California's history in exploiting its water resources, among other things. Upon finishing the book, the reader will likely be left with a sense of foreboding with regard to the future of water resource management in the Western U.S., at least if the past is any indication.

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California's struggles with water resource management are continuing, seemingly unabated from the controversies that plagued the Owens Valley Water Wars that Reisner so artfully discusses in his book. This time, however, the battle rages over the allocation of water between agricultural uses and environmental needs. A new bill -- which, apparently has some momentum -- would "kill a court-approved settlement to restore water to the San Joaquin River and undermine a multimillion-dollar water project to restore the Bay Delta and Northern California fisheries." Republicans, siding with agricultural producers and their interests, whole-heartedly support the bill, which would release much needed water to farmers, some of whom have been receiving only 75% of their annual allotment despite an above-average snowpack left behind from a wet, stormy California winter. Democrats, on the other hand, have taken up the cause of the environmentalists and California's apprently booming coastal fishing industry (?), assailing the bill for failing to recognize the equal -- if not greater -- need for the water on the part of the environment.

This issue has all the markings of a classic opportunity for any economists interested in ecosystem service valuation. However, I believe the root cause of the problem here to be the way water resources are valued on the part of agriculture. It's common knowledge that agriculture has it pretty easy when it comes to water policy. While I eagerly recognize the fact that farmers have suffered under below-average water availability, agricultural producers may have a better claim to the water if they paid anywhere near a reasonable price for the resource. Comparing the price of agricultural water and public supplies, water used in agriculture is priced at a mere fraction of the value it holds for residential and industrial uses. And while no market price exists for instream uses for the water, it certainly has value, to fishermen, nature-lovers, and as a medium for ecological services. Any policy that doesn't recognize these benefits is likely missing out on a huge chunk of the San Joaquin's water instream value.

This issue deserves a much richer economic analysis than it will receive here. However, I leave this issue by saying that, in the not-so-distant future, good water policy must force agricultural producers to recognize the true value of the water they use.