Water Economics

* No course on the political economy of water economics would be complete without a discussion of the different kinds of property law regimes governing water that are in place in different areas. The prior appropriation system of transferrable water rights used in the arid West is a property law regimes that produces very different outcomes than the common law English riparian rights regime used in the less arid Eastern United States, within in the U.S. This case of two totally different sets of property laws operating in the same country at the same time constitutes one of the classic natural experiments in which different sets of property laws are applied to the same problem and the impact of those property rights on the outcome can be observed. Any discussion of the different forms of economic organization of companies that distribute water to end users is grossly incomplete without a firm and prior understanding of property rights regimes that govern ownership of the water itself. It is also highly incomplete if it creates a false dichotomy between governmental water distribution companies and for profit company water distribution companies (with or without monopoly rights and/or utility regulation of those companies), when cooperatives aka mutual companies that are owned by either end consumers or retail distirbutors of water are realistically at least as common as either of the other two options.

*There is also considerable literature on the impact of nuances of differences between different versions of the prior appropriation system of water rights. For example, historically, travelling recreationally over water was not considered a productive use of water which could support the creation of a claim to an “in stream diversion” water right. But, the modern trend has been to see recreational use of water that says in the stream as something with economic value (in Colorado recreational hunting, fishing and rafting contribute more to state GDP than farming does), that should be placed on equal footing with the more traditional use of a water right to divert water from a stream to use it to irrigate crops, operate a manufacturing facility or put it to municipal use.

* The Western property rights orientation to water rights is also one of the earliest examples of government engaging in quite conscious and deliberate social engineering to constructe a grass roots, market based, property and contract right alternative to pre-19th century approaches to irrigated farming systems which almost always engendered highly centralized and authoritarian states whose rulers added value to society and thereby legitimatized their power by putting into place and operating irrigatation systems for agriculture which made it possible for populous urban societies to operated and feed themselves.

* “in the U.S. massive investment to provide incredibly cheap water to farmers, all owned and operated by the government,” FWIW, a lot of the water infrastructure widely believed by lay people to be owned and operated by the government is actually owned by non-profits and consumer cooperatives whose formation was encouraged by the U.S. government, and which provided debt financing for it in a manner a bit like FannieMae or FreddieMac, but the amount of direct federal government investment in water infrastructure is much more modest that you would expect in many instances.

* There are exceptions where there have been major federal investments in managing watersheds, like the Tennessee Valley Authority, and like some of the major projects on the Colorado and Mississippi Rivers some of which were built by the Army Corps of Engineers for electrical generation and flood control purposes primarily with support for irrigation as a relatively minor purpose. But, in general, government investments in providing water infrastructure and regulation of water usage has been predominantly a state and local government affair.

* This mostly state and local level system is patched together for major river basins that cross state boundaries mostly via an obscure (even to lawyers who don’t specialize in water law) set of interstate compacts, rather than under general laws adopted by Congress. Indeed, disputes arising under those interstate compacts make up a very large share of all original jurisdiction U.S. Supreme Court cases involving disputes between U.S. states, or between the United States and a State.

* Some of the main developments in the political economy of water since the big water project era of the 1950s and 1960s that paralleled the construction of the interstate highway system, have been (1) increased attention to water pollution and as time passes to sources of pollution like pharmasuitical disposal in sanitary sewers and runoff of feedlot waste, fertilizers and pesticides from agricultural users who are exempt from many clean water regulations, (2) increased awareness of the relevance of ground water which hadn’t been well understood at that time (mostly in relation to management of consumptive use of depleting sources of ground water and the scope of water pollution regulations in addressing toxins that seep into ground water systems), (3) increased attention to the interface between land use and flood and drought driven fire control (i.e. the wisdom or lack thereof of subsidizing efforts to rebuild structures in “stupid zones”, (4) increased understanding of the role of drainage patterns in the preservation of scarce top soil resources and in river delta/wetlands preservation, (5) increased recognition of the negative environmental impacts of man made dams and of draining swamps (aka wetlands), (6) increased attention to water conservation options like graywater systems, drip irrigation, more efficient household appliances and xeriscaping, and (7) planning for expected impacts of climate change on available water resources.

* In regard to the final developing issue in the political economy of water, the impacts of climate change on water economics, it is worth noting both the current long running and brutal multi-country series of wars and deadly raids and counter-raiids between Sahelian Muslism and their sub-Saharan African neighbors to the south that is being driven by the desertifaction of the increasingly arid (i.e. waterless) Sahel fringe of the Sahara desert that is growing ever larger which is itself being quite directly driven by man made global warming. Improved paleoclimatological data is increasingly revealing to us that non-human caused climate change in history and pre-history has been one of the most powerful drivers of the rise and fall of whole civilization and empires, and of many of the world’s mass migrations of human populations.

* In the context of municipal water systems, which seem to be the focus of the MRU program, it is also worthwhile to be clear about the distinction between water and sewer systems designed to make potable water available to people who live in towns, villages and cities on one hand, and none potable water systems designed to provide access to raw water primarily for irrigation purposes and as a source of pre-treated water for municipal water systems. Looking at the matter as a question of development economics, some of the more interesting historical examples that are well documented by not widely known and involve familiar places include (1) the successful English effort in the 19th and 20th centuries to get the raw sewage that was pervasive in the river as of the mid-18th century and for all previous eras out of the Thames and the intertwined story of London giving birth to modern epidemiology and municipal sewage regulation as an educated lay epidemiologist located the source of one of its cholera epidemics, (2) the successful American effort to prevent diseases rooted in the ecology of the Chesapeake Bay that caused pervasive levels of infectious diseases in all classes in the colonial era and 19th century, (3) similar successful efforts to end repeated waves of poor sanitation in Louisiana in the late 19th century, and (4) the spread of running water and sewage systems to the “New South” and Appalachia, the lasts parts of the United States to receive these innovations, following the end of the Reconstruction era and into the early years of the 20th century.

* Indeed, the story of the economic development of the “New South” in the period fromroughly the end of Reconstruction to the beginning of the Great Depression (which is almost invisible in standard introductory war and politics oriented history treatments), in general, is one of the more accessible and relevant historical stories for modern development economists despite the fact that it isn’t widely known. The history of this period in this region also illustrates the legal, political and economic mechanisms that brought about massive land ownership reform, the way that a huge class of newly freed slaves who had had minimal investments in their own human capital played out, the emergence first of a network of rural general stores that eventually grew into a network of rural small towns that are the backbone of the modern rural economies of the South, the impact of mass migration out of rural areas to urban industrial centers on the economic development of the places left behind, the development of educational infrastructure in a culture that has to be coaxed into seeing its value, and more.

* Good development economics needs to strive to avoid becoming the fact free wasteland of modern finance and mathematical model oriented macroeconomics, and should instead strive to recognize that there is nothing wrong with looking at historical and comparative examples of succesful economic development transitions in a case study methodology to understand economic development. Economics should be an empirically rooted study that helps its students understand how economic processes play out in the real world, when they work and when they fail, rather than being unduly wed to the methodology of a typical Econ 101 and 102 micro/macro survey course that leaps to a reductionist, mathematical model driven, reasoning from first principles oriented discipline that wants to ape the approaches used by physicists and to apply those methods to mass activities of people which are much messier and much more multifaceted.