Bringing water to the markets

For some, the very idea of privatizing water — a substance essential to human life on this planet — is simply unthinkable. Clean water is the right of every person, they would argue.

But if the history of water management in the western states is any indication, treating water as the commodity it is would go a long way toward curbing waste, improving delivery and ensuring that thirsty, growing cities have enough water to sustain themselves in an era of ongoing drought.

As we in Nevada know all too well, water is not allocated based on most urgent need, population density or price, but rather history. The first people to claim water rights are the ones who get to use them, provided the water is put to a beneficial use. But beneficial doesn’t always mean most intelligent, most urgent or most productive use.

Not only that, but residents of the West have a throughly distorted view of water — we turn on the tap, and it’s there, at a fraction of the actual cost to pump it from Lake Mead to our homes. Prices reflected in our water bills are kept artificially low, which gives us little reason to conserve. In some western cities, lush front lawns and swimming pools dot the landscape.

That’s where the free market comes in. Entrepreneurs who invest not only in buying water rights themselves, but also companies that build water infrastructure (think pipes, pumping stations, water meters and the like) have an incentive to direct water to where it will bring the highest price.

As a result, waste is discouraged. A recent story in The Atlantic magazine by Abrahm Lustgarten and ProPublica notes that 80 percent of water in the west goes to farmers, who use it without regard to efficiency or conservation, but rather to preserve their rights to future allocations. Crops are grown regardless of whether they’re actually needed.

In Australia, where years of drought prompted experimentation with private water solutions, farmers temporarily stopped growing crops such as cotton or rice once the price of the water became higher than the price the crops would bring at market.

The Atlantic story notes that reallocating just 10 percent of water used on farms to Western cities could salve the region’s constant water shortages, but that the political controversy surrounding water rights and decades-old water laws prevents such consideration. But even leasing water rights — essentially, paying farmers not to grow crops on a portion of their land — has shown promising results. (The Metropolitan Water District in Southern California has experimented with this in tightly controlled programs that allow farmers to profit while diverting water to urban populations.)

Yes, there are dangers: The sale of water rights contributed to the collapse of Crowley County in southeastern Colorado, as farms went fallow after upstream water users sold their water rights to fast-growing cities. And the impact on poor people cannot be ignored — some suggest a “lifeline” supply that will always guarantee a certain amount of water, regardless of household income.

But with those safeguards, private, for-profit companies using the free market to set prices can help allocate water to where it’s most needed, avoiding waste and ensuring that a drought-stricken region can survive and prosper, even in places where nature may not have intended humans to settle.