Wellspring of Ingenuity


I have a new article published at Sense and Sustainability

As an Australian, I’m used to water markets as a fairly standard policy tool. The Murray Darling Basin trading system has a comprehensive system of entitlement and allocation trades across basins and state lines, which proved its worth during the ‘millennium drought‘ of the early-mid 2000s. As water supplies dwindled, the market served to shift water to the most valuable crops, reducing the economic cost of the drought. That’s not to say it’s perfect. There are big distributional consequences, over-allocation is still a problem, and from what I understand, getting this system in place was a tortured, expensive, process, lasting the better part of 25 years. But it’s there now, and more or less working.

Although American water rights have not had the same transformation, that may be starting to change. A small community in Nevada is undertaking a policy experiment, which if successful, could lead the way. I’m personally interested in water reform after sharing an office at CSIRO with the late Jim McColl. Jim, and his close colleague, Mike Young, taught me their principles of ‘robust’ reform: applying separate policy instruments for separate policy goals, in a way which ensures functionality under varying environmental or economic conditions. Their water market design principles appear to do this. Both economists were instrumental in Australia’s water reform (along with many other areas of public policy), and Mike is also an adviser to the policy experiment in Nevada.

Link to the full post

photo credit: Jeff Crisdale (2005)


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