California Drought 2.0, or Is it 3.0?

California’s water woes are back in the headlines after Gov. Jerry Brown commanded a 25 percent cut in consumption last week after extended drought.

Pricing matters and we’ve not done the greatest job liberalizing infrastructure and matching resouces to market signals. California’s just the most extreme modern example, now pitting neighbor against neighbor. Pools in the desert are scorned, as are the lush desert golf courses, and thirsty agricultural interests.

But water doesn’t cost much. It needs to cost what its worth, and part of the job of markets is to determine prices. But markets are not what water utilities are.

After congressional testimony on western states water policy a year and a half ago, California’s water crisis resurfaced again. I wrote a column in Forbes then noting that California, western and national water resources and environmental amenities should be better integrated into the property-rights, wealth-creating sector. That’s an evolution derailed here as well as in other sectors such as in electromagnetic spectrum, electricity and transportation grids.

Recommendations were these:

First, better pricing of existing supplies can make shortages vanish. (I talked about the water/diamonds paradox; you can Google it.)

Second, improving water infrastructure can reduce the leaks that now deplete some 17 percent of the annual supply, as noted in a Competitive Enterprise Institute report by Bonner Cohen.

Third, better transport and infrastructure, including pipelines and canals, better reservoir storage, trucking, and crude oil carriers can secure supply and lessen artificial drought more cheaply than expensive politically pushed alternatives like desalination.

Fourth, improved trades between cities, farmers and private conservation campaigns can be essential to pricing and value.

All these can supplement direct sourcing alternatives including drilling, gray and wastewater treatment and reclamation; stormwater harvesting and surface storage and, OK, you got me: even desalination where it’s economically rational.

The path taken politically is usually restrictions on usage rather than pricing and liberalization, so there’ll be plenty headlines to come.