Economic Aspects Of Western Surface Water Allocation (native Americans, Instream, Water-storage Projects).

Abstract

The prior appropriation doctrine governs allocation of the naturally-variable flow of rivers in the American West. The central element of the doctrine is a time-priority queue for the resource: earlier water users establish rights (appropriate water rights) that are senior to subsequent users. The queue rations water among the users of different priority. Economic reasoning (represented in the research of Burness and Quirk, 1979) suggests that, after rent is appropriated from the initial establishment of appropriate rights, additional profit can be made from reallocation of water via a market. A market-based allocation shares the water flow and its risk. The research uses repeatedly the sharing principle to analyze the major issues of western water allocation. Chapter 2 extends previous research by developing a more general model of individual behavior in the initial-appropriation era. The chapter develops novel comparative-static results on the influence of position in the queue as an explanatory variable. It derives endogenous traits of the efficient water allocation for a Cobb-Douglas production function. Chapter 3 highlights a major structural impediment to a water market: vertically-integrated, irrigation-enterprise organizations. A simulation analysis describes the implication of relying on the initial water allocation rather than on a market; it predicts a ten-fold increase in aggregate expected profit with a market. The analysis extends to the quantitative tradeoff between a water-storage project to reduce natural variation and the efficient allocation of variation with a water market. The traditional reliance in the West on subsidized, agricultural water projects makes this important. Chapter 4 examines the allocation of surface water between in-stream and diversionary uses. A quantitative simulation describes the possibility of using water more efficiently in the diversionary-use sector to release water for instream demand. Potential Pareto improvements exist in allocation between the two sectors. Chapter 5 addresses economic aspects of Native-American water rights. These rights, which were unused, now are being asserted. They consequently are a source of conflict between Indian communities and established water users. The chapter describes a generic approach to settling these conflicts that uses the principle of cost efficiency.