WATER IN THE WEST
Western water rights have long been of interest to economists—at least since Catherine Coman’s article, “Some Unsettled Problems of Irrigation” appeared in the first issue of the American Economic Review in 1911—and the pattern of historical diversions incorporated in western surface water rights continues to dominate today. Studying the emergence of the prior appropriation doctrine can help us understand how property rights work to coordinate individuals for overcoming significant collective action problems and the advantages of property rights relative to political or informal institutions.
Property rights to surface water are formally administered under the prior appropriation doctrine in eighteen western US states and at least three Canadian provinces. Prior appropriation emerged voluntarily as an institutional innovation, replacing the riparian doctrine within twenty years across an immense area of over one million one hundred ninety-seven thousand square miles, suggesting large economic advantages. Water rights were not quantified under the incumbent riparian doctrine, which allowed “reasonable use” of surface water by owners of river-adjacent land. Digging a ditch and diverting a given quantity of water provided the basis for a prior appropriation claim—no riparian land ownership was necessary. The prior appropriation doctrine assigns priority to water rights based on when they were originally established—first in time, first in right—so that in times of drought users with high priority receive their full allocation before more junior users have the right to divert any water.
Water’s unique characteristics induce particularly challenging social choice problems for developing, using, and conserving water resources. The essential nature of water gives rise to a myriad of uses that are both consumptive and non-consumptive. Water is an input for production of everything from agricultural to industrial products, but it is also an essential final good necessary for life. The suitability of water for different uses depends on both the quality and quantity of water available. The transmission of water is fraught with complications including evaporation, seepage, gravity flow, and minimum-flow constraints. Finally, the distribution of water resources across western landscapes in rivers and streams creates classic upstream/ downstream externalities and common-pool resource management problems.
