California is in a real water crisis and bureaucratic regulations are only making it worse. Protecting habitats and mating grounds is certainly a noble goal, but it cannot be pursued as an open ended commitment: there are simply not enough resources to do everything that people consider desirable. At some point, the human cost of these policies exceeds the benefits derived from flourishing flora and fauna. In drought years this point shifts, and the public must make a conscious decision based on the trade-offs involved. In this case, we must weigh the interests of water consumers – including those of farmers, other producers, and residential users – against environmentalists’ own, no less selfish, interests.

California and other governments have traditionally used a particular group of policies to control the economic and human losses due to droughts. Among the most common are water conservation programs, or direct rationing, as was seen in the South in the recent past. Currently, California’s government is seeking to redirect water to needy areas and construct water facilities such as reservoirs to boost future capacity. Boosting supply and decreasing demand are the obvious solutions to the water problem in California, but one has to wonder if the government’s approach is actually the most effective, on practical or moral grounds.

The drought problem is exacerbated by California’s inane policy of allowing construction in dry, fire-prone areas, and then providing disaster protection to those who take advantage of such opportunities at extreme public expense. While there is a legitimate need for government-funded fire protection, the current trend socializes the extreme costs incurred by building in such areas, ultimately costing the taxpayers in addition to the risk-takers. Aside from the obvious injustice and inefficiency of such a situation, this encourages construction in dangerous areas by increasing moral hazard – the tendency of people who are protected from loss to make poor decisions. This compounds the problem and its associated costs over time.

In an ideal situation, the water available would be able to move to its most valued use. Yet the policy favoring only some groups, such as farmers, with lower prices, discourages efficient water use and hinders the adoption of more economically viable practices, preventing those who need or value water most from obtaining it. Such low prices do not reflect low costs – they are merely an indication of a refusal to pay costs. Being able to grow orchards in the desert is a marvel of human ingenuity, but only at the detriment of those who could have produced more with the water, or from those who have a greater need to consume it. Outright rationing has a similar effect, in that it prevents efficient allocation of resources. Here, individuals are prohibited from trading for water, at any price. The economic and human consequences are easy enough to see: those who need water the most are desperately unable to obtain it.

One of the most distressing outgrowths of our water policy has been the establishment of “water czars” responsible for the allocation of water resources and the development of infrastructure. The fundamental premise rationalizing the existence of such administrators is that the general public has gotten to the point where we cannot manage the most basic of our own affairs – acquiring the necessities of life – and would have “someone who can get things done” rather than the freedom to pursue our own lives in a manner consistent with our own several values. This moral corruption is among the first steps down Hayek’s Road to Serfdom. If we are to remain a society of free individuals, we must accept that individuals should act by their own will, for their own purposes, and not by the micromanagement of our most fundamental needs by bureaucrats.

To be truly sincere about providing scarce water to those who need it most, we must have a system of ascribing value and need, determining costs, and ensuring the cooperation of many individuals. The only system capable of doing this is a free marketplace. When prices accurately reflect scarcity and need, cost and benefit, individuals can use these price signals to coordinate supply to those who benefit most while realistically assessing and paying for the costs incurred by that supply. The public of California, and of other states with scarce water supplies, would be best served by adopting the most basic principles of freedom to the satisfaction of its most fundamental need.

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