It is time to stop quivering in our boots in pointless fear of the future and just roll up our sleeves and build it.
- Ray Pierrehumbert

Monday, June 18, 2007

Froot Loops Contention and Ownership of Environmental Fluids

This has always driven me crazy, and I haven't heard it discussed much.

In summer camp they would give us twelve little boxes of cereal for a table of eight kids who all loved breakfast cereal. The rule was you couldn't get seconds until you were done eating your first serving. This of course degenerated into a mad cereal eating contest, so half of us got to enjoy a second serving, and half only had a few seconds of cereal joy. (Of course this was one of the few sports I excelled at.)

If you associate oil, gas, or water rights with real estate property, and the reservoirs cross property lines, you have a similar bizarre incentive to pump as quickly as possible.

Via John Fleck, here is an interesting article on private sales of aquifer water in Texas.

In this context the "takings" clause is a disaster. The idea that all the water under my land is mine makes very little sense, because that would be the whole aquifer, wouldn't it?

Meanwhile the individual "owners" of water (really owners of water rights) find themselves in a sort of a race to cash in on them. The more of "my" water I sell, the less you will have of "yours".

The society had best do all the "taking" sooner rather than later, when the market value goes up.

Froot Loops Contention applies to oil and gas fields as well. I understand early in the days of wildcatting it was necessary for government to intervene lest all the wealth be drawn out so suddenly that much of it was left spatterred about the plains. Was that a "taking"?

I think there are a couple of things wrong with conventional economic thinking. One of them is the idea that any transaction between myself and somebody else doesn't affect you. In practice, as the world becomes more crowded this becomes less true. Fluids present an extreme case. If I sell my groundwater to Lubbock, that reduces my neighbor's ability to sell water to Abilene.

1 comment:

John Fleck said...

A wonderfully strange corollary of this is the distortion caused by the western "doctrine of prior appropriation". The first users get to keep using the surface waters. But "use" here is critical. If one conserves water, one is no longer using it, and therefore loses the rights to it. The result is that there is a tremendous incentive toward inefficiency. And toward growing alfalfa in the desert.