|Wealth and Want
|... because democracy alone is not enough to produce widely shared prosperity.
[reprinted from The Good Society, June 1991]
The above observation from a Roman philosopher and statesman, speaking to us through two thousand years, may motivate you to attend to what follows, even if I begin by calling foolish and false what you've been told is wise and true. Be patient. Like Harry Truman's economist, I have two hands: wait for the one you like better.
Once I was young and foolish and made many promises. I learned they are easy to make and hard to keep, so I turned to forecasts. Those are also easy to make, but hard to abide when they turn wrong.
Next I tried prescribing public policy. That is safe if the advisee is in Tierra del Fuego, and you are in the privileged sanctuary of a U.S. academy or bank. The going gets rougher as you diagnose and prescribe closer to home and offend the local Chamber of Commerce or water establishment: these bite back.
That left other choices. One is to acquire property, so I bought a small irrigated farm with a senior claim on the Santa Ana River. The second choice is to identify and refute fallacies, the weakness indulged in the present paper. This is good clean fun, and appropriate when you have been asked to be 'provocative'.
These fallacies, some of them spread by special pleaders ex parte, muddy the waters and darken the light needed to implement common rights, draft better water legislation, and raise the general welfare.
The late Senator Albert Severidge of Indiana, in his philosophical years wrote "You know, I've learned in the Widener Library at Harvard that most of what I was taught as a boy in Indiana is pure bunk". That is also true of much of what we ordinarily read and hear about water economics and ownership.
I am giving you a list of things I submit are pure bunk, or mostly so. My first points may seem radical, but stay your judgment, I have some right-wing thoughts coming 'on the other hand'.
Wrong! To begin, the word 'right' is wrong. A right is something like free speech, possessed by everyone. The only water rights, properly speaking, are common, which present water permits certainly are not.
Private water interests are claims, licenses, permits, holdings, reservations, privileges, or possessions. I do not say 'property,' except in reference to the state, water is the property of the states.
Most private water claims are licenses, at least in the 17 western states. Most state constitutions read that the water of a state belongs to the state (in trust for the people of the state).
If economists have two hands, (on the other hand!) a lawyer has more than a squid has arms, and as much ink to darken the waters. Murky ideas make for clouded titles and blinded citizens. Now and again, however, one finds a pure ray of light like this from Oregon Chief Justice McBride: -- "It does not seem to me that a license to appropriate water in this State ever rose above the dignity of a mere privilege over which The legislature has complete control."
A water license has about the same standing as
The evidence is, you do not find water licenses recorded like title deeds to real property. More important, you do not find them on the real estate tax rolls. Never have I heard a licensee demand to be taxed because he holds real property.
Lawyers habitually intone 'property' when describing water permits, especially their clients'. This is ceremonial and tendentious, to bolster the particular case.
It is also a group shibboleth, to bolster all clients' cases against all the outside, unlicensed public. Call it a class bias. After all, most lawyers get in this field to represent licensees, individually and collectively.
The upshot is that The Legislature has more latent power than most of us imagine. As electors and citizens our hands are not fled, but rather our minds. That's part of a lawyer's job, and they are good at it.
Wrong! Suppose this layman writer and the Oregon Chief Justice were in error, and water permits were real property. That is out of the frying pan, into the fire.
What does 'real' mean, applied to property or estate? It is not the opposite of 'imaginary.' No, 'real' is an elided English form of the French 'regal' taken into English when English kings spoke their native French. Real property is The King's.
We threw out kings in 1783, but not the royal powers. Rather, we transferred those powers to our State governments. By succession, real property means government property!
Every landowner is a tenant of the king or his successors in interest. The very word 'own' comes from 'owe.' An owner is one who owes. What he owed historically was fealty to his sovereign.
That used to mean bending the knee, kissing the royal foot, swearing allegiance, and showing up on demand to smite the enemy.
It has evolved into servitudes like eminent domain, police power, the public trust doctrine, and something else that our lawyers may have glided over, but economists underline: the tax power.
These concepts are basic to common law which has been brought into every U.S. state constitution (save Louisiana's). Moses was not just whistling Dixie when he quoted The Lord as saying "The land shall not be sold forever; for the land is mine, and ye are strangers and sojourners with me."
Chief Seattle would have approved. So would Brigham Young, who founded the once-independent nation of Deseret on that principle.
Moses was also speaking just as William the Norman spoke after conquered England, except that Moses was also a theocrat. "You hold title to this land from me; observe my rules."
That's the law we have inherited; that's how the system works. In one form or another it is found around the world, except in the minds abstract economic theorists like those of the Chicago School.
Wrong! Whoever said that has not been following zoning law. As a rule of thumb, zoning can take away about 85% of the use value of land before it is declared an unconstitutional 'taking' of property.
The owner must be left with some 'economically viable' use, meaning almost any use whose revenues exceed expenses, however small the net gain.
As to other property, well! No one has yet been compensated for losing the fruits of his sweated brow to the IRS, at rates which once soared as high as 90% in the top bracket.
Wrong, at least in my opinion. Property is not an end in itself; it is a means of getting resources put to their best use for the general good.
To secure that end, property rights are instituted among men, deriving their just standing from the consent of the unpropertied.
Whenever any form of property becomes destructive of that end, it is the right of the people to alter or to abolish it, and to institute new principles most likely to effect their safety and happiness.
Consent of the unpropertied?
That means property must work for the benefit of all, not just those who own property.
But abolish property!?
That is a red flag indeed, but note I said alter or abolish, and it is our own Declaration of Independence I am paraphrasing.
Like Jefferson, I generally prefer alter to abolish: 'abolishing' something is nihilistic until we know what we want to replace it with.
The point is, we have many degrees of freedom as citizens; we are not bound body and soul by decisions made, or allegedly made, in the past.
Wrong! At last I'm in my own field. Prices are determined by supply and demand, not cost. If you sell in a national or world market, or even a competitive local market, you are a price-taker, not a price-maker. You can't pass cost hikes on to consumers; you have to eat them.
In addition, water (like energy) is an unusual kind of input whose high price may actually increase production.
It would be easy to assume, using the good old idea of diminishing returns, that dearer water would reduce intensity of land use.
It certainly cuts water use, but when you pay more for water you often switch to higher-valued crops. That is what Southern California farming is all about. You substitute capital and labor for water on the same land, and often raise yields per acre.
You cannot afford to dump high-priced water on barley, or alfalfa, or rice, or irrigated pasture, or any other of these domesticated phreatophytes that guzzle up most of our underpriced water today.
A number of fairways and cemeteries would also give way to higher-valued uses.
With dearer water you use less by controlling it better, switching from primitive furrow irrigation to sprinklers, spitters and drip.
This in turn lets you do new things like growing avocados on steep hillsides formerly barren, yielding more dollars of product for less water (and in this case on waste land).
The above facts point to a fascinating, portentous corollary: you can tax water withdrawals without wrecking the water economy.
On the contrary, such taxes (carefully crafted to be constructive) can encourage conservation, getting more bins and bales for the bucket, so to speak.
Americans are raised on anti-tax slogans masquerading as economic analysis, always presuming taxes destroy good incentives and wreck the economy.
Here is a kind of tax that raises revenue while strengthening the economy.
This corollary is too good to drop, and is highlighted later.
Wrong! You can even control his hunting and fishing there, and apply police power. As to pumping, it depends on whether he owns what is under his land.
If it is oil, we all know mineral rights are routinely severed from surface rights by sale, reservation or lease. Water can be subject to constraints, too.
Limits on pumping water are not as common or severe as Huey Johnson and I think they should be, but they do exist. In coastal areas, pumping is limited and/or taxed to stop salt water intrusion.
Further inland, pumping can be stopped to control movement of toxic plumes that destroy valuable aquifers: this is done in the Bunker Hill aquifer under the Santa Ana River, threatened with fouling by toxins from Norton Air Force Base, San Bernardino.
Pumping is routinely stopped to prevent 'export' of water from lands overlying an aquifer: California calls that the 'correlative rights' doctrine. It is not always well observed, and not often well-advised, but very well established.
If that does not suffice to stop overdraft, pumping is controlled to prorate water among surface owners, and shorten pump lifts.
Also, pumping wells near streams can be stopped to prevent the indirect diversion of surface water. This happens on the alluvial fans that are so common in the west.
A simple solution to half our tractable water problems would be a severance tax on water withdrawals. If you can regulate it you can tax it.
A tax can be viewed as nothing more than an economic price charged by the owner of water (the state) for using its property.
If Chicago-School (and Rand Corporation) economists were more consistent in their ardor for the price system, and less consistent in their anarchistic mistrust of legislatures, they would seize upon this obvious application of the price system and boost it with all the considerable influence they wield.
Whether one chooses taxation regulation, we must control pumping in some manner if any system of surface control is to work.
While California rations and conserves surface water, landowners in the arid San Joaquin Valley just punch more and more wells into the aquifers and pump up free water the State keeps recharging at high cost.
Thus they play out their destined role in The Great Water Treadmill: subsidized water supply followed by overdraft followed by State rescue projects followed by new overdrafts, etc. ad bankruptcy.
This treadmill got well started in 1913 when Los Angeles tapped the Owens Valley waters to supply free water in the San Fernando Valley.
The lands there were timely pre-purchased by insiders, giving a clue to the forces behind the premature seizures and diversion of water.
The episode was dramatized in the film Chinatown, so the scenario is often now labelled 'the Chinatown syndrome' although the key names like Mulholland, Otis and Chandler sound distinctly occidental.
It is not just history; it is the present and near future: the Great Treadmill keeps turning. The Metropolitan Water District of Southern California (MWD) now presides over our destinies.
The MWD presses for more water sources, preaches domestic conservation, imposes rationing on its old customers -- and annexes new desert lands to water.
In similar fashion, Kern County landowners keep irrigating desert lands and overdrafting, while petitioning the Sacramento legislature for 'emergency' aid.
Partly wrong, although some economists are guilty as charged. Economics, properly pursued, deals with how best to meet human wants. Recreation, fishing, wildlife, amenities, clean air, pure water, sustained resource supply, watershed protection, good health, and conservation are legitimate human wants.
Many economists, I confess and deplore, are blind to such values, and think only of maximizing GNP measured in the brutal old-fashioned way, developed during World War II for war's emergency purposes and never revised.
Others, cowed by cow college deans, dare not think at all, and write only of sustaining farm land values: damn the cost to others.
Many others, however, are leaders in developing environmental and resource economics. Today wise environmentalists, rather than sniping at all economists, are allying with the last kind.
Here are four reasons why environmentalists and economists are natural allies.
(a) Economizing is conserving.
Indians are an extreme case, but most of us have a streak of their psychology. Not many generations back we shared the same kind of culture, a dependence on traditional lands we held in common, in trust for our descendants. These traditions affect current behavior, and are totally disregarded in mechanical-type formal micro modeling (except perhaps as tautological 'revealed preferences').
So, a pox on economists who belittle the importance of entitlements. They deserve the scorn and paranoia they evoke in environmentalists. The proper answer to them is, "if entitlement doesn't matter, give it all to me.' At the same time, give a break to other economists who are on your side. We need all the help we can get.
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper