When You Give Up On Allocating Resources via Markets and Prices, All That is Left is Interest Group Politics

One of the ugly facts about how we manage water is that by eschewing markets and prices to allocate scarce water, all that is left is command and control allocation to match supply and demand.  The uglier fact is that politicians like it that way.  A golf course that pays a higher market rate for water doesn't help a politician one bit.  A golf course that has to beg for water through a political process is a source of campaign donations for life.

In a free society without an intrusive government, it would not matter whether California almond growers were loved or hated.  If people did not like them, then they just wouldn't buy their product.  But in California, the government holds the power of life or death over businesses through a number of levers, not least of which is water.

Almonds have become the Left's] new bête noir. The nut is blamed for exacerbating the California drought, overtaxing honeybee colonies, starving salmon of river water, and price-gauging global consumers. Almonds may be loved by consumers, but almond growers, it seems, are increasingly despised in the media. In 2014, The Atlantic published a melodramatic essay, “The Dark Side of Almond Use”—with the ominous subtitle, “People are eating almonds in unprecedented amounts. Is that okay?” If no one much cared that California agriculture was in near depression for much of the latter twentieth century—and that almonds were hardly worth growing in the 1970s—they now worry that someone is netting $5,000 to $10,000 per acre on the nut.

It is almost too much to bear for a social or environmental activist that a corporate farm of 5,000 acres could in theory clear $30 million a year—without either exploiting poor workers or poisoning the environment, but in providing cool people with a healthy, hip, natural product. The kind of people who eat almond butter and drink almond milk, after all, are the kind of people who tend to endorse liberal causes.

As for almonds worsening the drought: The truth is that the nut uses about the same amount of water per acre as other irrigated California crops such as pasture, alfalfa, tree fruit, pistachios, cotton, or rice. In fact, almonds require a smaller percentage of yearly irrigation use than their percentage of California farmland calls for. Nonetheless, the growth of almond farming represents to many a greedy use of scarce collective resource.

  • Joe Mama

    Guns or butter. Economics and the market would lead California to grow those things that it is uniquely positioned to produce: Things like Almonds, year-round strawberries, Japanese plums, vegetabes and the like.

    It IS ludicrous to grow alfalfa to feed dairy cows in California. Vast swaths of the country can "do dairy" and ship it to California.

  • jimc5499

    Did the Almond Growers Association not make their required payment to the DNC or are they non-union farms?

  • SamWah

    Close down the almond farms!! Less tax money for Moonbeam! (There IS an upside.)

  • STW

    At collage in the central valley of California in the early 1970s the cause was the destruction of farm land. Apparently, that cause as a driver of income, has had it's day. It did make for passionate speeches, however.

  • Matthew Slyfield

    "Economics and the market would lead California to grow those things that it is uniquely positioned to produce: Things like Almonds, year-round strawberries, Japanese plums, vegetabes and the like."

    Actually, while the soil in CA is particularly fertile, there is not near enough local water supply to grow any of those crops, which is why CA farmers are fed water taken from hundreds of miles away, as far a the Colorado River. Water for which they pay something like $20 an acre foot but actually costs more like $200 an acre foot to deliver to them.

    CA farmers are constantly complaining that they would go bankrupt if they had to pay even half the real cost of the water they use.

    In the long run, it would probably be cheaper to ship that fertile soil to the mid west rather than to keep sending so much water into the CA desert.

  • FelineCannonball

    At the moment farmers are using subsidized transported water and/or mining fossil water. An open regional market without tax subsidies would be great. I'm not sure it would lead towards more almonds though. Probably just a lot less farming. Oil prices could make the water more useful for steam flooding and fracking, and price and supply fluctuations might discourage perennial crops that you can't let go fallow. There isn't enough groundwater to sustain the current acreage of trees.

  • Craig Loehle

    Remember that Cali cut water to 100,000 people to save the delta smelt (IIRC), most of this was farm land. Since they only support the oppressed (farm workers, smelt) and hate the rich (except Apple for some reason), the almond hate is just par for the course.

  • ErikTheRed

    I suspect that an actual market for water would drive the costs down considerably. Most governments are inefficient, but California is a special gold-star level of inefficiency.

  • ErikTheRed

    The irony is that many of the small, local, organic farms that progressives masturbate incessantly over are paying the full, residential rates for water (up to $2,000 per acre-foot). I have one friend who owns such a farm, and we buy groceries (CSA) from some others, we know the owners there and chat about such things (most of them are good capitalists). Which clearly underscores what a heavily-politicized scam the whole thing is. The deeper irony is that the counties that get most of the heavily-subsidized water are the Republican-leaning parts of the state, so not only is the whole thing eyeballs-deep in crony capitalism, but the water wars are more easily understood as a form of political warfare - diverting water to the delta smelt is probably less about environmental "concerns" than it is starving the people and companies who make some of the largest political donations to Republicans.

  • Matthew Slyfield

    The sheer scale of the physical infrastructure needed to move that much water that far is massive. Most of it wasn't even built by the state of California, it was built by the federal government under FDR.

    Because of the scale of physical infrastructure involved, I doubt that there is enough market space for more than a small handful of private operators, not nearly enough to drive enough efficiency to bring the cost down far enough.

  • ErikTheRed

    Oh it gets much, much worse than you think. No, most swaths of the country *can't* "do dairy and ship it to California" - because the state has regulations that make it impractical. And much of the alfalfa grown in the desert is shipped to China. Think about that. We're subsidizing alfalfa so much we can make it cheaper than the freaking Chinese *and* ship it there. ??

  • ErikTheRed

    I hear that argument ("natural monopoly") a lot and I'll confess I haven't looked into it here... but where i have looked into it in the areas I do have expertise, it's never even remotely penciled out. The raw infrastructure costs may or may not*, but the bureaucratic overhead and regulations get piled on. Remember - when markets are driven out, "necessary" rules and regulations take their place and the overhead is just flat freaking *insane*. We're talking 5-10 times any rational level of headcount, and it just gets worse over time. Also keep in mind that each head probably costs around twice the market rate once you figure in benefits, pensions, etc.

    *Even the raw infrastructure probably doesn't pencil out for a natural monopoly either. If you look at the extra costs associated with government contracting rules you could probably cover at least half of another competitor by not being flat out stupid about purchasing the labor and materials involved.

  • Matthew Slyfield

    "The raw infrastructure costs may or may not*"

    The raw infrastructure for these kinds of water projects goes way beyond raw materials. You need land to put the pipelines on, land hundreds of miles long and at least a thousand feet wide. Think about how or even if you can acquire that. And you have to have all of it and all of that infrastructure built out before you can deliver one drop of water. That's a huge pile of money to sink into a project with a 5 to 10 year horizon before you can even begin to start recouping your investment.

    On top of the land, and the pipes and pumps, you need water rights on a huge volume of water. Do you think you can get that much in water rights on the private market?

    I'm not saying it's a natural monopoly. But I don't think the market would support more than 2 or 3 suppliers at any price that will recoup the upfront investment in less than several decades, at least 3 decades from the time that the money starts going out the door.

    Most private investors these days are looking for a much faster payout.

  • David in Michigan

    I think we should follow the Zimbabwe example and break up these large farms by "giving the land back" to the Mexicans flooding into California. That way we can have both Social Justice and feed the world. Win/Win.

  • Fifty Ville

    No wonder politicians in California are against the sensible idea of desalinization plants to supply fresh water.

  • Corky Boyd

    .

  • Corky Boyd

    Surely you jest. Surely you jest. Zimbabwe forced the white farmers off their land. Zimbabwe, once the breadbasket of Africa, couldn't make enough grain to feed itself. The land was divvied up to political cronies who had no expertise in large scale agriculture or left fallow. It was and still is a disaster.