Priming the Invisible Pump

Water Markets Emerge (No. 9)


By Terry L. Anderson and Pamela S. Snyder

A Summary

Rain and snow may be falling today, but throughout the world, people continually fear the threat of water shortages. Is there too little water for the world's growing population? Are we running out of water?

No! is the emphatic answer from Terry L. Anderson and Pamela S. Snyder of the Political Economy Research Center (PERC). Water shortages loom because people fail to embrace the marketing of water.

That will soon change, say Anderson and Snyder in "Priming the Invisible Pump," a new paper in the PERC Policy Series.

"Water rights are coming full circle -- once again returning to a system that allows trade," they argue. "Markets are providing agricultural and urban users with more reliable supplies and with an incentive to conserve, and are enabling environmentalists to purchase instream flows to protect fish and recreational opportunities."

The paper, based on their book, In Pursuit of Water Markets: Priming the Invisible Pump, from the Cato Institute, points out:

  • Water markets helped ease the drought in California in 1991.
  • The Oregon Water Trust is buying water rights and leaving the water in the stream to protect fish against drought.
  • In places as far flung as Chile and Australia, trading of water is giving farmers flexibility and protection against shortages, while providing more water for growing urban populations.

"If progress toward greater reliance on markets continues," say Anderson and Snyder, "water supplies and efficiency will increase as users trade with one another, and consumption will be tamed by higher prices."

The paper gives a history of water law in the United States, including discussion of the restrictions by state and federal governments, which increased over the past century. They point out how those restrictions are now beginning to fall by the wayside.

Terry L. Anderson is a senior fellow at PERC and the former President and Executive Director of PERC as well as the John and Jean De Nault Senior Fellow at the Hoover Institution, Stanford University. His research helped launch the idea of free market environmentalism and has prompted public debate over the proper role of government in managing...
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