Rent Seeking and Institutional Evolution within the California Water Game

Abstract

When directives rather than contracts determine rights to water flows, agents will substitute away from securing water rights by contract toward securing them through political directives. When those directives are legitimated by court rulings, they alter the rules that govern social interaction. While farmers are able to secure water under different institutional arrangements, alterations in those arrangements through legislation and regulation can induce changes in organizational and allocative patterns of resource usage. In particular, we explore evolution in agricultural organization in California in response to legislative and regulatory changes in traditional water law. Institutional transformation expanded the membership for the arena of water governance in California, allowing parties who do not locally interact with or depend upon water and its allocation in California. To this end, we analyze the relationship between Big Players in the California Water Game and the reorientation of a water rights regime in light of legal precedent and actions from existing regulatory bodies.

Keywords: water rights; riparian systems; appropriative systems; rent seeking; Big Players; overlapping jurisdictions; political tectonics

JEL Classification: B52, D23, D73, H77, Q25