Trading Water: Market Extension, Social Improvement, or What?
This article reviews neoclassical, environmentalist, and institutionalist perspectives on the emerging institutional adjustments commonly referred to as water trading or water marketing. Although a holistic analysis of these emerging institutional reforms would be far more comprehensive and detailed, this article seeks only to provide an institutionalist perspective that may benefit more comprehensive research. As such, analysis of new sources of water supply, of specific water conservation measures, and of attitudes regarding water are largely neglected. Water trading is merely assessed in the context of the evolving legal structure and the existing, limited water supply in the American West, particularly California. The conclusion is that water trading, if properly administered, can generally benefit involved parties without widespread social costs and without jeopardizing social control. Generally, "water trading" or "water marketing" refers to water transfers between users, whether by lease or outright sale of water entitlements. Water is traded when one party foregoes (part of) its allocation in exchange for payment by a second party, which in turn receives additional water through a diversion system. Water is marketed when one party's conserved or recycled water is sold to a second party. The distinction is a minor one: the party selling the water foregoes "up