May 7, 2016

Rent Seeking and Institutional Evolution within the California Water Game

  • Richard Wagner

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
  • James Caton

    PhD Fellow
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Find the paper at SSRN. 

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. Especially when they are legitimated by court rulings, such directives 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 legislative and regulatory changes in traditional water law. 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.