The American West Is Drying Up. Can the Market Help?

When members of the Colorado River Water Users Association, or CRWUA, descended on Caesars Palace for their annual conference in December, few showed much enthusiasm for Las Vegas’s popular diversions. Attendees mostly bypassed the slots and roulette tables, the magic shows and nightclubs. The sole planned excursion on offer—an early morning jaunt to Hoover Dam—was the definition of a busman’s holiday. This was not a decadent bunch. They were serious-minded people dealing with a monumental problem. Some called it an emergency; even the most sanguine considered it a crisis.

Water was running out.

The CRWUA conference is always in Vegas. Water wonks have been making the pilgrimage since 1945, when the Strip was still known as Highway 91 and Elvis was playing dairy shows back in Tupelo. The city’s transformation, for better or worse, was as much their predecessors’ doing as it was gambling kingpin Meyer Lansky’s. They’d subdued the mighty Colorado River, channeling its waters—along with the megawatts of power they generated—to build not only Sin City but Los Angeles, San Diego, Phoenix, Tucson, and as much as 15 percent of the United States agriculture sector. It was not cowboys or pioneers but federal water engineers who birthed the West as we know it, “a culture and society built on … a sharply alienating, intensely managerial relationship with nature,” as historian Donald Worster put it.

This year’s meeting drew 1,700 or so attendees. Along with policy experts, hydrologists, commissioners, and environmentalists were many of the stakeholders—the property developers, agribusiness executives, tribal representatives, and so on—whose livelihoods, and in some cases lives, depend on the dwindling and beleaguered waterway. The pilgrims hailed mostly from seven Western states, divided a century ago into competing factions: the Upper Basin (Colorado, Wyoming, New Mexico, Utah) and the Lower Basin (Nevada, Arizona, California). They talked flow, irrigation, conservation, and, in more somber moments, seepage, evaporation, bathtub rings, and dead pools.

A week before the conference, local news stations aired a story about a man in Laughlin, a 90-minute drive to the south, who’d literally walked across the river and back while a drone hovered overhead, memorializing the escapade. The amusing human interest story had a forbidding subtext: The Colorado was drying up, thanks in part to the West’s 26-year-long “megadrought”—its worst in 1,200 years—which many scientists believe may be permanent.

The science isn’t complicated, but these days it bears repeating. Due to a warming atmosphere, snow lines in the Rockies and other ranges flanking the river are in retreat, meaning less spring snowmelt trickling into the basin, even as increasingly parched earth and warm air claim their share of the remaining moisture. As a result, the river’s 46 reservoirs, including the enormous man-made Lake Powell and Lake Mead, now stand more than two-thirds empty, according to a recent report by the Colorado River Research Group. A few more dry years coupled with continued overconsumption, the report suggests, could plunge Lake Mead into “dead pool” status, when levels fall so low that hydroelectric power (already running at a reduced capacity) flickers out and water no longer reaches the outlet works that channel it downriver.

As Matt Diserio, co-founder and president of Water Asset Management, a hedge fund that has spent millions buying land in the area (principally for the attached water rights), noted last year in an investor pitch, “It’s underreported just how severe and near-cataclysmic these risks are.”

How bad could it get? In late January, the United Nations released a report declaring the advent of what it called global “water bankruptcy”: a catastrophic new normal. The new terminology would seem to suggest a long-shot gamble that the language of financial insolvency might somehow spur action among leaders who have grown numb or even hostile to more sciencey admonitions.

One can hope. As the report states, “available water resources … have been significantly reduced, with some impacts … effectively irreversible on human time scales.” (Damn those human time scales.) The authors found the most severe threats in the Middle East, North Africa, South Asia, and, yes, parts of the U.S. Southwest. Similar forecasts are outlined in a study by South Korean researchers published in September in Nature Communications. Under high-warming scenarios, the authors determined, both Phoenix and San Diego will be among the areas where extreme, multiyear water scarcity—what the authors term “Day Zero Drought”—is projected to emerge within the coming decade.

Although Chennai, Cape Town, São Paolo, Mexico City, Kabul, and Tehran, among other localities, have already flirted with similarly apocalyptic circumstances, for the crowd at Caesars, such nightmares seemed remote. “We are not running out of water,” said Rhett Larson, professor of water law at Arizona State University and one of the conference’s keynote speakers. “We are running out of cheap water.”

Indeed, to many observers, the substance has been greatly undervalued for decades. Water used for irrigation—which in Arizona accounts for more than 70 percent of the state’s total usage—is had for a tiny fraction of its real cost. This enormous subsidy has encouraged many commercial ag firms to plant thirsty crops like cotton and alfalfa, much of it for export. Meanwhile, Arizona remains one of the fastest-growing states in the country, and property developers are eager to see that water directed toward new housing. As a result, a handful of speculators have stepped in, buying up farmland in hopes of channeling its water toward more urban areas for a tidy profit.

Amid this ongoing tussle, a few lonely voices, including a right-wing Arizona state representative named Alexander Kolodin, have been proposing a seemingly radical solution: What if we just ... gulp ... let the market decide?

To the extent that the CRWUA conference boasted anything close to a celebrity attendee, the honor belonged to Bruce Babbitt, the former governor of Arizona and later secretary of the interior. In between posing for selfies with fans, the fit 87-year-old weighed in on the dire state of affairs. The basin states would soon “be operating on what they call ‘run of the river,’” he told me. “We’ve been putting off the crisis by using the storage in these giant reservoirs of Glen Canyon and Hoover. There’s about a year left before there’ll be structural problems in Glen Canyon. There’ll be dead pool, probably, in Hoover Dam. So we really are at the decision point.”

Indeed, a political crisis quietly loomed over the conference. The Colorado River Compact, an agreement hammered out in 1922, had bestowed upon the Upper and Lower Basins an annual 7.5 million acre-feet of water apiece—a surging, rippling bounty that simply no longer exists, if in fact it ever did. Last updated in 2007, the compact was again up for renewal, and some tough-to-swallow compromises would be required.

The tug-of-war pitted the states of the Lower Basin, which for decades made eager use of their allotment—with the impressive population growth, agricultural output, and economic spoils to show for it—against their slower-to-develop and historically less needful neighbors to the north. While the Lower Basin states have cut back sharply and have agreed to shoulder the largest future reductions, they’re pressing the Upper Basin to chip in as the deficits grow. Meanwhile, the Upper Basin states, which never made full use of their entitlements, have clung fiercely to their water rights and the chance at future economic growth they represent. As in 1922, no representatives from the 30 or so Native American tribes who call the area home (and hold some of the most senior water rights, if not the infrastructure to exploit them), or from Mexico, which is also entitled to a portion of the Colorado’s flow, have been party to the negotiation.

State water commissioners had already blown one deadline when, on the conference’s final morning, they took the stage in the packed Augustus Ballroom for an event that felt like a cross between a high-level summit and a hostage video. Most attendees had already checked out of their hotel rooms—their wheeled suitcases lined the periphery of the space—but few dared skip this top-of-the-card reckoning.

Seated at a long dais draped with gold skirting, flags hanging behind them, the commissioners mostly stuck to their talking points. They trumpeted their states’ respective conservation efforts, highlighted the pain already felt by their various constituencies, demanded more flexibility from their opponents, and invoked the implacable power of Mother Nature to force a reckoning one way or another. (In other words, the house always wins.) Aside from a swaggering opener by California Commissioner JB Hamby (“California is here to save the Colorado River,” he began), the only real drama concerned the matter of whether Colorado Commissioner Becky Mitchell—recently dinged in the New York Times op-ed pages for her alleged recalcitrance—would become teary-eyed as she sometimes does during such appearances. Her voice cracked a bit, but the dam held fast.

The conference adjourned with no sign of progress. An extended deadline had been set for February 14, and late January would find the commissioners and their respective governors summoned to Washington for a skull-cracking session with Interior Secretary Doug Burgum. But no one I spoke to seemed to think the states would come to terms—not until the legal complaints started flying. “You can see the need for broad compromise,” observed John Fleck, an expert in water policy with the University of New Mexico Department of Economics. But the commissioners then “have to go back home and sell that compromise to local political constituencies, who say, ‘Don’t give up our water, fight for it.’ That makes a sharp cutback difficult.”

“The politics just dribbles down,’” observed David Zetland, a professor of political economy at Leiden University College and author of the book Living With Water Scarcity. “Say you have someone from California say, ‘OK, we’ll give up water to help Colorado.’ Immediately the water users in California will sue about their water rights.”

The current impasse was more than a century in the making. While water rights in the Eastern United States have long been based on an ancient concept known as riparianism—if a person holds land bordering a body of water, they automatically have the right to its use—in the West a new framework emerged, known as prior appropriation: Water rights were granted, in perpetuity, to whoever exploited them first. This approach was key to the settlement of the West. “You just turn it into a race,” ASU water law expert Larson explained in his CRWUA speech. “You say, ‘If you run as fast as you can into the desert and grab the most valuable resource … you’ll own that resource.’” There was a catch, however: If you failed to make use of the water, you’d lose it. Rampant overconsumption was thereby incentivized from the beginning and remains so in many areas.

Meanwhile, it’s now widely understood that the architects of the original 1922 compact profoundly overestimated the volume of water flowing through the Colorado River, and so promised the signatories considerably more than could reasonably be delivered. Nonetheless, the flow was sufficient for a time. Mining operations sprung up. California’s Imperial Valley became an agricultural marvel. Rural Arizona exploded in cotton fluff. Great cities rose from dust—then sprawled in all directions. It was all pretty great until it wasn’t.

Even before the impacts of climate breakdown were understood, a few keen observers saw the water issue plainly. One was Maj. John Wesley Powell, the explorer who’d drawn the first scientific maps of the Colorado. In 1893, at a Los Angeles meeting of the International Irrigation Congress, he informed the assembled delegates—men for whom Manifest Destiny was at that moment playing out precisely as promised—that they might want to scale back their ambitions just a smidge. “I tell you gentlemen you are piling up a heritage of conflict and litigation over water rights,” he predicted, “for there is not sufficient water to supply the land.”

Perhaps unsurprisingly, Powell’s appraisal was cheerfully ignored. Well over a century later, the reservoir named in his honor is “dancing with deadpool,” as the Colorado River Research Group recently put it. Indeed, some water management experts are seriously considering letting the river simply bypass the Glen Canyon Dam altogether, thereby draining Lake Powell to the dregs.

In his 2015 novel, The Water Knife, set in the southwestern United States after the Colorado River has gone dry, author Paolo Bacigalupi writes of how the water managers of the West “had thrown on the garments of fertility for a century, pretending to greenery and growth as they … pumped up the Ice Age and spread it across the land.”

He’s talking about aquifers, essentially sponges made of limestone, clay, gravel, or other porous geological matter. In places where surface water is too distant to reach, people have long made use of groundwater by sinking small communal or private wells, which may be replenished by rainfall. But dig a little deeper—for instance, to irrigate a large agricultural operation or provide drinking water to a new housing development—and you’re tapping water that’s lain undisturbed for millennia.

“Most of the aquifers that we’re talking about require thousands of years to recharge,” Larson explained. “Imagine you have a bathtub full of water, and every 10 years, a drop comes out of the faucet, but every day you take a bucket out. Well, within a week, you’re going to empty the bathtub.”

That’s what’s happening under Gary Saiter’s town of Wenden, Arizona. Saiter spent years as an executive for Sherwin-Williams before retiring and delving into municipal governance. “I didn’t know anything about water before I went on the water board,” he told me. “I know a lot now.”

While prior appropriation still dictates the apportionment of Arizona’s surface water (provided it’s put to “beneficial use,” vaguely defined), groundwater is different. For decades, Arizona law allowed just about anyone who owned a parcel of land to essentially stick in a straw and suck up whatever lay beneath. This free-for-all was challenged in the late 1940s by landowners in the town of Laveen Village, now a Phoenix suburb, whose wells ran dry due to the aggressive overpumping of a neighbor who was using the water to irrigate land miles away. The state Supreme Court ruled in the plaintiffs’ favor, before reversing itself under pressure from powerful agricultural interests. For decades thereafter, so-called percolating water was considered a kind of bonus accessory of the dirt from which one drew it.

The problem was obvious: Land is stationary, but water flows and trickles, usually down. As the water table drops, elementary hydrology suggests that only those with the financial wherewithal to drill the deepest wells will thrive. As Robert Glennon, author of Unquenchable: America’s Water Crisis and What to Do About It, pointed out, “Instead of a property right, it’s like a circular firing squad.”

In 1980, the legal framework changed with the Groundwater Management Act, now considered one of Babbitt’s crowning political achievements. Its most consequential provision was the curtailment of groundwater extraction in urban areas. But as pathbreaking as the legislation may have been, it contained a rather large loophole: In rural counties, where Big Ag held sway, the free-for-all continued unchanged.

In 1991, Arizona officials, already well aware that the surface water supplies on which their thriving cities depended were being depleted, designated several aquifers as “transportation basins,” from which water could be pumped into the Central Arizona Project, the 336 miles of canals stretching from the Colorado, for use in metropolitan areas should the need arise. These basins “were specifically set aside as casualties,” explained Kathryn Sorensen, director of research for the Kyl Center for Water Policy. “It is allowable under state law to essentially drain them and then import the water into the Valley of the Sun and other areas.” One of these, the McMullen Valley Basin, lies beneath Wenden—albeit receding deeper every day. Sixty-nine years ago, Saiter told me, residents only needed to drill 107 feet down to find water; now, the water table sits at more than five times that depth. “Fifty percent of the aquifer is gone,” he said. “So, we’re dying.” But, he added quickly, “We’re not dead.”

There’s an important caveat in the law that created the transportation basins: Only those who have owned acreage in McMullen since 1988 are eligible to transfer water—and the last landowner who met that criterion, the city of Phoenix, sold off the parcel in 2012. The buyer, a company called International Farming Corp., soon gave up on winter vegetables, which had long been produced on the site, in favor of alfalfa.

A forage crop beloved by livestock, alfalfa has been a contentious topic in Arizona since 2015, when it emerged that a Saudi Arabian dairy company had bought thousands of acres in La Paz County and was aggressively irrigating its alfalfa fields for export to the kingdom. “Foreign countries with limited [water] supply but lots of money realized that the U.S. is an open market with no regulations, so let’s just go grab some,” Glennon recalled.

“If you have free water, you grow alfalfa,” Zetland agreed. “This is the American taxpayer subsidizing Saudi milk.”

Meanwhile, in neighboring McMullen Valley, an agribusiness based in the United Arab Emirates was up to the same thing. While gulf nations were hardly the only corporate interests to realize that Arizona’s regulatory patchwork had created a significant business opportunity, the foreign angle lent the issue additional salience. Amid a public outcry, the state canceled several Saudi leases due to “excessive amounts of water being pumped from the land—free of charge,” and the McMullen Basin parcel producing alfalfa for the UAE was sold for a staggering $100 million (a 233 percent markup). The new owner, a firm named Emporia III, was eventually identified as a subsidiary of Water Asset Management, one of several water-focused investment groups, and for many observers, the most deplorable water villain since John Huston’s menacing turn as Chinatown’s Noah Cross. “They went out there over a period of years and bought up individual farms under different names, different corporations, which all interestingly enough have the same email address in New York City,” Babbitt explained.

Now, the company is banking on a legislative change that will allow it to sell off the water to the highest bidder, most likely property developers eager to further expand the exurbs around Phoenix. Water Asset Management declined several interview requests, but in a panel discussion at a recent Goldman Sachs forum, Diserio outlined his company’s strategy. “There’s a substantial arbitrage between a molecule that is regulated or allowed to only be used for agricultural consumption,” he said, “and then having regulatory rules that also allow for municipal and industrial consumption of that molecule.”

“What they talked about doing in 1991, you’re seeing it now come into fruition,” said Holly Irwin, a La Paz County supervisor who’s been fighting to protect rural aquifers since watching a similar dynamic play out in the adjacent Harquahala Basin. In that case, the town of Buckeye, a fast-growing municipality west of Phoenix, purchased a single acre of land in the basin for $80 million, which will entitle it to nearly 6,000 acre-feet of water per year—enough to more than double Buckeye’s current population of 125,000.

Plans call for the area to eventually house well over one million people, according to Mayor Eric Orsborn. Meanwhile, communities in the designated transportation zones look on in dismay as the water they rely on disappears from under their feet. “It’s not fair to take water to allow another area to grow when you’re killing off a community that is reliant on that natural resource,” Irwin said.

Gary Saiter of Wenden agreed. “Frankly, I don’t care if Buckeye continues to grow or not. Does it have the resources to do it without damaging other parts of the state? No, they don’t. We have to give up our assets and potentially our way of life just so Buckeye or whoever can grow. Morally, I find that reprehensible. Why are they better than us?” Legislation allowing Water Asset Management to spirit McMullen water out of the county recently passed out of committee. Should it become law, it will greatly accelerate what is already an existential crisis for Wenden. “It’s a train coming down the track,” Saiter said. “I mean, it’s out there a ways, but it’s coming.”

In terms of water, “Arizona’s like living on Mars, OK?” Kolodin told me, sitting in the modest, comedically cluttered office of his Phoenix law practice, an ADHD fever dream of half-empty soda cups and Jenga-like towers of legal briefs. An intense, wiry election-law attorney, Kolodin currently serves in the Arizona statehouse, representing the affluent golf mecca of Scottsdale, long a conservative stronghold. “I like to say we censured the FBI before it was cool,” he said.

Kolodin, who is running for secretary of state, is perhaps best known for his supporting role in the attempt to overturn the 2020 election. (He was the local attorney who filed Sidney Powell’s “Kraken” lawsuit alleging massive election fraud.) Admonished by the State Bar in 2023 after a disciplinary panel held that he had “violated his duty to the legal profession, the legal system, and the public,” he agreed to take a series of ethics classes.

Clad in a dark blue suit with a red tie, Kolodin spoke emphatically and at a fast clip. The Turning Point USA annual conference was underway at the nearby Convention Center, and he was hoping to put in an appearance. (Asked about the AK-47 resting a few quick steps from his office chair, he explained, “after Charlie Kirk got assassinated, I’m not taking any chances.”)

Since winning his first primary in 2023, Kolodin has steeped himself in the nuances of water policy. “I realized that we were headed for a pretty bad situation, and I wanted to be able to do something about it,” he told me. And he thinks he has a solution to the problem. “The actual water crisis,” he said, “is the red tape.”

Under Kolodin’s scheme, the license to pump water—for instance, to irrigate one’s farmland—would be converted into property that could then be sold to someone else. Instead of the guy with the longest straw being able to slurp up his neighbors’ water, rights would be “correlative,” with each party entitled only to the percentage of the basin corresponding to his or her sliver of acreage above.

“You can farm it, you can blast it off to the moon, you can sell it, you can lease it, whatever you want to do,” Kolodin explained. “But once that water is gone, it’s gone. If I pump it all out next year, my land becomes effectively worthless, and so I’ve got an incentive to slow down. But in our current system, I have an incentive to use every drop of water that I am legally allowed to pump. Why? Because my neighbor’s got the same incentive. So either I use it or he uses it, which means you’ve actually created a situation where everybody is competing to pump the aquifer dry.”

While studying law at the University of Pennsylvania, Kolodin was a Reagan Fellow with the Goldwater Institute, and, like any good libertarian, he deplores most regulation. “It’s not for the government to come in and say, ‘Your use bad, your use good,’ right?’ This is this kind of Central Planning mentality that’s fucked our state, frankly. With my solution, it’s win-win. If I’m a developer, I can come along and make an offer to somebody who has an agricultural operation, maybe for part of the water, maybe for all the water, whatever. I think what would happen is that the water would flow to where it was most needed and most useful to the largest number of people.”

One might imagine such thinking would appeal to speculators like the team at Water Asset Management, but Kolodin considers them his toughest opponents. By his reckoning, the last thing the investors want is more water on the market, as it would instantly devalue their primary asset. “If you can keep the rest of the state out of a market-based system, these guys get to name their price,” he said. “The few corporations who hold Arizona’s lifeline, this is the biggest lie that they tell—that we have to protect the public from the market, when in fact the market would protect the public from them.”

Nonetheless, he thinks the demonization of the company and others like it is overblown. “They’re not evil, right? They’re rational actors responding to incentives,” he explained. “A rational actor is interested in maximizing profit. He looks at a restricted supply of transferable water rights in a state stricken by drought, and goes, ‘Shit, that’s the biggest no-brainer investment in the history of Earth! Of course, I’m going to try to corner that market with my buddies....’ Arizona should be concerned less about rational actors doing what rational actors do than, ‘Hey, why did our elected officials create the environment for those rational actors to monopolize the water that my city depends on?’”

Of course, adopting Kolodin’s scheme would do little to solve the underlying problem—less water to go around with every passing year, due in large part to the wanton defilement of the atmosphere. “Personally, I have no idea about climate change,” Kolodin said. “I don’t know if it’s real, not real, what’s the magnitude. Because I’m not a climate scientist, and I don’t trust the people who are. The relevant thing for policymaking in this state is that we have lower flows on the Colorado. That could stop next year; it could stop in a hundred years. What a prudent person does in that situation is say, ‘I want the state to be ready for the worst-case scenario.’ The second people start going, climate change, climate change, climate change, now it’s politicized.”

Whether the problem is man-made or not, he figures, his free-market approach would at least impose some fairness, discipline, and rationality on a system that has long been dangerously short on all three. “The farmer loses nothing, gains a potentially valuable right,” he said. “The cities gain an alternative source of water. And it’s good for the aquifer, because pumping is reduced. You would think that would be an easy sell, right? Except that a lot of people make money off of the scarcity.”

His only goal, he said, is to protect his constituents and, ultimately, his state. “I want to make sure that Arizonans enjoy the things that we got to grow up with—being able to eat a good steak, having a swimming pool in the backyard, and having grass in the local park. I mean, this is my home.”

Still, he knows it’s a hard sell. Water is hardly the only precondition for human survival, but we tend to place it in a unique category, a tendency University of North Carolina professor of environmental sciences Dale Whittington attributes to “ancient instincts” acquired during our hunter-gatherer past and best discarded. “People always say, ‘Water is life,’” Kolodin observed, “but that does not mean that it’s immune from the economic laws that govern every other good and service. The market always gets the last word.” Paraphrasing Ayn Rand, he added, “You can avoid reality, but not the consequences of ignoring reality.”

Given my enduring belief in the legitimacy of the 2020 election, I was surprised to find myself agreeing with aspects of Kolodin’s reasoning. But numerous water policy experts I spoke to offered similar views. Much as we recoil at the idea of water as a commodity with a particular value, most of us pay real money to a municipal water utility, after all. Scarcity will demand difficult compromises among competing parties. Assigning an economic value to this substance—something markets excel at—is not a bad first step in deciding how best to use it.

Besides, Zetland explained, it’s not as if our current approach to water management is even remotely fair. “The alternatives to a market are essentially lawyers, best friends, back-scratching, theft, almost anything you can think of,” he said. Better to let the water flow toward its most valuable uses, agreed Fleck, director of the University of New Mexico Water Resources Program and co-author of Science Be Dammed: How Ignoring Inconvenient Science Drained the Colorado River. “If you look at it in purely market-good terms—the value of water in an urban setting versus the economic productivity of that water on an alfalfa field—there’s just no comparison,” he said, adding that residential uses are “orders of magnitude more valuable. So what the pure market economists would say is, ‘Well, let’s set up a system where transactions could move a good from low value to high value uses, and that generates net societal value.’”

For Babbitt, who has spent more than half a century grappling with the issue of just who gets water in Arizona and under what terms, the idea sounds OK in theory, but he doubts it could actually be implemented. “Where you gotta be realistic is, there is no way of undoing a hundred years of history and moving into a free market,” he said. “It’s all kind of abstract, because you couldn’t unwind all the laws and stuff.”

It certainly isn’t easy. For years, the only nation in the world to implement a genuine market-based system of freshwater rights was Chile—and it took a CIA-backed military junta to make it happen. But in 2007, Australia, which had been experimenting with similar designs on a much smaller scale for years, created a national water market of its own. The catalyst was the so-called Millennium Drought, which began in the mid-1990s and then got worse, particularly in the Murray-Darling River Basin, a key agricultural center. By around 2001, the country was nearing a state of crisis. “We’d got to the stage that, actually, the River Murray was not flowing,” Mike Young, an economist and water policy expert at the University of Adelaide, recalled. “There were boats lying everywhere on their sides.”

Young was one of the architects of the new cap-and-trade water regime, under which existing rights to water from an aquifer or river catchment were converted to an “entitlement,” a percentage share of what’s available at a given time. The system allowed corporate and individual rights-holders to log into special accounts on “water exchange platforms” and view their holdings—the monetary value fluctuating day by day—as easily as checking an investment portfolio. They could then sell their entitlements or lease their annual allotments, in whatever amounts they chose, with the click of a mouse. Or they could use them.

Many chose to simply sit on them. “The prices went up, because suddenly you could save water,” Young said, “and that was the right thing to do.” The system made water rights nearly as fungible as water itself. One of the more popular aspects of the plan, Young said, was the opportunity to use water as a form of collateral. “A farmer whose shares had gone up in value”—and they did, in some cases by 20 percent per year—“suddenly had a new asset. So if they wanted to make a big investment, new irrigation system, a new tractor, they just borrowed the money against the water because it was so secure.”

Now, in years of scarcity, Australia’s water prices spike, prompting farmers to fallow their fields and unload their allotments, thereby surviving downturns that might otherwise force them out of business. Much of that water is purchased by producers of higher value crops such as wine grapes and nuts. “Australia now has an almond industry which is almost as big as America’s,” Young enthused, noting that he and his wife are big fans of the famously water-intensive crop.

Australia’s new water scheme was far from perfect, however. One wrinkle involved the way shares were granted. Aboriginal groups that had never received their due once again felt shortchanged when the government opted to divide up shares based on preexisting rights. “A lot of people argued that it should be done as if we’re gonna make everything fairer at the same time,” Young allowed, while insisting that doing so would have probably tanked the entire project. “Soon as you start playing that game, you end up in strife.” The government has recently begun buying up shares to compensate Indigenous communities.

Other issues have emerged. In 2017, an explosive documentary revealed the extent to which some large operations were gaming the system—quietly extracting water to which they had no claim, sometimes by tampering with monitoring equipment. The boldest of them created massive storage pools and pumped them full of river water, often illegally, to the dismay of local residents.

And an extensive government inquiry released in 2021 found “scant rules governing the conduct of market participants, and no particular body to oversee trading activities, undermining confidence in fair and efficient markets.” The report called for stricter regulation, a mandatory code of conduct for water brokers, and more transparency around trading data. A special police force has been empowered to uncover wrongdoing and hold water thieves accountable.

Young has heard the criticism, which he termed “people grizzling and complaining,” but said he considered it a natural part of a radical transition. “The only thing you know with certainty is there’s going to be a need for adjustment,” he said. “Australia actually, I think, has done an incredible job. It’s very close to perfect.”

One chilly winter day in the early 1990s, a political science professor at the University of Indiana found herself far from home, on the banks of the Indrawati River in Bahunepati, Nepal. Doffing her shoes and rolling up her trousers, she stepped into the frigid current and began to wade across. Elinor Ostrom was perhaps more accustomed to academic settings—she would go on to become the first woman to win the Nobel Prize in economics—but her ideas were based on concrete, real-world evidence. On the far side of the river, an hour’s walk uphill, lay the Majha Kulo Irrigation System, one of more than 100 “farmer-managed” water projects she and her colleagues would study and catalog as part of an elaborate research project. Ostrom believed that only by talking to the farmers themselves could she truly begin to understand how scarce resources were collectively managed for the mutual benefit of participants.

Prior to Ostrom’s work, conventional wisdom held that such resources would inevitably come to ruin due to the innate selfishness of the human species. This notion had been popularized by ecologist Garrett Hardin, whose influential essay lamenting the “Tragedy of the Commons” appeared in 1968.

While Hardin’s formulation remains popular—I heard the phrase used several times at the CRWUA conference—his fierce opposition to immigration and advocacy of eugenics, among other racist obsessions, have rightly cast a shadow over his legacy. But the strongest refutation of his hypothesis came from Ostrom, who demonstrated through her fieldwork that, all over the world, societies do in fact manage commons, be they fisheries, pastures, forests, waterways, or farmland, for their collective benefit.

Ostrom was no credulous utopian. She noted that certain factors made such systems more effective—among them, the direct participation of stakeholders in management, infrastructure maintenance, rulemaking, and enforcement. Her studies of irrigation systems showed that those overseen by the farmers whose livelihoods depended on them, as opposed to government agencies or NGOs, produced markedly better results.

There are lessons here for those working to allocate water in an era of ever-increasing scarcity. For one thing, resources operated on a small scale tend to be better managed, suggesting that a system as vast as the Colorado River Basin is best approached as a collection of mini-systems, overseen by groups of stakeholders who share responsibility for stewarding their allotments, but who also have meaningful input into systemwide decision-making. As for free-market approaches like the one proposed by Kolodin, they are most successful when the parties doing the buying and selling actually use the water. Australia’s decision to open its market to any armchair trader looking to turn a profit—while in theory adding a measure of liquidity—tended to naturally erode the sense of community interest such frameworks require.

Perhaps more important is an acknowledgment that not every party with a meaningful stake in this most precious of all planetary resources can participate in a market. While experiments like those undertaken in Chile and Australia can be credited with boosting GDP and channeling water to the “highest and best use,” such uses are inevitably defined in economic terms. The value of a flourishing ecosystem, a thriving watershed, a healthy river, or an ancient aquifer is not so easily plugged into an Excel spreadsheet. Certainly, there’s a commercial rationale for producing high-end wines, “flavor forward” almonds, pima cotton, premium ice cream, and tens of thousands of pristine new Spanish-style ranch homes in the desert. But a market that funnels all available water toward those ends would not in fact be operating to our collective benefit—whatever the market signals indicate.

Zetland considers Ostrom his “intellectual godmother,” and he’s done a lot of thinking about how to synthesize her work with the laws of supply and demand. His conclusion? Markets can indeed provide an answer to our water woes, but only a partial one.

Economic theory defines goods as either excludable (something that can be privately owned) or non-excludable (things we share). Water falls into both categories—you can buy a bottle of Evian but not the snowpack on Pikes Peak. If you rely solely on a market to allocate a non-excludable good, for instance, the contents of a river or ancient aquifer, he said, “You’re fucked. It’s not gonna go well.” Zetland points to Chile, where property rights remain sacrosanct. “They forgot to set aside water for the environment,” he noted. “And what that meant is that everybody, all the mining companies, and the cities, and the farmers, had very good access to water rights, and they use water very efficiently. But there was literally no space for the environment.”

Zetland suggests we think of two distinct categories: social water and economic water. Our first priority must be setting aside sufficient supplies to sustain life in its varied forms. “Whatever’s left over is economic—let the market roar,” he said.

As of Valentine’s Day, negotiations between the Upper and Lower Basin states of the Colorado River remained deadlocked, and reports suggested that the Trump administration would unilaterally impose a solution, likely setting up a protracted legal battle at a time when the river and those who rely on it can ill afford one. It didn’t help that, days before, EPA Administrator Lee Zeldin gleefully announced that the United States would essentially do everything in its power to devastate the planet’s ecosystem—a poignant act of charity on behalf of a handful of coal and oil executives, many of whom also happen to be big Trump donors.

Whatever approach we land on for navigating our new era of water bankruptcy, the GOP’s craven and unconscionable indulgence of the fossil fuel industry is guaranteed to make the crisis much, much worse. But “normal folks don’t care, as long as water’s coming out of the tap,” Zetland said. “They don’t notice the environment dying. The businesspeople just keep their heads down and keep pumping water. The government is like, ‘Kick it down the road.’”

Short of a radical rethinking of our relationship to the environment that sustains us, he added, “People are just going to keep watching the water going down the drain. And it’s gone.”