California Water Crisis

The California water crisis is a great example of how badly state-run monopolies allocate scarce resources.  According to Scott Alexander at Slate Star Codex, the entire thing could be solved by simply paying the alfalfa industry $860 million to not grow alfalfa, which would pretty much make up the shortfall.  That sounds like a lot of money, but the state is spending billions on rebates for low-flow toilets and all sorts of things like that, which will not even save a fraction of what shutting down the alfalfa industry would cost.  Alexander isn’t saying this is even the optimal solution.  His point is, that the market could easily come up with much better solutions than the ones they’re proposing, solutions that are already acknowledged to be inadequate.  $860 million comes to about $20 a year per California resident.

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