There’s a reason why “You don’t miss your water, until you well runs dry” is an adage that has endured. It not only expresses a general principle – you don’t feel a lack until you feel a need; it cites a great example. Water is something you especially hate to miss, because – literally and figuratively – water is life. Miss enough water and we’ll be missing you.
In market economics, the space between missing something and dying for the lack of it is measured in “elasticity.” The more elasticity buyers have, the more they can mitigate their need for a product when supplies are low or absent, and the less they’re going to pay. Conversely, sellers love markets where buyers have little or no elasticity, they need the product so badly it is, or at least it feels like, a life-or-death situation.
Which is why markets for illegal narcotics or legal pharmaceuticals, or medical care or medical devices have, over recent decades, attracted such a flow of investment capital. When people need crack, or Oxy-Contin, or surgery, or a pacemaker; when it’s your money or your life, people and public healthcare systems tend to find the money, which keeps sellers’ prices and profits high.
In the arid American West, water is a sparse commodity and as population and development have grown, conflicting needs for water have intensified, notwithstanding notable successes by citizen/consumers in places like Albuquerque in reducing per capita use. Experience has shown, taxpayers are not only willing to cut back on their water, they’re willing to pay more for it.
Which all goes to show you, without elasticity, a buyer’s will can be bent a seller’s way. If Albuquerqueans don’t like their price of water, where are they going to go? This town sits in a desert.
Water-sellers in deserts have an economic advantage. Can you guess where a lot of fresh investment capital has been flowing recently? Yep, buying up water rights in Western desert or arid locations and selling the H2O to the highest bidder.
Old-fashioned economic predation. But with a new, even deadlier twist. Capitalists from the East and West Coasts, and from states on the Persian Gulf have been buying up water rights, not to squeeze few more bucks out of the locals, but to squeeze much bigger bucks from folks in cities or countries far away who “miss their water” more.
If capital is just money on a much larger scale, then the swoop of capital investors to the American West’s pools of water is just a scaling-up of a long-accomplished monetization of a key natural resource. But should money alone set the value of water for tract houses in suburban Phoenix versus the value of the same water for alfalfa and cotton fields near the California-Arizona state line?
Ben Ryder Howe has written about The Colorado River water issue for the New York Times and has also written for The New Yorker, The Atlantic Monthly, and Outside. His work has been selected for Best American Travel Writing. He is a former senior editor of The Paris Review. He, his wife, and their two children live on Staten Island. He is the author of My Korean Deli: Risking It All for a Convenience Store.