Do jobs per drop calculations support more use of water markets?

The UC-D Watershed Center counters crops per drop calculations with jobs per drop calculations and then makes a rather large leap to their conclusion ... we need more water markets - not rules and regulations.

I am not persuaded.  The biggest impact of expanded water markets, especially if combined with expensive conveyance infrastructure like Delta tunnel(s) also supported by the PPIC/Davis group, will be more ag-to-urban water transfers that direct water away from Central Valley agriculture.  The economic impact of the out-of-ag transfers on the Valley could outweigh any marginal efficiency benefits from reallocating water between higher and lower revenue farmers.  Coastal urban areas should be encouraged to develop alternative local supplies, so I would be more supportive of water transfers if ag-urban or out of basin transfers were limited.   

Water is not the only thing that can be moved around in the Valley.  As water becomes more scarce, I believe within basin transfers will be part of the solution, but it may be less costly and more efficient to move crops, farm workers, and capital to more water rich locations in the Valley than it is to move water long distances out of watersheds.  (an acre foot of water weighs 2.7 million pounds and is worth a few hundred dollars in agricultural use)     

I also wonder about the validity of these types of calculations that suggest water/jobs ratios are fixed.  Water/nut ratios cited by environmentalists might vary widely too, but I suspect their is even greater variation in water/job ratio based on local conditions and production technology.  In fact, I have long wondered the extent to which labor and water can be substitutes in the agriculture production function.  This could be part of the reason that farm job loss during droughts has generally been less than predicted by simplistic fixed proportions analysis.  For example,  Santa Clara researchers found nearly 34% of vegetable crops went unharvested in California fields during 2016-17, and that there was a lot of variation in the unharvested amounts by field even for the same crops, and that labor availability/costs was a factor.  I wonder if the unharvested percentage declines in a drought year, some fields might be fallowed, but more labor could be applied to the fields that are planted increasing the harvested crop per drop on the remaining fields.  And there might be other ways that water-labor could be substitutes, for instance in more closely monitoring/managing irrigation equipment.

I am very much a market oriented economist, but I am deeply skeptical about the potential of water markets to be a major part of California water solutions.  The transactions costs are extremely high (both transporation and regulatory), the potential for third-party impacts is large, and markets are unlikely to be competitive. 

And as water becomes increasingly scarce, I believe regulatory limits on planting decisions could be warranted some day, and could be part of long-run management plans.  We could use market principles to limit the cost of the regulations, for example if we have licenses that limit plantings of certain permanent crops - these could be transferable in markets.  I once heard a very smart salmon fisherman say (sadly I forget their name) something like "we have to deal with transferable catch limits and quotas to avoid the tragedy of the commons in the oceans, why not an ITQ (individual transferable quota) for trees to avoid the tragedy of the commons in groundwater."

The job per drop data also suggest reducing field crops like corn and rice that have low labor intensity and relatively low revenue per acre.  I worry if that were to go too far.  These crops often provide valuable wildlife habitat, and fallowing these types of crops in drought years provides an important buffer to reduce water use while minimizing economic disruptions due to their relatively low labor intensity and relatively high ability to substitute with imported crops.

Of course, these calculations of jobs per drop are based on 2010 data and probably already outdated.  The cost and scarcity of labor is having a much bigger impact on most farmers than the cost and scarcity of water.  As discussed above, labor scarcity could increase the jobs per drop calculation for vegetables but the change in that number would not necessarily be very meaningful for water management. 

While I have cautioned about drawing too many conclusions from these numbers above, I would also be very interested in seeing updated calculations for 2020 and the years ahead as data becomes available.