Owens Valley Revisited: A Reassessment of the West’s First Great Water Transfer

Published by EH.NET (March 2008)

Gary D. Libecap, Owens Valley Revisited: A Reassessment of the West’s First Great Water Transfer. Stanford, CA: Stanford University Press, 2007. vii + 209 pp. $65 (cloth), ISBN: 978-0-8047-5379-1.

Reviewed for EH.NET by Mark Kanazawa, Department of Economics, Carleton College.

Gary Libecap has had a long and distinguished career as one of our foremost economic historians working in the area of natural resources. Part of Libecap’s richly-deserved reputation derives from his uncanny ability to identify important resource topics surrounded by popular myths, and to perform careful analysis based upon hard data, to explode those myths. Thanks to Libecap’s research, we understand timber policy, oil and gas management, deforestation in the Amazon River basin, and the Dust Bowl ? to name only a few ? much better than we did pre-Libecap. In his latest book Owens Valley Revisited, Libecap takes on one of the most enduring myths in western water history ? the famous (or infamous, depending upon your point of view) transfer of water from Owens Valley to Los Angeles that occurred in the early part of the twentieth century. This particular myth holds enormous sway among water historians (which the average economic historian might be surprised to hear is a pretty sizable group), and continues to hold sway in the popular imagination thanks in part to its retelling in popular histories such as Marc Reisner’s Cadillac Desert and its popularization in movies such as Roman Polanski’s Chinatown.

In Owens Valley Revisited, Libecap refuses to fall under the popular sway. Rather, as in everything he does, he tries to get to the factual bottom of things by carefully marshalling theory and evidence to tell the most compelling story he can. The result is impressive: using extensive archival data, Libecap manages to convincingly demonstrate that the popular “rape and pillage” myth surrounding Owens Valley is in actuality much more complicated than generally perceived. The more compelling story that Libecap documents, and one that economists in general will find much more satisfying, is not one in which water was stolen in the middle of the night. Rather, Los Angeles and Owens Valley farmers engaged in a complex set of strategies and negotiations over the division of the surplus from use of Owens Valley water. The ability of Los Angeles to extract surplus ? and they did manage to extract quite a bit ? depended in large part on their monopsony status in the market for the water, given transactions costs that often (but not always!) impeded successful organizing by the Owens Valley farmers. And in the end, it all mattered little: Owens Valley was not reduced to a wasteland because of the diversion of its water to Los Angeles. Irrigated farming was likely not to last much longer in Owens Valley in any case and the diversion only had the effect of nudging the local economy towards grazing, which was much better suited to local conditions – all of which Libecap documents in the first two-thirds of the book with careful argumentation, data, and statistical analysis.

The remainder of the book gives a brief account of what happened afterwards, as Los Angeles continued to buy up land in Owens Valley and expanded and consolidated its water diversion system to send more water south to Los Angeles. Water deliveries gradually increased over time, and then jumped in 1970 when a second aqueduct to Los Angeles was completed. 1970 is, of course, a year that is quite familiar to environmental historians, a year known for the first Earth Day and the passage of the Clean Air Act, a year considered by many to be when the modern environmental movement was born. The expanded environmental consciousness also played out in the post-1970 struggle over diversions from Owens Valley and the neighboring Mono Basin that imposed new environmental consequences including the famous desiccation of Mono Lake and gave rise to litigation to fight the diversions ? none of which is completely new to water historians or legal scholars. Libecap, however, takes the occasion to reinforce a central message of his book; namely, the desirability of (more) freely operating water transfers. Far better, he argues, to allow Los Angeles and Mono/Owens interests to sit down and negotiate over division of the water resources than to engage in the contentious litigation that has plagued the ongoing struggle over the water for more than three decades. Far better than relying on the public trust doctrine to allocate the water, which weakened private rights and only increased the likelihood of contentious litigation.

Some economists will find the post-episode discussion, contained in chapters 6 though 8, a bit less satisfying than the earlier account and analysis of the episode itself. These arguments are not new, nor are they supported by data or new analysis. Libecap invokes arguments of impeccable economic pedigree, such as the danger of property rights attenuation under the public trust doctrine and the accompanying disincentives for investment. More satisfying, however, would be a more sophisticated treatment that went beyond what some might construe as (and I will say this way too strongly) blind free-market advocacy, and instead systematically considered factors such as transaction costs, litigation costs, rent dissipation, and interest group advocacy that have been stressed by legal scholars such as Carol Rose and Saul Levmore. The point is that just as the public trust doctrine is unlikely to work perfectly, neither is an unfettered market: under conditions that vary with regard to the above factors, each may have a role to play. There is no doubt in my mind that Libecap recognizes all this, and that the market orientation of the book is a conscious strategy to combat the “water is different” attitude that continues to pervade many discussions of western water. However, in my view scholars need to move beyond the black-and-white of current discussions of water markets and into the larger grey area where there is still a lot of work to be done.

None of these comments are to be interpreted as fatal criticism of this very fine book, in which Gary Libecap continues to cement his well-deserved reputation as one of our generation’s finest economic historians.

Mark Kanazawa (Department of Economics, Carleton College) is currently working on a book on the emergence of water rights during the California Gold Rush.