The Economics of Solving Environmental Problems: The Case of Indigenous Water Claims in the American West
North Carolina State University
Friday, January 24, 2020
Taylor-Hibbard Seminar Room (Rm103)
12:00 pm-1:30 pm
Remedies to environmental problems often are implemented late and are incomplete. In the American West, water extractions often exceed limits that would ensure environmental and economic wellbeing in the long term, yet solutions remain elusive. A growing source of uncertainty in bringing the region’s human and ecological systems into balance is that 170 of 226 American Indian reservations have unresolved claims to water. We use an economic framework to analyze a novel and complete dataset on settlement agreements for previously resolved reservation water claims. We show that tribes on reservations undertake the settlement process only when the economic value of water is high. When more users are involved in the negotiations, transaction costs delay settlement, increasing water insecurity and ecological damage. We use our findings to predict allocations for 24 ongoing water right negotiations, resolving a key uncertainty. High transaction costs help explain the difficulty of solving key water management problems, even when the benefits of doing so appear large. To demonstrate the relevance of our approach beyond the case at hand, we provide additional examples from the management of groundwater extraction and nutrient pollution.