Editor’s note: “What is the libertarian philosophy concerning ownership, control and use of water resources?” asks a professor who is studying the subject.
That is about as tough a question as has ever been thrown at F.E.E.—a problem to which we’ve given little, if any, attention. But what an opportunity for a libertarian to test his views!
The professor’s inquiry is reproduced below, with his permission, in the expectation that others will want to participate in the search for solution. He chooses to remain anonymous until he feels more certain of his own views about water rights. Suggestions and comments sent to the Foundation will be forwarded to the professor.
For some years I have been on the mailing list of the Foundation for Economic Education and have been an avid reader of your publications. While I exercise my freedom to disagree with some of your ideas now and then, I think I have in common with the Foundation a strong belief in the virtues of a free society. My belief is founded on a personal scale of values which places freedom high on the list, and also on the conviction that the free society yields other benefits in addition to freedom. I believe it tends to be more progressive and more efficient in the economic sense. It is, I think, stronger but less prone to aggression.
My primary purpose in writing this letter is to solicit ideas from you or members of your staff on a problem which is currently engaging my interest and part of my time. I am endeavoring to appraise legal systems by which water resources are allocated. The primary criterion in making this appraisal is whether or not these systems are conducive to efficient utilization of water resources. My first impression is that a system which places water resources in private hands and relies on consumer choice and free competition will be most conducive to efficient utilization of such resources. There appear to be no a priori reasons why the free market economy should be any less efficient in guiding the utilization of water than it is ‘in guiding the utilization of land, petroleum, coal, or the production and distribution of foodstuffs, clothing, or any other scarce goods. Moreover, the free market system appears to apply a concept of freedom and a definition of the legitimate role of collective interference with it in a free society which has often been stated in your publications in some such words as “freedom means the right to do as you like so long as you don’t interfere with similar rights of others, and the sole function of government is to protect this right from encroachment by other individuals or groups.” But there are some complicating peculiarities about water resources that make it difficult to apply the above maxim of freedom in devising a system for water resource allocation and perhaps in some cases raise questions about the desirability of leaving decisions on water resource utilization to the market economy.
First, what is meant by private ownership of water resources? Establishing ownership of certain particular molecules of water ordinarily is not feasible or even what is desired. A mill or hydroelectric enterprise wants a flow of water. Many other users also want flowing water. Some water resources occur naturally as flowing streams and some are relatively stationary reservoirs, like petroleum deposits. Some of these water reservoirs, most of them in fact, are self-replenishing, unlike petroleum deposits. So too are the flowing streams. Having regular access to a flow of water at a given rate requires control of the movement of water in many cases. Since ultimately supplies of fresh water come from rainfall, maintenance of a supply may require control of cloud seeding and other practices to influence rainfall as well as control of its movement after it has precipitated on to the earth. Maintenance of a supply of water may necessitate limitations on actions by other persons affecting the flow of water thousands of miles away.
Second, what is meant by utilization of water? Some uses of water are consumptive as for example, drinking, and irrigation. Other uses, such as water power, navigation, recreation, certain industrial uses, and sanitation, are essentially nonconsumptive. They do not appreciably diminish the supply available for subsequent uses. Many nonconsumptive uses, however, alter the quality of the water and affect the stability and channels of flow.
Another complication results from the fact that water is not always an asset. It may be undesirable if it is present when and where it is not wanted. It can be too plentiful at certain times and places. Individual efforts to avoid the undesirable effects of water may cause harm to others. Elimination of a flood threat downstream may require reservoirs upstream which flood other land. An individual landowner cannot ordinarily protect his land from flooding by building a levee only on that part of the riverbank which he may own; in fact, flood protection by levees will fail if even one riparian landowner in the area of flood danger refuses to build or permit the building of a levee on his land. How should the free society take care of these problems?
Vast and complex systems of law, common and statute, have been developed dealing with questions of who has the right to the use of water and how it may or must be used. Throughout the world and down through the ages water resource utilization has been one of the most highly regulated of economic activities. I am endeavoring to determine the extent to which the laws and customs relative to water in the United States contribute to or hamper the efficient use of water. If the best method of securing efficient use of water is free consumer choice under a system of private ownership and competitive markets, as the libertarian believes is the case, evaluation of the legal framework involves ascertaining the extent to which it promotes or inhibits such a system. In order to present some of these problems in more concrete form, I have summarized below a few of the legal principles governing allocation of water in the United States, and I have posed some questions concerning the compatibility of these principles with the libertarian philosophy. I would appreciate your thoughts on these questions.
American law commonly recognizes two kinds of water supplies—surface and underground. Surface water may occur in streams or lakes, or it may be diffused such as that running over fields on its way to lakes and streams. Most underground water percolates down from the surface into reservoirs of relatively stationary waters or into flowing underground streams or some of both.
Basically, one of two common-law systems of allocating surface water (other than diffused) for private use is followed in this country. Statutes have codified and modified both. The first is called the riparian system, which still governs in most of the eastern states. According to this rule of law, the owner of land through which or along the boundaries of which streams flow has rights to the continued, undiminished, and unpolluted flow of the stream past his land. No one upstream, even another riparian landowner, can use the water so as to interfere with the flow to downstream riparian owners. This rule of law is usually qualified to permit reasonable domestic uses and stock watering by riparian owners even if such uses diminish the flow. The riparian owner can insist on maintenance of flow even though he is making no use of the water himself and does not even contemplate doing so. The riparian water right thus is attached to the riparian lands and is a right to use as long as the natural condition of the stream or lake is not appreciably altered.
The other doctrine, which prevails in most western states, is called the appropriation doctrine. According to it, water rights may be acquired by either riparian or nonriparian landowners on a “first-come, first-served” basis. The first to make “beneficial” use of water acquires the right thereto, and in case of water shortage the rights acquired later in time have to give way first. This is not a system of pro rata distribution but a system of priorities in which prior (in time) water rights are entitled to be fully satisfied before subordinate rights can claim any water at all. These appropriation rights are rights to use certain amounts of water during specific periods of time for certain purposes. The holder of the right cannot ordinarily change the use without losing the right and cannot sell the water to someone else to use for any other purpose at any other place. The continuance of the right is dependent on exercise of it. Failure to use the water for a period of time results in forfeiture of the right.
The law on underground water traditionally has been similar to the petroleum resources law. The surface landowner owns the subsoil rights to water and can pump as much water from sources under his land as he wishes to and is able to. His neighbors can do likewise. If he takes all of the water, his neighbors have no claim against him—the water belongs to the owners of overlying land who capture it. This common-law rule has been modified in many states both by statute and court decisions in a number of ways. Rights to water in underground streams and/or reservoirs are sometimes treated in the same manner as surface water rights. In some cases the water in underground reservoirs is divided among overlying landowners, legal limits on pumping being imposed on each landowner so as to provide for equitable (not necessarily equal) apportionment, particularly in times of shortage, and to prevent excessive pumping which greatly lowers the water table or exhausts the supply altogether.
Overriding all these rules regarding private use of water, of course, are the eminent domain statutes which permit the taking of private water rights for public use. The public uses are thus held to be of paramount importance and do not have to demonstrate this priority by competitive bidding in a free market. A hierarchy of priority of public uses may even need to be established to determine which ones have first claim on the water.
The utilization of water is complicated by many other legal principles almost too numerous to mention. The water originating or flowing through lands owned by the federal government is subject to a great many controls which affect private and public users of such water on public lands and after it flows out of public lands. Federal authority over navigable streams also enters the picture of rights regarding the use of water. Problems also result from the fact that the state is the usual unit of government which confers water rights while water supplies are frequently interstate in character. Hydrologic processes do not recognize state or even national boundaries. The state of Nebraska may give its citizens rights to use Missouri River water flowing through Nebraska but it cannot prevent South Dakota from taking all the water first. This example is an exaggeration, of course, but it illustrates a valid and important principle in American water law.
There are several points at which questions regarding the compatibility of these water rights laws with the libertarian philosophy come to my mind:
1. Does the libertarian philosophy afford a basis for choosing between the appropriation and the riparian principles in allocating surface water rights for private use?
2. Does the libertarian philosophy afford a basis for evaluating the various systems of allocating underground water? Should each overlying landowner be entitled to a proportionate share? Should he be entitled to what he finds and takes or is some other policy a better application of the free way?
3. Are legal restrictions on pumping from underground wells, imposed in the interest of maintaining the water table, compatible with the libertarian philosophy?
4. Is a law which lists priorities of use, as many appropriation statutes do, compatible with libertarian ideas?
5. What about the whole matter of eminent domain, taking private property for public use, taking upstream land for a reservoir to protect downstream landowners from floods, or appropriating private water supplies for municipal use?
6. Should an appropriator have to show “beneficial use,” whatever that is? Shouldn’t he be the judge of this?
7. Why should not an appropriator, having established his water right by prior use, be free to change the use of his appropriated water, or free to sell the water to anyone else who wants to buy it to use for whatever purpose?
I find it no simple task to translate the credo of “do as you like as long as you don’t interfere with other people’s rights” into specific policies in many of these situations. What are other people’s rights? IfI take water out of a stream, I interfere with the flow which may affect downstream users. But if everyone has to let the water flow on by, it goes to the sea with no one using it. If I build a dike which shunts excess water off my land on to my neighbor’s land, am I infringing on his rights? If water is scarce and I use it for watering my lawn while others haven’t enough to drink, is this infringing on the rights of others? If so, doesn’t the same principle apply to all economic goods? If collective action to prevent such “waste” or “misuse” is warranted in the name of protecting individual rights, isn’t the foun dation laid for collective establishment of a whole set of legal priorities to replace the free market as a way of allocating any scarce resource?
Any thoughts you may have on these matters will be greatly appreciated. 
If it be admitted that a man, possessing absolute power, may misuse that power by wronging his adversaries, why should a majority not be liable to the same reproach? Men are not apt to change their characters by agglomeration; nor does their patience in the presence of obstacles increase with the consciousness of their strength. And for these reasons I can never willingly invest any number of my fellow creatures with that unlimited authority which I should refuse to any one of them.
de Tocqueville, “Democracy in America”