What can economic history tell us about the future of water policy?

what-can-economic-history-tell-us-about-the-future-of-water-policy?

“The invading Templars were warriors, not farmers,” Espín-Sánchez said. “They created a corporation that [had] the property rights over the water…[which sold] water to the farmers every year.” Water, necessary for supporting the irrigation of the farms and ranches in the region as well as for domestic life, was secured in a collection of aljibes, or cisterns. The ancient corporation, and its market system of water distribution, have remained intact through to the modern day. In the early twentieth century, a reservoir was constructed for the town, and farming transitioned from wine-making and olive-farming to the cultivation of citrus and apricots, which required significantly more water.

In 1966, the water market in Mula – a small municipality in Murcia – was replaced by a quota system. Espín-Sánchez and his co-author, Javier Donna of the University of Florida, empirically investigate how this institutional change affected efficiency and farmer welfare. Most farmers in Mula grow similar crops – apricots and citrus, both of which require significant amounts of water. It is also a particularly dry region that experiences high annual aggregate rain volatility: in years where there was little rainfall, demand for water can often exceed supply. Due to the lack of adequate historical data, Espín-Sánchez and Donna built a structural econometric model using detailed input data (units of water purchased, rainfall amount, number of apricot trees, etc.) to compute farming output under the two systems. To ensure consistency, they also focused only on apricot growers. Using estimated water demand and liquidity constraints, they found that farmers would obtain 8% more revenue under the quota system.

Old Auction Room in Mula
An old auction room in Mula, Spain. Photo courtesy José Antonio Espín-Sánchez.

Water theft as social insurance

In a separate paper, Espín-Sánchez and Donna study Murcia’s unique legal system – particularly its treatment of irrigation misuse and water theft – in order to understand the social and legal dimensions around water scarcity in this drought-prone region. Much as water quotas protect poor farmers by allowing them to access water in years when they are experiencing financial hardship, the researchers found that Murcia’s legal system also affords “social insurance” to poor farmers through flexible punishments for water theft in years of drought.

As an ancient, socially stable, and economically efficient self-governing territory, Murcia has used the same system for resolving water conflicts for centuries. Specifically, judges in Murcia (called the “Council of Good Men”) use a flexible scale of punishment that takes into consideration a range of factors, including whether the irrigation misuse or water theft was committed during a drought, and whether the perpetrator is wealthy and a repeat offender.

“This treatment is very fair”, Espín-Sánchez said. “It will punish greedy farmers or rich farmers, and it will be lenient with poor farmers. This is good because it creates a kind of [social] insurance for the farmers…the proof that this is successful is that they’ve been doing it for almost 1000 years, and they still do it.” This social insurance allows for leniency on poor farmers during drought years, when they are more likely to struggle, while deterring criminal activity from wealthy farmers.

To further examine this flexible form of justice, Espín-Sánchez and Donna developed a dynamic model that described how judges weighed the benefits of both criminal deterrence and social insurance for farmers in distributing penalties for water-related violations. Utilizing judicial records from 1851 to 1948, they found that wealthy offenders (identified by the honorific “don” next to their name in historical records) were punished more harshly than those who were poor, and repeat offenders were punished more harshly than first-time offenders. Moreover, wealthy farmers were punished particularly harshly when the victim was a poor farmer.

This progressive system (implemented by judges who were themselves farmers) thus provides social insurance for poor farmers while also preventing opportunistic wealthy farmers from preying upon poorer ones. Given the system’s effectiveness at utilizing the close-knit region’s social aspects to maintain a low crime rate and protect poor farmers, the long-lived Council of Good Men has been recognized as part of UNESCO’s Intangible Cultural Heritage.

Water distribution in the present day

Water scarcity is accelerating in many regions around the globe, including India, Latin America, and the United States – and as these issues become an increasingly global concern, so too will water theft and inequitable water access. As such, Espín-Sánchez and Donna’s research is timely and raises important questions for the future of water distribution. What combination of regulations will efficiently allocate the increasingly scarce global water supply, and what methods of conflict resolution are most effective for sustainable water resource management?

Espín-Sánchez and Donna’s research suggests that there is no one-size-fits-all solution and that local factors matter greatly. Their paper comparing water markets and quota systems, in particular, suggests that in regions like India, a quota system may be beneficial for poor farmers who often face liquidity constraints. Quota systems would be particularly efficient when operating in small sub-regions with relatively homogenous crops and high aggregate rain volatility, it will likely be efficient. However, it can be difficult to assess whether quotas or water markets would be more effective in regions with overlapping public and private water ownership, where distorted prices can make it challenging to estimate water demand.

Likewise, much as quota systems can support farmers through times of financial hardship, Mula’s time-tested legal system emphasizes the importance of protecting poor farmers from irrigation misuse and water theft. As resources become increasingly scarce, progressive legal systems and water distribution methods can endure enhanced pressure and scrutiny. Mula’s ancient traditions, which prioritize the protection of the poorest and most vulnerable members of society, offer a lesson in how flexible, socially conscious economic and justice systems can bolster communities through times of drought and hardship.


Clare Kemmerer is a second-year graduate student in the MAR program at the Yale Institute of Sacred Music, concentrating in the study of visual arts and material culture, and an EGC Communications Intern. 

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