Scarcity and the Evolution of Water Rights in the Nineteenth Century: the Role of Climate and Asset Type

The adoption of a hybrid approach to water rights known as the California doctrine in some western states of the United States (US) and Australia creates some doubt as to what factors drive scarcity and the evolution of property rights to water. In previous studies commentators have argued that climate is the only variable that drives water scarcity. This can explain why private rights (prior appropriation) were adopted in western states of the US during the nineteenth century. However, it cannot explain why the hybrid approach where common and private rights co-existed in nine of seventeen arid US states and two Australian colonies persisted. This paper shows that in addition to climate, the dominant type of asset investment impacts water scarcity via the mobility constraint. Asset investment can be deployable or non-deployable. When deployable assets dominate the mobility constraint is close to zero and not binding thereby reducing water scarcity because alternative production locations are available. Conversely when non-deployable assets dominate the mobility constraint is close to one and binding so that assets are unable to be moved to alternative production locations. We present a framework that combines climate and asset type in order to determine the net effects on water scarcity in order to predict when and where common and/or private water rights will evolve. Empirical evidence from several countries is used to verify the frameworks predicative capacity. The findings show the combination of these two variables is better able to explain the emergence and persistence of the hybrid California doctrine as well as the adoption of ‘pure’ private rights (the Colorado doctrine) in eight of seventeen US states than if we rely on climate alone.