Title: Concepts Used as Economic Criteria for a System of Water Rights by S.V. Ciriacy-Wantrup
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Title: Concepts Used as Economic Criteria for a System of Water Rights by S.V. Ciriacy-Wantrup
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Language: English
Publisher: The Conservation Foundation
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Spatial Coverage: North America -- United States of America -- Florida
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Abstract: Richard Hamann's Collection - Concepts Used as Economic Criteria for a System of Water Rights by S.V. Ciriacy-Wantrup
General Note: Box 12, Folder 11 ( Conservation Foundation - Symposium Papers on Water Allocation in Eastern U. S. - 1956 ), Item 43
Funding: Digitized by the Legal Technology Institute in the Levin College of Law at the University of Florida.
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I


Cirlacy-Wantrup
Draft for discussion



THE COJMEEVATION FOOU~ION

SYMPOSIUM ON TE LAW OF WATER ALLOCATION
IN THE EASTERN MITED STATES

Cosmos Club, Washington, D. C.
October 4-6, 1956











Concepts Used as Economic Criteria for a System
of Water Rights

by


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S. V. Ciriacy-Wantrup


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THE COMSEMRATION FOUDATIO~
30 East O4th Street
New York City


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CONCEPTS USED AS ECONOMIC CRITERIA FOR A SYSTEM OF WATER RIGHTS

by

S. V. Ciriacy-Wantrup
University of California


Contents: 1. Economic Criteria "In" and "For" Water Law 2. Inter-
pretation of "Security" of Water Rights 3. Security of
Water Rights and Protection of Investment 4. Interpreta-
tion of "Flexibility" of Water Rights 5. Welfare Econom-
ics and Water Allocation 6. Economic Criteria and the
Public Interest



1. Economic Criteria "In" and "For" Water Law


Economic criteria are frequently implied in statutes concerned with water

law, in judicial creation of water law through decisions in individual cases of

controversy, and in administrative regulations by executive agencies--criteria

"in" water law.2/ Well-known examples are concepts like "reasonable" and "bene-

ficial" use, "waste," "surplus" of water, "maximum development," and "adequate

compensation." A semantic analysis, from the economic point of view, of these

and similar concepts would be interesting and useful. But this is not how I

propose to interpret my topic--or rather, an analysis of criteria "in" water law

appears to cover only one aspect of the assignment.

Economic criteria are also common in semipopular and technical discussions,

both in law and economics, when a system of water rights is considered as a

whole--criteria "for" water law. In this country, there are mainly three of
------------------------- ------------------ --------

1/ Giannini Foundation Paper No. Prepared for the Symposium on the Law
of Water Allocation in the Eastern United States, Cosmos Club, Washington, D. C.,
October 4-6, 1956.

The author wishes to acknowledge helpful comments on points of water law by
Wells A. Hutchins and Stephen C. Smith.

g/ "Water law" will be interpreted here broadly to include contributions by the
legislative, judicial, and executive branches of government,


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T 9


these systems. First, in the eastern states, water rights are based on the

riparian doctrine--with modifications in some states as, for example, North

Carolina. Second, in the Great Basin and Mountain states, water rights are

based on appropriation. Third, around the fringes of this heartland of the

appropriation doctrine, the prevailing system of water rights is a "blend"

exhibiting features of both doctrines--although in secular perspective the

appropriation doctrine appears in the ascendency; this blend prevails in the

Pacific Coast and the High Plains states.

In appraising these systems of water rights, a dichotomy of criteria is

mainly used. One criterion is exemplified by a set of concepts such as "secu-

rity," "protection," and "rigidity" of water rights. The other criterion is

represented by concepts like "flexibility," "adaptibility," and "insecurity."

Anyone familiar with the literature cannot fail to become impressed by the

vagueness, plasticity, and contradiction which characterize the use of these

concepts. An examination of their economic meaning is needed.

This dichotomy of criteria is applied jointly. In examining its applica-

tion, one has to explore the gradations on the logical axis between the two

poles and the resulting compromise in institutional arrangements. But also,

one has to examine to what extent the two criteria can be applied together

without such a compromise.

The consequences of institutional arrangements, if viewed over time, are

complex. Applying a logical polarity to relations in reality does not always

give a perfect "fit." Although it frequently happens--examples will be given

below--that a change in institutional arrangements results in an increase in

terms of one criterion and a decrease in terms of the other, this does not always

happen. In other words, that the two criteria are poles logically does not











necessarily mean that a change in institutional arrangements cannot be con-

sidered that results in increases in terms of one criterion without changes

in terms of the other or that results in increases (decreases) in terms of

both. In this, and in other aspects, our dichotomy is similar to that of

"order" and "freedom" which has occupied students of jurisprudence for a long

time and is not being neglected by economists of quite different "schools."I/

The two criteria imply a problem area which is one of the most important

and difficult both for economic theory and policy. This is the problem area

of "economic change" and of "dynamics" versus "statics" in economic discourse.

This area is also the one in which tie relations between law and economics

raise some of the most acute and baffling issues/ Thus, focusing on these

two criteria brings us to the core of the main theme of this symposium.

Focusing on economic criteria used "for" water law does not mean that

economic criteria used "in" water law (referred to in the first paragraph) are

to be neglected. Both can be regarded as means of serving a common end--the

"public interest." The public interest is the concept that connects criteria

"for" with those "in" water law. Examining the economic meaning and implica-

tions of the former is not without relevance for the latter.

In examining concepts as criteria, the emphasis of this paper is on

functional relations in economics, not on legal history or on normative
----------------------- --------------rr r -- r----

1/ Commons John R., Institutional Economics (New York: The Macmillan
Company, 1931).

Knight, F. H., Freedom and Reform (New York: Harper and Brothers, 1947)
and The Economic Organization (New York: A. M. Kelley, 1951).

Bobbins, Lionel, "Freedom and Order," Economics and Public Policy
(Washington, D. C.: Brookings Institution, 1955). (Brookings Lectures, 1954.)

2/ See: Ciriacy-Wantrup, S. V., "Some Economic Issues in Water Rights,"
Journal of Farm Economics, vol. XXXII, no, 5, December, 1955, pp. 875-885.


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4.


meanings in law. The significance of the case law in this country is impres-

sive--especially to one, as the present writer, who grew up in the legal climate

of the Code Napoleon and its successors. But tracing historically the inter-

pretation of economic concepts through the maze of case law is more a task for

a student of law than for an economist. Likewise, it would be presumptuous

for an economist to suggest how economic concepts should be interpreted in law.

A great deal is being written lately on the "integration" of law and

economics. If by this term is meant that students in the two disciplines need

greater understanding for each other's problems, tools, and limitations, one

can wholeheartedly agree. If it is suggested by this term that concepts and

processes of concept formation employed by economists should be transplanted

to law (and vice versa), the prospective benefits would seem dubious. On the

other hand, emphasis on the functional relations of concepts used as economic

criteria "for" and "in" law may help in clarifying areas of common interest

between two social science disciplines.

The "functional relations" to be studied in this paper may be indicated

by two closely connected questions: First, one may ask, what are the economic

implications--in the sense of logical and probable factual consequences--if

concepts used as criteria "for" and "in" water law are interpreted and applied

in certain ways. Second, one may ask, how far and why are these implications

helpful or obstructive if certain economic objectives are sought. The economic

interpretations and objectives selected should, of course; have relevance for

actual problems of public water policy.

Although indicated by these questions, it may be well to point out explic-

itly at this time that the problem at hand will be viewed as one of positive





0 V


5.


rather than normative economics.l The consequences of this approach for the

relations between economics and law will become apparent later (Section 6).



2. Interpretation of "Security" of Water Rights


To the economist, "security" of water rights means something different and

much broader than their "protection" means to the student of law. The latter

concept merely means protection against unlawful acts by others--as such acts

are construed by the law. Such protection is always subject to the two major

categories of "legal uncertainty," that is, to "rule uncertainty" and to "fact

uncertainty."2/ Legal uncertainty, in this sense, is a characteristic of judi-

cial decisions. Like other types of uncertainty, it also affects economic

decisions.

Economists are inclined to disregard or underestimate the significance of

legal uncertainty. For them, security of a water right connotes (1) protection

against what I propose to call "physical uncertainty," that is, against vari-

ability over time of the quantity of water usable under the right due to seasonal

or annual variability of "natural" run-off and ground-water recharge, and (2) pro-

tection against what I shall call "uncertainty of water tenure"/ or, for short,

"tenure uncertainty," that is, protection against variability over time of the

quantity of water usable under the right due to lawful acts of others--who may

be individuals or groups, private or public.



1/ For a discussion of this differentiation see: Friedman, Milton, Essays in
Positive Economics (Chicago: University of Chicago Press, 1953).

2/ This terminology has been popularized by Frank. See: Frank, Jerome, The
Law and the Modern Mind (6th ed.; New York: Coward McCann, 1948).

3/ Tenure uncertainty is not confined to water--and other "fugitive" resources--
but is one of the most important economic forces affecting resource use. See:
Ciriacy-Wantrup, 8. V., "Capital Returns from Soil-Conservation Practices," Journal
of Farm Economics, vol. XXIX, no. 4, pt. 2, November, 1947, PP. 1181-1196.

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