In such an analysis, some benefits are considered which the private user
must leave out of account. Such benefits may, for example, result from flood
control or ground-water recharge. Benefits yielded after 20 years are also
considered. For example, dams and other facilities may be usable by the munici-
pality although it may not be legally required to pay for them. Further, some
costs of construction which the private user must consider appear smaller in
benefit-cost analysis--for example, labor costs of construction in a period of
unemployment under sticky wage rates.
The foregoing argument in favor of "protection of investment" in water
resources development is based on two necessary conditions: (1) that
expenditures for durable assets are in the public interest, although they
may not be economical for private water users, and (2) that the most economical
alternative for public policy to develop water resources is a guarantee just
sufficient to induce private development. There is no implication in this
argument that "protection of investment" per se is in the public interest.
4. Interpretation of "Flexibility" of Water Rights
In interpreting flexibility of water rights, one thinks first of all of
"legal flexibility." This is a corollary to "legal uncertainty," the two main
categories of which were mentioned above (Section 2).
Legal uncertainty may be regarded as the price that must be paid for
obtaining legal flexibility. There has been considerable discussion within the
legal profession on whether or not the product--a law responsive to the needs
of the community--stands in fair relation to its price. During the twentieth
century, the trend in legal thinking has been to answer this question in the
affirmative. To be sure, there are differences among prominent legal thinkers
with respect to the desirable degree of flexibility in particular areas of
law--such as property rights; but all agree (including non-American jurists)
that flexibility is necessary and that the American development of the Anglo-
Saxon common law is better suited than other legal systems for approaching the
most desirable degree of flexibility through trial and error and step by step.
Within jurisprudence, this degree at a given time and place will remain the
subject of perpetual discussion, reappraisal, shifting of emphasis, and ambi-
valent attitudes. Far from being a weakness, such a condition would appear
a normal or even necessary one for an effective contribution by the law to
"social engineering"--to use a term popular with Roscoe Pother stu-
Within economics, we are concerned not so much with legal flexibility
as with the needs t ea es onds. In economics, therefore,
1! 1 i i ---- ------ L-
the interpretation of "flexibility of water rl fght' e1-
ibility of water law" as discussed in jurisprudence, and an increase in flexi-
bility of water rights is not necessarily incompatible with an increase in their
security--as stated in the beginning (Section 1). The needs of ar ular interest
in connection with flexibility of water rigts are crated by economy. hangs
The impact of economic change upon water use may be divided conceptually
into two parts--which in reality, and for water policy, are not independent:
(1) a change in aggregate development of water resources within a region (country,
state, watershed, ground-water basin), and (2) a change in allocation of water
resources between regions, uses (municipal, agricultural, industrial, recreational),
and users (individuals, firms, public districts, government agencies). The
-- -- -- -- -- -------------------------- ---- -- -- -- -- -- -- -- -- -
I/ Pound, Roscoe, The Spirit of the Common Law (Francestown, New Hampshire:
Marshall Jones Company, 1921).
criterion "security of water rights" is significant for the former change--as
discussed in the preceding two sections. The criterion "flexibility of water
rights," as interpreted here, focuses on those aspects of water rights which
facilitate or obstruct changes over time in the allocation of water resources
between regions, uses, and users. Several such aspectsmust be considered.
There is first the "transferability" of water rights. Water rights, like
other property rights, can be transferred in various ways.
Voluntary transfer of water rights through buying and selling--with land
if they are "appurtenant" or without land if they are not--is not uncommon.
Appropriative rights are better suited for such transfer than riparian rights
because the former are clearly defined in quantity, priority, points of diver-
sion, and other ways. Transfer of riparian and correlative rights generally
requires also transfer of land.1/ Furthermore, they are not clearly defined
quantitatively and are insecure against physical and tenure uncertainties
(Section 2). With respect to transferability, therefore, the appropriation
doctrine favors flexibility of water rights in the course of economic change.
The market for water rights--and especially its "imperfections"--is an
interesting topic for the economist. This paper, however, is more concerned
with flexibility of water rights as a whole. Transfer of water rights through
the market mechanism is only one aspect. Involuntary transfer of water rights
is probably more important in number of transactions and quantity of water in-
volved than transfers through the market.
i/ Riparian rights may be waived by a grant to nonriparians. Such grant is
not effective against other riparians and is not really a transfer of the riparian
right. But from the economic standpoint, it is just as effective. It frequently
happens that riparian rights are bought up or condemned,
Involuntary transfer may, first of all, be accomplished through condemnation
for public use. This process, by constitutional provision, involves compensation.
Appropriative rights are better suited for this process than riparian and correla-
tive rights for the same reasons as were mentioned in connection with voluntary
transfer. Furthermore, it is usually sufficient to condemn only a few appropriative
rights with high priority. Under the riparian doctrine, it is frequently necessary
to condemn all riparian rights. In this comparison, we assume, of course, that
only one system of rights applies to a water resource (Section 2).
Second, involuntary transfer can be accomplished through prescription. This
process of transfer does not involve compensation. As we know (Section 2), pre-
scription operates under all water-right systems; but there are differences in its
economic significance under various systems.1 Prescription takes time--from 3 to
20 years (5 years in California), depending on the statute of limitation--to ripen
into a vested prescriptive right. Adverse and open beneficial use, the condition
for prescription, is more likely to persist unobjected to for such a period against
downstream riparian rights and correlative rights than against appropriative rights.
A prescriptive right can in turn be lost through prescription by others. Prescrip-
tion, therefore, is not irreversible but a potentially always present and economic-
ally interesting process of transfer.
Abandonment and forfeiture of water rights--operating only under appropria-
tion--may also be regarded as processes of transfer. Their present over-all
significance for flexibility of water rights is minor. However, through defining
I/ The differences suggested here do not involve the legal problem of whether
or not a prescriptive title "good against the world" can be established without
the necessity of valid statutory appropriation. For different conclusions on this
Kletzing, Russell R., "Prescriptive Water Rights in California: Is Applica-
tion a Prerequisite?" California Law Beview, vol. 39, no. 3, September, 1951,
Trowbridge, Delger, "Prescriptive Water Bights in California: An Addendum,"
California Law Review, vol. 39, no. 4, December, 1951, pp. 525-527.
Craig, Gavin M., "Prescriptive Water Rights in California and the Necessity
for a Valid Statutory Appropriation," California Law review, vol. 42, no. 2, May,
1954, pp. 219-242.
conditions of forfeiture--for example, through legislative, judicial, and
executive defining and redefining of "beneficial" use--the economic significance
of this process could be increased,
Voluntary and involuntary transfer of water rights is only one aspect of
flexibility. There is fairly general agreement that, aside from the aspect of
transferability, a water right system based on the riparian and correlative
rights doctrines if compared with a system based on appropriation, contains
elements of greater flexibility. Under the riparian doctrine, new uses created
by economic change compete on an equal legal basis with older uses and obtain
rights that are no less secure against physical uncertainty than older rights.
This is a corollary to the tenure uncertainty so characteristic for riparian
and correlative rights (Section 2). Under the appropriation doctrine, on the
other hand, new uses can obtain only inferior rights in terms of security
against physical uncertainty. As just noted, however, the economic significance
of such flexibility, inherent in riparian and correlative rights, is reduced
over time for a given region through prescription.
Preferences and reservations are important for flexibility because of
their obstructive influence. They tend to continue into the future the favorable
treatment of certain uses or users on the basis of present economic conditions.
Preferences and reservations do not obstruct growth itself. Quite the contrary,
they are designed to facilitate growth. They facilitate, however, only the
growth of that use which is deemed to deserve preferential treatment on the
basis of present economic conditions. They obstruct the growth of other uses.
Economic change may well require a change in the ranking of uses. As already
suggested (Section 2), preferential treatment is unobjectionable for domestic
and municipal uses. On the other hand, extension of preferences to other uses--
for example, in favor of agricultural against industrial--or extension of
reservations to all users of one region against users of another--for example,
in favor of counties and watersheds of "origin" against those of "destination -
obstructs changes over time in the allocation of water resources.
The aspects of flexibility discussed so far relate to statutory water law.
It would be a serious mistake to overlook the great significance of the case
law for flexibility. As already stated (Section 1), concepts are used as cri-
teria "in" water law that imply an economic appraisal. These concepts are
rather plastic and give considerable scope to the judicial development of
water law through decisions in individual cases of controversy. Concepts like
"reasonable" and "beneficial" use, "waste," "surplus" of water, "maximum utili-
zation" are interpreted and reinterpreted by the courts continuously in the
light of changing economic conditions. Over time, the result has frequently
been a change in the allocation of water resources between uses and, through it,
Besides taking economic change into account in deciding controversies,
the courts are directly concerned with the transfer of water rights through
eminent domain. Condemnation of water rights for public use is well established
in all states. Going much farther than that, the State of Washington permits
any person to condemn a lower water use for a higher use. For this purpose
Ealifornia, State of, Water Code 1953 (Sacramento: California Printing
Division), Section 10505, pO 195.
Ibid., Section 11460, p. 205.
See also: Ciriacy-Wantrup, "Some Economic Issues in Water Rights," op. cit.
2iev. Code Wash., sec. 90.04.030.
__~__~___ ____I_ __
any beneficial use is declared to be a public use. The courts determine which
use is the higher one.
Under the American form of government, the contribution to flexibility by the
executive branch of government is probably smaller than that of the legislative and
the judiciary because of the constitutional issue of "delegation of power." In
some states, however, the executive agency charged with the administration of appro-
priation statutes is given considerable discretion in granting and conditioning
appropriation permits. Such discretion has been upheld by the courts,
This section has considered the economic meaning of flexibility of water rights
and the institutional possibilities through which flexibility may become operative
in reality There remains the task of considering flexibility jointly with security
as economic criteria from the standpoint of public water policy.
i/Sections 1253 and 1254 of the California Water Code provide that the Depart-
ment of Public Works shall allow appropriations under terms and conditions which
"in its judgment" will best serve the public interest in water conservation. How-
ever, in acting upon applications, the Department shall be guided by the policy
that domestic use of water is highest and irrigation next highest. The California
Supreme Court, in East Bay n pal Utility Diet. v. State Department of Public
Works, 1 Caif.(2d) 47b, 479-4M, 35 Pac. (d) 1027 (l934), upheld the action of
the state agency in inserting in a permit, pursuant to these statutory provisions,
the following condition: "The right to store and use water for power purposes
under this permit shall not interfere with future appropriations of said water for
agricultural or municipal purposes."
In a more recent decision, in Temescal Water Co. v. State DeXpamet of Pub-
lic Works, 44 Calif. (2d) 90, 99-101, 2o PaM. (2d) 1 (1955) the court held that
the cumulative effect of statutory changes had been to create a type of proceeding
greatly different from that considered in some earlier decisions. In carrying out
its present duty, held the court, the Department of Public Works exercises a broad
discretion in determining whether the issuance of a permit will best serve the pub-
lic interest. That determination requires an administrative adjudication. If
issuance of the permit is protested as the statute authorizes, the administrative
decision may be made only after a hearing of the protest, The decision is subject
to judicial review by way of writ of mandate.
These two decisions were called to the author's attention by Wells A. Hutchins.