Agriculture has always been a major strength of the American economy. However, now American farming is headed towards a collapse.
US farming is unsustainable, as farmers are mining the water rather than harvesting it. In California’s Central Valley, farmers are extracting twice as much water than is being added. Not only is the water table falling, but the ceilings of empty aquifers are falling in. The water caves are physically collapsing, and once the space gets filled, there is no more room for the water to fill in. The underground water is lost forever.
Farmers in the Central Valley keep digging deeper to get water. When the deepest water is all taken, then the farms will be dry.
Water has a common pool problem. When the landowners can extract the water without limit, each farmer has an incentive to draw out as much as possible. Then the water gets used up that much faster. California has failed to require payments high enough for water extraction to induce sustainable use.
Over-pumping is an old problem, and much of the San Juaquin Valley in California has already sunk from previous over-consumption. Now the Valley is sinking some more. As the ground falls, infrastructure - canals, roads, and bridges - will crack and break. Another problem is well failure: as the underground water gets used up, the pumps draw out sand, which wears out the pumps.
The basic moral question is, who is the proper owner of natural water? Water is ultimately a common pool that should belong to everyone in a region, including persons who will be here in the future. Equal benefits can be implemented by having the users pay the price that keeps the quantity demanded equal to the average annual quantity supplied from rain and snow.
It takes a gallon of water to produce one almond. The true cost of that gallon of water is not the pumping costs but the market price of water when the quantity obtained is sustainable. This is economically similar to a toll road charge just high enough to prevent congestion. When the price is water is too low, the usage is congested.
A similar problem is occurring in the Ogallala Aquifer in the US Midwest, from South Dakota to Texas, with an area of 225,000 square miles, where the water has fallen by over 300 billion gallons per year during the past half century. About 30 percent of the Kansas portion has already been pumped out. It will take thousands of years for the underground water to recharge.
The farmers are stuck in a previous-investment problem. If from the beginning, farmers had to pay the sustainable price for water, they would have invested accordingly. Instead, in effect, farmers and consumers have been subsidizes by not paying the full social cost for water.
A higher price for water would now require major changes in farming practices and crops, with large losses. If farmers and ranchers paid the true cost of water, it would be more expensive to feed cattle, and beef prices would rise sharply. There would be less domestic production and more imports.
Possibly water could be piped into the USA from Canada, but many Canadians oppose this. There would be less resistance to exporting water from Alaska, but companies in China are also seeking to import water from Alaska with tanker ships. At any rate, importing water from the north would be costly, and not really solve the gigantic water demands of American agriculture.
The political pressure is to avoid big changes, even though everyone knows they are pushing the problem to the future. American agriculture is doomed to collapse.
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FRED E. FOLDVARY, Ph.D., (May 11, 1946 — June 5, 2021) was an economist who wrote weekly editorials for Progress.org since 1997. Foldvary’s commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and San Jose State University.
Foldvary is the author of The Soul of Liberty, Public Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary’s areas of research included public finance, governance, ethical philosophy, and land economics.
Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.