Comment by AnthonyMouse

> But there's no simple way, and in particular no cheap way from a budgetary perspective, to get there even if the motivation existed to get around the monumental collective action problem, which it doesn't.

It seems like maybe there is though.

The first problem is the "use it or lose it" provisions where someone has the rights to use water but not sell it, thereby encouraging waste. That one has a solid solution: If they have the right to use it, they get the right to sell it. Make sale inalienable from use. Then you don't have to pay them anything because you're giving them something instead of taking it. But you get higher water availability as now all these people wasting "free" water start selling it because the opportunity cost of not selling it is now worth more than the wasteful use. The only "problem" here is that they get a windfall, but we can solve that in the same way as the second "problem".

Which is the takings clause. The purpose of that is to prevent unequal takings. If the government needs your land to build a railroad, they have to pay you for it, because they're taking yours but not anyone else's. Whereas when they take everyone's property at the same rate it's called property tax, and that's allowed. So if you just got a windfall of water rights in a dry place, congrats, you now have a valuable property right which is subject to property tax. Not using the water and don't want to pay the tax? Then sell the water. Since the buyer values it at more than you do, and the tax is less than 100% of the value, everyone comes out ahead compared to the status quo. The previous inefficient user gets $100 in money instead of $10 worth of inefficient use, the government gets some proportion of that in new tax revenue (variously property tax on the rights and income tax on the sale), the buyer gets water it values at >$100.