The Myth, and Insight, of Owens Valley

Yesterday’s Washington Post included an article on the political battle between Las Vegas and northern Nevada over access to northern Nevada’s groundwater.

Unhelpfully, the article repeated the myth of Owens Valley, the southeastern California valley that, a century ago, became part of the nation’s first major water rights agreement. Under the deal, valley residents sold their property and water rights to Los Angeles, and much of the valley’s water was carried away by aqueduct to fuel the city’s growth into a major metropolitan area.

The Post repeats the myth faithfully:

The specter of California’s Owens Valley looms over the area, as people recall the aqueducts that almost 100 years ago turned a lush agricultural community into an environmental disaster so that water could be delivered to Los Angeles.

[…]

William Mulholland, as head of the Los Angeles water department in 1904, conceived the idea of an aqueduct from the Owens Valley. “He had no interest in draining the valley, he had no interest in creating that wasteland,” [Bob Fulkerson, state director of the Progressive Leadership Alliance of Nevada] said. “He did not want that to happen, but that’s what did happen because once the siphon was started it was impossible to turn it off.”

University of Arizona professor Gary Libecap, in research he summarized in a Summer 2005 Regulation article, has effectively exploded this myth.

Far from being a “lush agricultural community,” historical data show Owens Valley contained small, relatively low-production farms with a total of only about 50,000 acres in cultivation. Much of the valley’s income came from livestock, not planting. The area featured a fairly short growing season, high elevation, alkaline soils, and poor access to markets. In short, Libecap concludes, “Those data suggest that Owens Valley farmers may have been quite anxious to sell their land to an interested buyer.”

The Los Angeles–Owens Valley deal provided that buyer. Libecap’s research shows valley landowners were offered considerably more money for their property and water rights than what their farms were worth. The payments became even more enticing after the California legislature and courts forced the city to sweeten the deals.

That may ultimately prove the solution to the Nevada problem. As Ronald Coase famously argues, original distribution of property rights will not prove an impediment to ultimate efficiency so long as transactions costs are minimal. Put more simply, Las Vegas likely needs to up its offers to northern Nevada counties in order to get the water it needs. And, given Vegas’s growth rate, that bid is likely forthcoming.

Censorship Is Worse Than Fake News

A big story on the front page of the Washington Post Style section is illustrated with a beautiful, stylized photo of new CBS anchor Katie Couric. In tiny letters almost invisible to the naked eye, the photo source is identified as CBS. In other words, it’s a publicity photo, not a news photo. There’s another glamorous CBS photo dominating page 8, where the story jumps.

Would the Post print a corporate news release? Not likely, though smaller papers do. Is that different from using a corporate photo? Perhaps. Should the Federal Newspaper Commission look into the use of corporate photos and corporate news releases? Oh, right, we don’t have a Federal Newspaper Commission, because we have a First Amendment.

Why, then, is something called the Federal Communications Commission investigating the use of “video news releases” by television broadcasters (as reported on the front page of the Business section the same day)? Oh, right, because somehow the First Amendment doesn’t give broadcasters the same free speech rights that newspapers enjoy. Prodded by the anti-free-speech lobby Center for Media and Democracy, the FCC wants to know if broadcasters clearly label “video news releases” produced by corporations when they are used on local news programs. CMD is well within its rights to criticize the use of VNRs. But when it calls for government regulation of what can and must be shown on news broadcasts, it’s calling for censorship. And censorship is far worse than “fake news” about new products on local television broadcasts.

If This Is Wrong I Don’t Want to Be Reich

Pathological liar Robert Reich offers a commentary on Wednesday morning’s “Marketplace Radio” (not posted yet) complaining that American companies are not lobbying for more spending on science and math education because they are unpatriotically opening labs and software design offices in India and China. So let’s see … he’s upset that the people of the world’s two largest countries are finally entering the modern world, and he’s upset that huge American businesses are not lobbying for more business subsidies. What a great liberal!

Political Governance vs. Corporate Governance

A New York Times columnist says it may be a mistake to try “to make government run more like a business.” Citing research by Matthias Benz and Bruno S. Frey, summarized by Larry Yu, the Times says that government works better than the private sector:

The authority over government is split among the branches of government. In business, Mr. Yu writes, “even if directors have stepped up their governance in recent years, institutional norms still stack the deck in favor of C.E.O.’s.”

And while chief executives and directors can serve forever, politicians need to face re-election regularly.

When it comes to corporate governance, maybe there is something to be learned from governments.

Well, let’s see. According to a Booz Allen study, dismissals of corporate CEOs have risen sharply in the past decade. Among the world’s 2,500 largest public companies, “CEOs are as likely to leave prematurely as to retire normally. Continuing a pattern from 2004, in 2005 nearly half of all CEO departures were due to poor performance or mergers.”

Meanwhile, almost no members of Congress are removed from office involuntarily. As this chart shows, House reelection rates are approaching 100 percent.

Does that mean that the U.S. government is performing so much better than the average company that there’s no need for change? It seems unlikely that even the Times columnist would make that claim. No, if you read the links above from Booz Allen and the Washington Monthly, you can see some of the differences between politics and business: Business is competitive, to begin with. There are 2,500 large companies in the survey, all competing with one another and with millions of upstart challengers. If Sears and K-Mart don’t stay on their toes, Target and Wal-Mart will take their business. Wikipedia lists pages and pages of defunct companies, all of which failed to satisfy customers. Executives lost their jobs, and shareholders lost their money, and those realities are a powerful incentive to executives and shareholders of other companies. Corporate boards are getting more aggressive, and different companies are testing different rules for governance – outsider CEOs, separating the jobs of CEO and chairman, acquisitions, divestitures, going public, going private – in an attempt to find the rules that will produce the greatest customer satisfaction and thus the greatest profits.

Contrast that with government. Failed bureaucrats are almost never fired; indeed, the standard response to bureaucratic failure is to appropriate more money for the agency. Gerrymandering, campaign finance restrictions, and taxpayer-funded constituent service and propaganda make it almost impossible for a member of Congress to be turned out of office. People spend other people’s money far less efficiently than their own.

I think the Times got it backwards. It would be more appropriate to say, “When it comes to government, maybe there is something to be learned from corporate governance” – such as the value of decentralization and competition, retirement ages or term limits, and real penalties for poor performance. Since those factors are unlikely to occur in political systems, the best lesson is to keep as much of life as possible in the private sector.

“Abolish Religious Schools” — Guardian Columnist

In response to the latest Islamist terrorist plot, Guardian columnist Polly Toynbee makes the following recommendation:

A new Commission on Integration and Cohesion, launching this month, will be worthless unless its first recommendation is to end religious and ethnic segregation in schools. That means no Church of England or Catholic schools, no Muslim or Jewish schools.

Ah yes, social cohesion through religious tyranny, a winning strategy down through the centuries. Nyet.

A nation that fought a number of civil wars over (among other things) the repression of religious freedom should have learned that compulsion in matters of faith does not breed social harmony. I would have thought Ms. Toynbee particularly well equipped to pass along that historical pearl, given that she is the descendant of not one but two well known British historians. Apparently the nut does sometimes fall far from the tree.

Will Power

In another terrific column today, George Will continues his judicious study of the foreign-policy reality created by a profoundly unconservative administration. His last paragraph is a gem:

Foreign policy “realists” considered Middle East stability the goal. The realists’ critics, who regard realism as reprehensibly unambitious, considered stability the problem. That problem has been solved.

Along the way, Will begins to quibble with the war metaphor that has governed our response to terrorism since 9/11. Though, contra the lefty bumper sticker, war may sometimes be the answer, military action is ill-suited to combating a transnational stateless conspiracy operating, among other places, from within the already-democratic West. Will writes that

better law enforcement, which probably could have prevented Sept. 11, is central to combating terrorism. F-16s are not useful tools against terrorism that issues from places such as Hamburg (where Mohamed Atta lived before dying in the North Tower of the World Trade Center) and High Wycombe, England.

In the course of making that point, the nation’s premier conservative columnist cites John Kerry–favorably. This could not have been what George W. Bush envisioned when he said he’d govern as “a uniter, not a divider.”