Madness! – South Dakota opts for a water lottery

The South Dakota state Water Board has to determine when existing groundwater sources are ‘fully appropriated’ (used to the limit e.g. by farmers for irrigation). Applications for fully appropriated aquifers are accepted during a 30-day time period.  Applications are placed in a lottery drawing system. The winners will then be announced. This is the first time for this procedure; South Dakota is the first (US) state to allocate water resources by lottery.

Comment: Another bizarre example of valuable state assets being gifted to profit-seeking enterprises.

The water in South Dakota, it has been established, belongs to the people. It should be a source of revenue for them. Gifting it to businesses deprives the good folks of SD some relief from taxation. But it gets worse: distributing allocations by lottery means that the precious water may not be used for the most productive use.

By definition, valuable goods distributed by lottery are given away below the price that would balance supply and demand. We accept this for college places because society demands that educational opportunity should not depend solely on ability to pay. But giving away publicly-owned assets to business enterprises for free or by lottery is economic illiteracy.

This is not the only example of such naiveté that can be found in the arch-capitalist US of A: oil-drilling licences, radio-spectra, hunting permits, rafting permits, student accommodation are all given away by lottery! Wake up you citizens of America! Reclaim what is yours! Stop the corporate free-loading! Stop the lotteries for public assets!

Source for this story: http://www.argusleader.com/story/opinion/readers/2014/10/20/voice-south-dakota-water-lottery/17595461/

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13 Responses

  1. Conall,

    Your advocacy of matching demand for public property with supply by raising prices is based on the assumption that the sole objective of government policy is collecting as much money as possible for the government’s coffers. If this is the case, why not simply raise taxes on the rich?

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  2. Yoram,

    According to your advocacy of the Gilens-Page thesis, it would be impossible for democratically-elected governments to raise taxes on the rich. The alternative explanation is that, in a globalised economy, raising taxes on the rich can be counterproductive, and governments may well use lotteries on account of the desire for equity in the distribution of scarce resources. They may even feel that farming is a socially-valuable activity, even though it is, in capitalist economies, a “profit-seeking enterprise”. (As Smith put it: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”) If this is the case then would we really want to allocate all water licences to the highest bidder? This would privilege corporate agri-business at the expense of smallholders (who would benefit from equal chance if lottery was the method of distribution). I’m surprised that it’s left to a capitalist lickspittle like me to defend the equitable (and inefficient) distribution of scarce resources in the interest of social justice. Conall’s call for citizens to rise up in defence of the interests of the rich and powerful (the highest bidder) is a bit of a shock.

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  3. Making commercial enterprises pay for the use of public resources, rather than making them a free gift is, of course, a very effective, just and economically efficient way of taxing the rich. Economists since Ricardo have been aware of this.

    It is quite a different matter to say that collective provision of health or education, free at the point of use, should be replaced by marketised provision. This is a matter of social policy, as well as repairing market failure.

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  4. How do you think the super-rich get so rich? In the economics textbook fantasy of capitalism it’s by hard work and ingenuity. In reality it’s by capturing and enclosing (and NOT paying for the use of) the commons.

    Imagine the local community council in an area of South Dakota, chosen by sortition. This council would soon be dominated by the local small business and farming interests. They would find all sorts of reasons to allow public assets like land and water to be expropriated for their own use. That’s my fear for Burnheim’s localism.

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  5. Conall, as an economist you know far more about all this than me, but I’ve always understood the argument for enclosure as one of making efficient use of scarce resources. Market fanatics would leave it all to the highest bidder but the case for allocation of water resources by sortition is to give the small farmer as good an opportunity as the agribusiness. No doubt the relentless forces of capital accumulation would soon turn (some of) the smallholders into the super-rich, but that’s all the more reason for using sortition to maintain some pretence of a level playing field. The modern equivalent of the commons is public ownership and/or collectivisation, but my scant knowledge of 20th century history reveals a strong link between this policy and catastrophic famine. Perhaps that’s why the American people are reluctant to “wake up and reclaim what is theirs” — they would much rather purchase the products of agribusiness from Walmart than till the soil themselves (or starve).

    P.S. I agree with your concerns about local voluntary demarchic committees, that’s why I advocate the informed judgement of a statistical sample of all citizens. This microcosm would determine policy after listening to the opposing arguments presented by elite advocates (including those making the case for economic efficiency, social justice and collectivisation). If advocacy rights were endogenous then there would be a chance of the decision process being overwhelmed by a faction supporting any one of the above positions. If the topic of the allotted committee were (say) the allocation of water resources and other commons, they might be unduly influenced by the chance (but persuasive) presence of an economist with an antipathy to the enclosure of public resources and may not know who to turn to for opposing viewpoints. If too much power were left in the hands of the “impartial” civil servants (or “scientists” as kejamo put it in a recent commentary) overseeing the process this would likely be even worse, as they are frequently the product of whatever social theory was dominant at the time they were at university (reading PPE). That’s why advocacy rights need to be a) exogenous and b) adversarial.

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  6. Ah! The ‘Tragedy’ of the Commons as enunciated by Hardin. A recent post in OK on Elin Ostrom shows that this is black pro-market propaganda, that the Commons and the commoners are perfectly well able to manage themselves, oftentimes with the aid of lotteries to decide who-gets-what.

    I too like the bucolic vision of happy independent peasants eking out a modest lifestyle in the countryside. There are far, far better ways to encourage this than producer subsidies like the CAP (or free water for irrigation). The NFU (Nat Farmers Union) are past-masters at peddling the plight of the small family farmers, whilst dodging the fact that it’s the Duke of Westminster who makes millions from CAP.

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  7. Yes the intellectual roots of OK in the CP are still there to be seen. Seriously though, although some small Spanish farming communities may still operate a working commons, America has been Lockean from the start, so it’s a tad unrealistic to expect it to be run on the basis of pre-capitalist economic principles. (One of the earliest use of sortition in America was for the equitable allocation of land to settlers for them to enclose and combine with their labour.) If we are serious about the modern potential of sortition then we need to take the world as it is, rather than how it might have been were it not for half a millennium of capitalism and possessive individualism. Or is this blog just another forum for utopian visions of “happy independent peasants eking out a modest lifestyle in the countryside” (a dream that you share with neo-Rousseauvians like Pol Pot)?

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  8. Conall,

    > Making commercial enterprises pay for the use of public resources, rather than making them a free gift is, of course, a very effective, just and economically efficient way of taxing the rich. Economists since Ricardo have been aware of this.

    In what way is it “just as effective” as taxing? Is there a passage from Ricardo you can refer me to which makes this argument?

    And in any case, even if this were true, relying on usage fees means the rich get preferential access to public resources. Why shouldn’t the poor enjoy just as much rafting, hunting or radio broadcasting as the rich do? Taxing doesn’t have this undesirable side effect.

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  9. I think we are moving too far from the core theme of this blog — the use of lottery in social affairs. Most contributors concentrate on reform of politics. I happen to focus on distribution by lottery as an alternative to bureaucratic directive or by pricing in the market.

    But on my website you can see that the mode of distribution is subsidiary to

    1. Replacement of taxation by resource-based charges.
    2. Distribution of most of the proceeds as a Universal Basic Income.
    (This is almost what happens in Alaska. Have a look)

    Then you can consider when there might be a public policy reason to distribute assets by lottery e.g. education.

    I find it odd, Yoram, that you think that hunters and rafters, who spend huge sums on equipment and travel, should then be entitled to use public assets for free! At least if charged for, the public bodies would have a source of revenue to conserve and enhance these natural resources?

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  10. > I think we are moving too far from the core theme of this blog — the use of lottery in social affairs.

    Why? It seems that this is very close to the heart of the issue: what are the objectives of public resource allocation?

    > I find it odd, Yoram, that you think that hunters and rafters, who spend huge sums on equipment and travel, should then be entitled to use public assets for free! At least if charged for, the public bodies would have a source of revenue to conserve and enhance these natural resources?

    The hunters and rafters, if they are rich, should contribute to the public coffers through income or wealth taxes. Again, if the objective is obtaining a source of revenue, then fees seem like an arbitrary, inefficient and unjust way to go about it. This is alleviated to some extent if the revenues are indeed distributed equally as UBI. Even then there are problems with the idea, but until the fees are translated to UBI the whole fees thing seems like a gift to the rich.

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  11. YG: >The hunters and rafters, if they are rich, should contribute to the public coffers through income or wealth taxes.

    But according to you this, in an electoral democracy, is impossible, as only the preferences of the rich and powerful have any influence (you support the G&P view that median voter preferences have no effect on public policy outcomes).

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  12. *** Following Keith Sutherland(November 3) if the median voter has no effect on public policy outcomes, only the preferences of the rich and powerful will have any influence, and income or wealth taxes will be impossible. This binary view is not necessary. The material interests of the wealth elite are a strong factor in our polyarchy, but there are other material interests, and there are moral interests, and political outcomes are the result of a complex set of forces. The correlation of this result with median voter preferences (themselves under influence of social forces) may be small or zero, it does not imply that only the wealth elite material interests are taken into account.
    *** We must acknowledge that the material interests of the wealth elite are an important factor, but it is not the one factor. The lobby against income and wealth taxes is strong, but it is not the one lobby in our polyarchies, and that explains that these taxes may exist.

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  13. André

    My comment was prompted by the claims of Gilens and Page (taken up enthusiastically by some commentators on this blog) that only the preferences of the rich have any purchase on policy outcomes. I agree with you that this is simplistic nonsense, driven largely by reductive materialist dogma.

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