Distortive Incentives and Resource Misallocation: Unveiling the Paradox of California’s Water Crisis 
By Robert Huang, University of Southern California 


There are complex economic dynamics underlying California’s current water shortages. For decades, the heavily subsidized agriculture sector used surface water at nominal costs and pumped groundwater without restrictions. What incentive would farmers have to conserve when they could so easily obtain water and knew that their neighbors’ water extraction diminished the water available to themselves?

Distortive Incentives and R... by Hoover Institution

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