Contrariwise, it will likely increase access to water by allowing futures contract prices to signal future scarcity and motivate capital investment in production.
This is one area where I’ll take government investment over capital investment every time. I can’t imagine how bad it would be having water production controlled by a bunch of capitalists. What happens when private equity buys out the tech and rights so they can put it into value extraction mode?
The cost of the futures contracts would go up in anticipation and other capitalists would invest in order to make some of that sweet profit and then there would be more people competing to produce water. Basically the opposite of the government, who would tell you "you use too much water", raise taxes and institute rationing.
When a private company owns one of the most basic resources for survival, then they have the ultimate leverage over you.
Privately owned water is being extracted from a region and then sold. They have no incentive to sell water to those who need it to survive, except if they also accidentally make the owners more money.
One basic consequence is incredible human suffering and an extreme amount of power imbalance. Then, it is a matter of time and critical mass until things get ugly and violent.
It sounds like you have a problem against privately owned water rights (the exclusive right to extract water from some region and then sell it), not against water futures per se?
FWIW I'm sympathetic to that position (in some form), it would just be better to be more precise... people are acting like "water is a basic human right" is a principle that can straightforwardly be used to derive the rest of our water policy.
Good point. The issue I have with water futures in particular is two fold:
It solidifies the notion of privately owned water sources in a general sense: That's too much "free market" for my taste and goes against my ethical disposition.
Secondly it doesn't solve any problems and challenges. The incentive here is to profit from making market predictions. No more, no less.
There are more balanced approaches to handle water distribution. Via public commissions and regulated use for example.
> Secondly it doesn't solve any problems and challenges. The incentive here is to profit from making market predictions. No more, no less.
For many people, it allows them to get price stability. It means that, for the length of a growing season, they can have water at a known price and not be vulnerable to price swings.
IMO, that does address a real challenge or problem faced by real people. Especially in agricultural places where water markets already exist, like California.
I think you're right, though. There must be a better way to handle this. I'd love to hear about realistic ways to reform California's water rights system!
Sure, but privately owned water and all the problems you describe existed long before these contracts came on the market and I don't see how futures contracts make them any worse.
In fact futures contracts could in theory even take away a little of the power they have since, in effect, they won't be able to raise water prices on you over night, but you can have a 3-6 month warning that a price rise is coming and can plan accordingly.
