Water marketing as a reallocative institution in Texas

Policy selection for guiding the allocation of water resources has long been debated among economists and policymakers. Economists have been prone to recommend water marketing on theoretical grounds, but the appraisal of realistic opportunities for employing market institutions requires analysis of actual markets. Twenty years of market activity in the Lower Rio Grande Valley of Texas are reviewed along with the historical development of water law in Texas and procedural requirements for transferring water rights. Developed data indicate active water marketing practices with significant volumes of agricultural water having been sold to municipalities. For transactions involving representative cities, estimated municipal benefits from water marketing are determined to far exceed the agricultural costs of the transfer. Attention to the unique circumstances of this region is required prior to extending results to other areas.