The LA papers are full of worries over the local drought but have yet to discover, pricing, incentives, and politicized misallocations. This is why I was happy to find Eduardo Porter's "The Risks of Cheap Water" in the NY Times.
Water can be metered and sold. There is no reason other than politics for nutty politicized allocations. Politicians do like politicized allocations. There is a nice post on all this by Alex Tabarrok at MR. Gary Libecap has been all over California water policy missteps for some time.
Milton Friedman quipped, "If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand.” People smiled. But in California, we have droughts, popping water mains, water cops to patrol who waters when. Dirty cars are now a local badge of honor. It's funny bit it's not.