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BOOK REVIEW Owens Valley Revisited: A Reassessment of the West’s First Great Water Transfer by Gary D. Libecap Palo Alto, Calif.: Stanford University Press, 2007, $65 cloth, $24.95 paper, 224 pp. After all this time focusing on Jonah, it’s nice to finally get the whale’s perspective. Gary Libecap has produced a new economic analysis of the century-long, acrimonious relations between Los Angeles’s Department of Water and Power (LADWP), and Owens Valley, a region of California that supplies water to Los Angeles. Libecap has plumbed the LADWP archives and other sources to throw new light on LADWP’s experience buying out and managing over one quarter million acres of land to secure its long-term water supply. Libecap hopes to take the Owens Valley story in a new direction telling us, as the movies say, what happened was just business. His book, Owens Valley Revisited: A Reassessment of the West’s First Great Water Transfer, belongs on the shelf of any water resources economist, as well as on the shelves of historians seeking multiple perspectives on the economic evolution of the American West. In a thin, 224-page, but well-documented volume, interesting stories emerge. Farmers in the Valley pursued a two-track approach to their relationship with LADWP, especially during the 1920s. On the one track, farmers were market participants, aggressively negotiating land prices with monopsonist LADWP. On the second track, farmers were political activists, lobbying the state legislature, taking out newspaper ads, and occasionally even dynamiting LADWP infrastructure. Other histories have focused on this latter track. Libecap is the first author to merge these two stories, focusing on price negotiations. To Libecap, farmer activism was a negotiating tactic. Farmers understood the wide negotiating space between urban willingness -to-pay for water and agricultural willingness-to-accept prices for water. Libecap ’s farmers at their cores are shrewd negotiators attempting every tactic possible to drive up prices for their land and capture the gains from trade. Since they faced a monopsonist, they didn’t have negotiating power. Instead they attempt to politicize the land sales to force prices up. While Libecap admits that this strategy ultimately didn’t affect prices that much, we do see farmers in a new light: not merely powerless, but shrewd and active despite their powerlessness . A second interesting story concerns the political struggle over whether LADWP should be forced to purchase urban land in Owens Valley. The local, and ultimately winning, argument ran that since LADWP had so heavily damaged the Valley’s economy (a premise Libecap disputes with credible data), LADWP ought to also buy out the harmed urban landowners. The fascinating formula proposed by Valley landowners was to inflate the value of their urban lands at the rate land values were growing in Los Angeles since the presence of water in either area would have produced the same rate of growth. This argument must have been compelling at the time Land Economics N May 2008 N 84 (2): 358–359 ISSN 0023-7639; E-ISSN 1543-8325 E 2008 by the Board of Regents of the University of Wisconsin System because LADWP was forced to buy city land and did pay a price roughly consistent with this formulation, far higher than the local market was offering. The strength of this book is its carefully documented and analyzed study of negotiations and sales of land. Libecap asserts that since farmers as sellers of their land would never take a price lower than their reservation price, a completed sale is evidence of gains from trade and that farmers were market players. To drive home and justify the economic approach taken, Libecap embeds a crucial assumption. It is that farmers’ reservation prices were independent of the prior actions of the monopsonist buyer, LADWP. When reservation prices are independent of prior actions of buyers and sellers, one can assert that markets conform to utilitarian ideals. However, by buying up huge tracts of land, LADWP profoundly altered everyone’s expectation of the future of the region; the expected value of land declined. If LADWP’s prior actions served to drive down farmers’ reservation prices before most negotiations even began, a purely economic...


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pp. 358-359
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