Institutional path dependence in climate adaptation

de Gary D. Libecap

"Katharine Coman's "Some Unsettled Problems of Irrigation," published in March 1911 in the first issue of the American Economic Review addressed issues of water supply, rights, and organization. These same issues have relevance today 100 years later in face of growing concern about the availability of fresh water worldwide as demand grows and as supplies become more uncertain due to the potential effects of climate change. The central point of this article is that appropriative water rights and irrigation districts that emerged in the American West in the late 19th and early 20th centuries in response to aridity to facilitate agricultural water delivery, use, and trade raise the transaction costs today of water markets. These markets are vital for smooth re-allocation of water to higher-valued uses elsewhere in the economy and for flexible response to greater hydrological uncertainty. This institutional path dependence illustrates how past arrangements to meet conditions of the time constrain contemporary economic opportunities. They cannot be easily significantly modified or replaced ex post"--National Bureau of Economic Research web site.

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The economics of climate change