HDG Activity

Why Grow Rice in the Desert?

Directions

Read the Handy Dandy Guide and the mystery. Read the clues assigned to your group. Be careful. While all the clues are correct, only some are useful in solving the mystery. Decide which clues are most relevant to solving the mystery. Use the clues and one or more of the ideas from the Handy Dandy Guide to figure out a solution to the mystery. Write your solution.

Handy Dandy Guide

1. People choose.

2. People's choices involve costs.

3. People respond to incentives in predictable ways.

4. People create economic systems that influence individual choices and incentives.

5. People gain when they trade voluntarily.

6. People's choices have consequences that lie in the future.

The Mystery

We think of farmers as sensible, practical people, inclined to make prudent decisions about their work. But farmers sometimes make decisions that seem very strange. For example, farmers in California grow large crops of rice (which requires a great deal of water) in the desert (the Sacramento Valley).

Why would farmers grow rice in the desert?

The Clues

1. Farmers in California are able to earn an income growing and selling rice.2. Most of the water used in growing rice comes from government-sponsored

irrigation projects. 3. The price California farmers pay for water used in irrigation is well below the

market price. The farmers get a substantial discount.4. Starting in 1902, the federal government began to subsidize construction of

large water storage and delivery projects.5. In periods of severe drought, Californians are warned against flushing toilets,

watering lawns, and taking showers.6. Rice is grown in many parts of the world, especially in Asia.7. California farmers, like farmers everywhere, have good years (sunshine and

adequate rain) and bad years (drought).8. Many grape producers in California went out of business in the 1980s.

Record your solution

On the face of it, nothing could be more odd than farmers choosing to grow rice in a desert, unless perhaps it were vintners choosing to grow cabernet sauvignon grapes in the Jack Pine forests of northern Minnesota. But unusual incentives are at work here, and in light of those incentives the rice paddies in the desert do not look so odd after all. Rice farmers have negotiated an agreement with the U.S government that permits them to purchase water at a very low price (Clues 2 and 3). Thus, even though water in the desert is scarce, these farmers obtain it at a low cost. The low costs mean that rice grown in the desert can be a highly profitable crop (Clue 1) despite the arid environment in which it is grown. The problem in this mystery is much like the one described in Lesson 2. In each case, artificially low prices for water encourage extravagant uses of water. In each case, market prices for water would create an incentive for more frugal uses of water. In each case, people who benefit from their access to cheap water maintain their advantage through political activity. And in each case the costs of providing cheap water are spread out over such a large population of taxpayers that the cost per taxpayer will scarcely be noticed. The pattern of large, concerted benefits for an influential few, along with small, diffuse costs paid by many taxpayers, means that rice paddies and mist sprays are unlikely to disappear from the deserts any time soon.