For more than half a century, in nearly all western states, the regulatory agencies (the State Engineer or equivalent) used impairment of other water rights as the primary criterion for approving or rejecting change applications to move water to higher-valued uses. In recent years, however, protests to change applications have been brought by "stakeholders" who do not own water rights, but who argue that they are affected by water transfers. Under the impairment rule, these parties do not have statutory standing to protest successfully. But they have brought legal suits to block transfers, and the courts have considered whether additional criteria involving "impacts on social welfare" are needed to evaluate transfers. State Supreme Court rulings on such suits in Utah and Nevada are reviewed as prototype cases. The Utah court held that additional "social welfare" criteria must be utilized by the State Engineer in evaluating change applications, whereas the Nevada court held that such criteria were already incorporated in existing water statutes and administrative practice. The critical question raised in the paper is whether existing state regulatory agencies can effectively implement a real "social welfare" criterion to evaluate change applications. The conclusion is that they probably cannot, and that if they try, water allocations will be politicized to a much greater extent than they are now, and efficient market transfers will be impeded if not completely prevented.

Market purchases of water rights for environmental purposes in the western United States have involved purchases by public agencies of at least 88 850 acre feet of water over the last five years. Annual water leasing for environmental purposes has been more active, with 1.72 million acre feet leased in the western United States. The most frequent reasons for these transactions are for wildlife (primarily waterfowl), recreation and fisheries. The average price paid for a water right is $609 per acre foot, while it is $30 per acre foot for an annual water lease. As evidenced by the ability of government agencies to purchase water in voluntary transactions, environmental uses of water are often competitive with many low-value agricultural crops in the western United States.

The visitor industry plays a pivotal role in Hawaii's economy, accounting for 30% of the gross state product. It is an important consumer of the states freshwater supply, with a clear potential for substantial additional demand in the years ahead. Water consumption in hotels and golf courses that cater to the needs of the visitor was analysed. Regression analysis showed that size and price were important determinants of water use by golf courses. The numbers of units, swimming pools and golf courses were found to be statistically significant determinants in water consumption by the hotels. Pricing could be an effective instrument in efficient water allocation to golf courses. A small change in price, however, is unlikely to make a major impact on water use decisions by the resorts and hotels.

A conceptual model of a representative irrigated farm is formulated to study farm responses to two economic policies commonly suggested to encourage agricultural water conservation, and to characterize the hydrological and economic circumstances in which these responses provide the desired conservation. The economic policies studied are to increase the irrigator's cost of applied water and to subsidize the irrigator's cost of investing in improved on-farm irrigation efficiency. Comparative statics results demonstrate that increasing the cost of applied water may be a more effectual water conservation policy than subsidizing the cost of improved on-farm irrigation efficiency.

One potential side-effect of irrigation water rate reform is groundwater substitution. As surface water prices rise, irrigators may find it cheaper to rely on on-farm wells than a regional irrigation district. The impact of surface water price on well adoption is examined in a conjunctive use system where both surface water and groundwater are used to meet irrigator demand. Results indicate that as the price of surface water approaches 62% of the marginal cost of pumping groundwater, irrigators are more likely to have on-farm pumping capabilities. This result suggests that proposed water rate reforms by the United States Bureau of Reclamation may result in irrigators substituting groundwater for surface water by adopting on-farm wells.

A Parks modified multinomial logit model is used to examine the influence of the agricultural economic environment on irrigation technology transitions in the mid-plains states. Simulation analyses assess expected agricultural water conservation and its implications for water quality/environmental goals and water institutional reform. Under baseline agri-economic assumptions, regional agricultural water use efficiency could improve from 2.3% to 9.8%. Technology-specific elasticities show that crop price effects on irrigation technology transitions are relatively inelastic. Results for the mid-plains states differ from those obtained for the Pacific north-west (an earlier study), implying that differentially endowed resource regions will likely require different resource conservation policy and institutional approaches.

Irrigated agriculture is closely linked to water quality problems throughout the western United States. In this paper it is argued that the market failure paradigm is not adequate as an environmental policy guide, especially for water quality problems involving individual irrigators. An alternative stewardship paradigm is developed and applied to nitrate pollution of groundwater in central Nebraska. This paradigm holds that producers are not profit maximizers, that information is imperfect and that producers care enough about the environment to voluntarily substitute some environmental quality for income. The analysis suggests that education can produce significant improvements in environmental quality, and that in some circumstances education may be more effective than regulations or incentive-based strategies.