It's very odd that you talk about a decentralized market when water allocation in the US Southwest was decided by the Colorado River Compact in 1922. This is central allocation and, famously, based on over-estimated flow numbers.
Most large famines were caused by flooding or drought. More people died in the Chinese famine of 1906–1907 than the Russian famine of 1921–1922 and the Soviet famine of 1932–1933 combined.
> The existing system of water rights doesn't feel like a collective decision, but rather entrenched special interests and lobbyists.
That is absolutely correct, and would covered in the first week of any water rights class. In the West, "water flows uphill toward money", as I learned from reading "Cadillac Desert".
Or if you want a novel, read "The Milagro Beanfield War." The small farmers (mostly Hispanic) were drafted for WWII and couldn't farm, so lost their water rights, while the large farmers (mostly Anglo) could hire help.
And who got to set up the water law? https://en.wikipedia.org/wiki/Santa_Fe_Ring
"The Santa Fe Ring was an informal group of powerful politicians, attorneys, and land speculators in territorial New Mexico from 1865 until 1912. The Ring was composed of newly-arrived Anglo Americans and opportunistic Hispanics from long-resident and prominent families in New Mexico. Acquiring wealth, both groups realized, lay in owning or controlling the millions of acres of land which the Spanish and Mexican governments of New Mexico had granted to individuals and communities. The acquisition of grant lands by members of the Santa Fe Ring was facilitated by U.S. courts who had no allegiance to Mexican claims and land practices which featured allocating most of the land in grants to the common ownership of the first settlers and their descendants vs. legal private ownership."
What exists is a patchwork of economic systems, there is no cohesive whole, and you clearly prefer the US one which prioritizes the private ownership model of Econ 101.
That's why you can't view it simply through an Econ 101 lens.
