There is nothing to figure out. The state controls the price (and allocation) of water. Farmers use up huge amounts of water very inefficiently, but they have political power. They use this power to get their water cheaply and to get the state to effectively subsidize their water.
It's an entirely political issue. To quote reason.com
The reason that California is suffering from a water shortage is the same reason why there were bread lines in the former Soviet Union: Central planning that allocated goods by fiat to favored groups rather than price signals.
I agree with most of that, but I think it takes it too far. The bread lines in the Soviet Union were due to the need to hide the favoritism, while the special farmer prices are explicit and lots of favoritism to farmers is well-known. And while farmer political power drags out the process, I don't think it's the main culprit. This is largely the legacy of a system designed for a different environment, where water was not a binding constraint. Switching systems when a commons becomes oversubscribed is very difficult.
I don't see any central planning in Calif...
I think we need a discussion thread for the californian drought going on. I would like to compile information in the main post and would like help compiling it. If we really are proud to be effective altruists then this is an area we should really figure out.
Any one have any good ideas on how we can help?