Institutional Arrangements to Improve Water Quality in Irrigated Agriculture 1

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.