Historically, economic theory has played a miniscule role in groundwater policy deliberations because of its complexity. This paper is intended for practitioners. Its goal is to distill the seminal 1931 paper by Harold Hotelling and show how it can be applied to manage a quasi-nonrenewable resource like groundwater. Hotelling’s framework is then used to critique both the rule of capture era and the current era of regulation by groundwater conservation districts. The latter also draws heavily on the analysis by Brady et al. in a 2016 Bush School Capstone Report. Finally, a regulatory fix is proposed based on the ideas of Nobel Laureate, Vernon Smith (1977) that would use groundwater bank accounts to assure the efficient use of groundwater over time.
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