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<br />r,J133rl <br /> <br />The only other significant function of state government is ful- <br /> <br />filled by the State Engineer, who is charged with the administration <br /> <br />of the water rights system. In effect, the State Engineer polices <br /> <br />the system, but has little discretionary authority over the uses to <br /> <br />which the water is put. <br /> <br />In summary, the present water rights system constitutes a private <br /> <br />market approach to the allocation of a scarce resource, with a narrow <br /> <br />role being accorded to state government. Without doubt, this system <br /> <br /> <br />has served Colorado well during the past 100 years and has contributed <br /> <br /> <br />to the timely and orderly development of the state's economic base and <br /> <br /> <br />to the quality of our urban surroundings. <br /> <br />At the same time, however, there is one major problem with this <br /> <br />system -- a problem which is common to many systems that rely on the <br /> <br />marketplace to allocate resources. <br /> <br />Market systems recognize the values, whatever they may be, which <br /> <br />people place on resources, or on the rights to use the resource, <br /> <br />through the prices at which they are bought and sold. In order for <br /> <br />a market exchange to take place, however, it must be possible to <br /> <br />identify a piece of property which can be reduced to private owner- <br /> <br />ship. If such property rights cannot be defined, then the values <br /> <br />which people place in owning or using a resource cannot be recognized <br /> <br />by the market.. <br />Water is, in part, a resource which can be reduced to private <br /> <br />ownership. When water is diverted from a stream, it can be identified <br /> <br />as private property, to which the owner has the exclusive right of use. <br /> <br />8 <br />