Earlier quoted context omitted.
How do you determine who owns water in the first place.
In a world in which transaction costs are sufficiently low, Coase's Theorem says it doesn't matter: you make the best initial choice you can, and then people execute free market trades to get to the overall most efficient allocation. So one way of looking at the whole problem is to ask why transaction costs are too high to make this feasible. And the obvious answer is politics.
efficiency and humanity are sometimes at odds. Slavery was very efficient.