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Production economics literature contains many studies which assume that the producer's goal is to ma,cimize profits. This study tests the hypothesis that Bernoullian and le,cicographic utility are more accurate predictors of farmer behavior than profit maximization. Si,c large California farms were used to test the hypothesis. After-income ta,c E-V (e,cpectation-variance) boundaries were developed for each farm and utility, and profit maximizing crop plans were determined for each. A goodness-of-fit criterion showed that Bernoullian utility formulations provided the greatest accuracy in predicting actual and planned crop patterns, followed by the lexicographic formulation. Profit maximization showed the poorest predictive power.

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An optimal control model is used to determine the socially optimal spatial and temporal allocation of groundwater and surface water among agricultural and urban uses. The control model is described briefly and its advantages over other dynamic models are enumerated. Optimal rates of groundwater pumpage over the planning horizon were highly sensitive to increasing energy costs. Groundwater basins are shown to react differently to alternative economic and hydrological parameters. In a dynamic setting, a policy of pump taxes was shown empirically to be superior to pro-rata quotas and uncontrolled pumpage.Key words: control model, groundwater, energy cost, pro-rata allocation, Pigovian taxation.The severe drought in the western United States in 1976-78 brought the problems of allocating extremely limited water resources to the attention of agriculturalists and urbanites alike. Greatly reduced surface water supplies exacerbated the already critical pressure on remaining groundwater stocks in the same areas.The chronic overdraft of many western states groundwater basins can be attributed directly to their common pool nature. The lack of explicit property rights to groundwater stocks results in individual users of the resource evaluating only their own private pumping costs in their decision framework and implicitly assigning a zero opportunity cost to the stock portion of the resource. Thus, the private decision does not take into account any user cost and results in a divergence in the private and the social optimal rate of pumping. 1 The objective of this paper is to describe briefly an optimal control model which can be used to determine the socially optimal spatial and temporal allocation of groundwater and surface water among agricultural and urban uses. The control model is then applied to a representative region of California under several sets of energy costs. Two policies, prorata allocation and taxation, are evaluated empirically as alternatives for accounting for externalities due to the common pool problem. The Conceptual FrameworkSeveral authors have investigated the conjunctive use of groundwater and surface water using various techniques. Buras developed a dynamic programming algorithm to solve the problem of conjunctive use of reservoirs and aquifers. His operating policy, however, considered the physical system as a single unit and thus ignored differences in hydrology that occur in a complex groundwater system. Burt (1964, 1966, 1967a, b) utilized a mathematical programming approach to develop a demand function for irrigation water used in a dynamic programming formulation of the aquifer management problem. Bredehoeft and Young used a simulation model to estimate the solution of problems involving the development of a stream-aquifer system in an economic model of irrigation. Bear and Levin studied optimal utilization of an aquifer as one element of a Jay E. Noel is a resource economist with Auslam and Associates,