The 101 level solution means that Native Americans who were granted water rights by the Spanish, and guaranteed those rights by US treaties, would have to outbid urban users in order to grow subsistence crops.

The heavy users have more influence over the laws which govern the infrastructure, as the history of water rights in the West clearly shows. We see it now when secretive organizations negotiate with water companies under NDA to get water for new data centers - something a smaller water user couldn't do.

The riparian doctrine of the East, with its high rainfall, don't work so well in the dry West, which is why it generally uses the prior appropriation doctrine. Water management was traditionally under a communal system. Some of these still exist as acequia associations, which include equity and fairness in their decisions, which doesn't follow the prior appropriation doctrine.

Econ 101 doesn't handle these issues.