It is helpful to look at how water is actually used in CA. I thought this blog post was a decent attempt: http://slatestarcodex.com/2015/05/11/california-water-you-do...
If you’re forced to choose between the lesser of two evils, paying alfalfa farmers is where it’s at. Obviously better water management would be the sensible choice, but that hasn’t been on the table for decades.
This developed a problem as people were paid to not produce and when droughts happened, there was not enough food to go around - a critical failure for a civilization. A problem that is a relevant lesson today as politicians had used faulty economics to try to fix the problem.
Modern farm policy is wasteful, and deserves criticism, but it turned the problem on its head by subsidizing farmers to produce as much as possible. We've gone from occasionally starving to death to having medical problems from eating too much. A good problem to have.