Because "the market" doesn't actually fix shit, even if water rights were anything like a market system in california. The ONLY thing a market does is incentivize people to increase profits, period. Unless you can tie proper better water management DIRECTLY to increased profits, with ZERO ALTERNATIVE WAY TO DECREASE WATER COST, the market will do ANYTHING other than reduce water usage. For example, if it's cheaper to lobby the government of california to force citizens to use less water, then that's exactly what will be done. Which is what HAS been done for at least a decade.

"The market" isn't magic, despite what your Economics 101 youtube channel of choice says.