Public Utility Ownership in 19th-Century America: The 'Aberrant' Case of Water
Scott E. Masten
University of Michigan, Stephen M. Ross School of Business
November 20, 2009
Journal of Law, Economics, and Organization, Forthcoming
Unlike other public utilities, most water in the United States is supplied by publicly owned and operated waterworks. The predominance of the public sector in the supply of water was not always the case, however; private firms dominated U.S. water supply throughout most of the 19th century. This paper analyzes the puzzle of why water and sanitation systems were the only major utilities to become predominantly public by, first, re-examining historical accounts of the problems of contracting for water services in light of modern theories of economic organization and, then, evaluating hypotheses derived from those accounts using data on 373 waterworks serving U.S. municipalities with populations over 10,000 in 1890. Among other results, municipal ownership is found to be related to the distribution of population and commerce within a city in ways that suggest that frictions between cities and private companies over system extensions and improvements played a significant role in the shift to municipal ownership.
Number of Pages in PDF File: 66
Keywords: Public utilities, contracting
JEL Classification: L14, L22, L33, L95
Date posted: September 27, 2004 ; Last revised: January 1, 2010
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