Clean water and American waterworks

FC mentioned that Werner Troesken, who died recently and unexpectedly,  had worked in the same area as me (water services). I went to his Google Scholar to see what he had written and found — amazing! — that I had used his most cited paper (“Population growth in US counties, 1840–1990”) in my PhD dissertation (p84):

A literature review uncovered only one article that discusses the influence of water on urban growth. Beeson et al. (2001) find that precipitation has a significant positive effect on population density in the United States of 1840. By 1990, this significance disappears. In fact, precipitation has a negative correlation with population growth in the 150 years after 1840. These results correspond to what we know about water in the western US: As infrastructure has brought water to arid regions, people have moved from wet, colder areas to dry, warmer areas.

In fact, I just mentioned this result to someone last week.

As I browsed through Troesken’s other papers, I found two with interesting results. In “Municipalizing American Waterworks, 1897–1915” [pdf], Troesken and Geddes (2003) describe how private water companies, fearing seizures by municipalities, would underinvest in infrastructure and thus give municipalities an excuse (under-investment) to take them over! This damned-if-you-do, damned-if-you-don’t result makes sense in the contexts of “bilateral monopoly” (a single seller facing a single buyer) and “stranded assets” (an asset that, once built, cannot be moved or re-used in any way), since in those situations it’s hard to get one side to spend on an investment that the other side might use (or benefit from) without needing to pay. In our paper on the history of the Dutch drinking water sector [pdf], we ran into this situation with English companies underinvesting (or not investing) in Dutch cities that ended up building their own water and wastewater systems.

In a second paper, Ferrie and Troesken (2008) describe “Water and Chicago’s mortality transition, 1850–1925” via the direct reduction in typhoid fever due to access to clean water and a much larger indirect impact of lower mortality among those who survived typhoid but died of another disease. This paper is interesting because the indirect drop in deaths is triple the direct drop. In our drinking water paper, we did not get into the details on the benefits of clean water, but we surely would have cited this paper in support of wide, diffuse benefits.

It’s a pity that Professor Troesken’s life ended prematurely. We need more economic historians like him.

Addendum (1 Nov): I forgot that I had downloaded another paper (“Regime change and corruption: A history of public utility regulation” [pdf]), which I just read. This chapter is interesting for two reason. First, Troesken argues that ownership changes (from public to private ownership of utilities — and vice-versa) is driven by the need for regime change because the existing structure (either private or public) has been compromised by regulatory capture. Second, this paper — and its thesis — fits into my existing idea that the public-private cycle is driven by public underinvestment (to keep prices low) that lead to privatization, which leads to re-municipalization once those investments are made (and prices rise).

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

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