Private vs Public Water Provision

One issue I’ve been puzzling over is whether there is clear empirical evidence on the superiority of either mode of organizing water utilities. I suspect that private vs. public matters much less than how well the provider’s incentives are designed – and of course whether prices reflect market clearing.

I recommend David Zetland’s convenient blog category “private vs public” to access his posts that touch on this topic. Included are a number of useful resource links. E.g., International Water Pricing: An Overview and Historic and Modern Case Studies.

Another useful example of empirical work is this one: Private vs Public Water Provision based upon some good work by UCSB masters students

Readers will know that I favor neither public nor private (investor-owned) provision of water, since the problems of ownership structure are less important than the problems of monopoly. (And the solution to monopoly — if not competition — is careful community monitoring.)

For more evidence on what does and does not matter, read this group project [PDF] by five UC Santa Barbara masters students.

Our research identified two primary differences between the public and privately owned water utilities in Thousand Oaks:

The privately owned water providers operate with greater efficiency than the public utility on three of the four indices of operational efficiency we evaluated;

The publicly-owned water provider charged significantly lower rates in the privately owned water providers for the 15 year period examined.

There was no significant difference between the providers on the basis of infrastructure investment and condition, water quality, water conservation, or customer satisfaction.

Read the whole report (232 pp) to get a serious dose of facts.

Bottom Line: There are tradeoffs between public and private ownership. If they’re weren’t, ALL water would be provided by one or the other!