I often hear people say “sanitation is a public good”, but sanitation services are not strictly speaking public goods according to the definition of such goods. In this post, I explain that it’s the excreta-free environment they enable which is the public good
A toilet (≠ sanitation) is a private good / asset. It is partially “rival”, meaning you can’t use it at the same time as someone else (in the same way you use a park, motorway or public radio), though many people can use one toilet. It is also excludable, meaning you can stop other people from using it (with a lock, or by having it inside your house). These two concepts (rivalry and excludability) are how economists define public goods. For public goods, both of these characteristics must be missing or weak.
A WASH-related example might be a dam. Sure you can shut it down to exclude people (or states). Likewise, if water demand increases substantially then benefits of the dam may become rival (just as a motorway or park can become congested). Ultimately, however, dams provide public goods most of the time.
What about sanitation, then? Taking its common definition as the separation of human excreta from human contact, sanitation as a broad concept arguably has public good characteristics. An excreta-free living environment is non-rival and non-excludable – everyone benefits and you can’t “use it up”. So if everyone uses sanitation and it is safely-managed the this can provide a public good.
Why does this matter? Private actors in the market will underinvest in public goods. This is because their benefits accrue society-wide and not only to the person making the investment. This is the key argument for public goods receiving public finance, e.g. investment or subsidies. Public finance is needed to overcome the fact that private investment is below the socially optimal level. The use of public finance is also justified when there are externalities – more on that another time.
Accordingly, there is a strong “public good” justification for sanitation (in its broad sense) receiving public finance. However, which aspects of sanitation should national or municipal governments fund? Which element of the service chain is the most underfunded by private individuals? Would public investment in one element “crowd out” private investment, and therefore distort markets? There are no easy answers.
In the below 2×2 matrix, I give some WASH/water examples (in red) within the rivalry/excludability framework. The ‘club goods’ quadrant is the only tricky one – think of it as you have to be part of the club to get the good (excludable), but once you’re in your use doesn’t diminish anybody else’s. My WASH example is piped water connection – you have to pay a fee to join the utility club. As with the dam example above, though, non-rivalry only goes so far (when there are limits to rivalry people sometimes call those quasi-public goods). For example, if there is excess water demand, then eventually everyone will suffer from intermittent supply (especially poorer people at the tail end of the network…).
6 thoughts on “Sanitation as a public good and private asset”
“These two concepts (rivalry and excludability) are how economists strictly define public goods. To be or provide a public good, you have to have both.” I think you meant to write,
“…a public good, both of these characteristics must be missing or weak” – or –
“these two concepts (non-rivalry and non-excludability) are how…”
sewer networks are probably a good example of a club good, esp in the context of settings where HHs have to pay for connection costs.
important to distinguish super structure from containment structure when referring to “toilet” in top left quad since people tend to use the word ‘toilet’ loosely to mean both. super structure goes there. containment? more interesting question…
good point, Alyse, I have clarified re: missing/weak!
Agree that sewer networks also a good example of club good, in similar way to water connections. The main difference I can think of is that in many settings if you stop paying your water bill you get cut off (kicked out of the club). In most urban settings there aren’t many good alternatives to being in the water network club.
However, if you stop paying your sewer bill (esp if it’s not the same bill as your water bill) it is less clear what happens. Maybe you get kicked out of the water club too. But if you opt out of the sewer club you might have the option of discharging waste (illegally) to the drainage network.
Yep. This is why systems tend to work better when there is a clear and regulated service authority that can tie users of the public good-protecting parts of sanitation to the proverbial mast a bit with a Commitment to Pay mechanism (e.g. bundling water and sanitation bills, building those costs into rental fees via property fees/taxes). Any organization w authority to generate revenue through mandated payments then must be subject to performance and economic regulation so people are not obligated to pay for services not properly rendered. This supports the argument for applying a regulated-utility model to sanitation services broadly. Whether delivered via sewered systems or non-sewered systems, the characteristics of investing in and managing safe containment/conveyance/treatment for NSS have all the same economic properties as SS capital investments and management. …and then there is how it all works in practice 🙂