Sanitation as a public good and private asset

I often hear people say “sanitation is a public good”. This is broadly true, in my view, but as with many things, it’s a bit more complicated than that.

A toilet (≠ sanitation) is a private good / asset. It is “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). 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 strictly define public goods. To be or provide a public good, you have to have both.

A WASH-related example might be a dam. Sure you can shut it down to exclude people (or states). Likewise, if water demand becomes really great 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 elements. An excreta-free living environment is non-rival and non-excludable – everyone benefits and you can’t “use it up”. So “everyone using sanitation” is a public good, as long as it is safely-managed.

Why does this matter, anyway? According to economic theory, 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, in the form of subsidies or similar. 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… but I’ve been doing some thinking on the “which element of the chain” bit, and will hopefully get a chance to write it up soon.

In the meantime, below is a diagram I made in the course of doing some teaching on the WASH MSc at Cranfield. I was trying to show how different WASH examples (in red) fit into the public goods framework. It should be self-explanatory. 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…).


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