William J. Hausman

Property Rights versus Public Spirit: Ownership and Efficiency of U.S. Electric Utilities Prior to Rate-of-Return Regulation

For over a century, American economists have been engaged in a vigorous theoretical and empirical debate over the economic performance of publicly-owned versus privately-owned electric utilities. The authors review the historical debate and use micro data collected by the U.S. Commissioner of Labor in 1897-98 to construct efficiency measures based on a nonparametric frontier production function. Since this is prior to state rate-of-return regulation, regulatory effects do not confound the analysis. The authors find that publicly-owned electric utilities were significantly more efficient than their privately-owned counterparts. Copyright 1991 by MIT Press.

Time-of-day pricing in the U.S. electric power industry at the turn of the century

Around the turn of the century, a debate occurred within the infant U.S. electric power industry on the issue of electricity rate structures. We describe those discussions and consider the views of some of the economists who first addressed the issue. Although they were ultimately unsuccessful, there were sophisticated advocates of time-of-day rates among the first engineers, utility executives, and economists to study electricity rates.

The Market for Capital and the Origins of State Regulation of Electric Utilities in the United States

We provide evidence that the problem of raising capital in the early days of the U.S. electric-utility industry motivated industry leaders to embrace state rate-of-return regulation in return for a secure territorial monopoly. Utility executives anticipated that this would lead to a reduction in borrowing costs. Using firm-level bond data for 1910–1919, we estimate a model and find that state regulation led to lower borrowing costs but that the magnitude of the reduction was small. We also find evidence that output of electric utilities in states with regulation was higher than output in states without regulation.

A Model of the London Coal Trade in the Eighteenth Century

By the eighteenth century Newcastle coal was the primary source of fuel for London. Two major characteristics of the trade were periodic attempts at cartelization by producers and the existence of a substantial per unit tax on the commodity. In order to measure the relative quantitative impact of market structure and tax policy, a linear supply and demand model is estimated using two-stage least squares. The major arguments of the paper are that the cartels were ineffective in restricting supply, that the tax on coal raised its price significantly, and that final consumers bore the greatest share of the tax burden. Upon the cheap and regular acquisition of fossile fuel, our national improvement and prosperity eminently depends. Robert Edington An Essay on the Coal Trade (1803, 7).

A Paradox of Voting: Cyclical Majorities and the Case of Muscle Shoals:

Although social choice theorists have long recognized the theoretical possibility of cyclical majorities in democratic settings, it has been difficult to find a clear example of cyclical voting in a real-world setting. This is at least partly due to the fact that legislative rules suppress their appearance. This paper identifies and examines a definitive and significant example of cyclical voting. The cycle occurred in a series of votes in the U.S. Senate during one week in January 1925 on the issue of what the federal government should do with the Muscle Shoals works, initiated during World War I and still a significant political issue in the 1920s.

How politics, economics, and institutions shaped electric utility regulation in the United States: 1879–2009

The history of electric utility regulation at both the state and national level from the beginning of the industry through the aftermath of the California energy crisis of 2000–01 is presented. That history was partly determined by the economics of the industry – on the supply side by its cost structure, network characteristics, and lack of storability – on the demand side by its price inelasticity for all but the largest consumers, and partly by politics. These factors influenced the institutions that were created to regulate the industry, a process also complicated greatly by US federalism. The intensity of regulation waxed and waned in response to real or perceived problems in the industry.

Falling Water: The Origins of Direct Federal Participation in the US Electric Utility Industry, 1902–1933

The federal governments role as a direct producer in a non-defense, non-distressed American industry is unique to electric power. This participation arose during the first three decades of the twentieth century; it was politically controversial then and remains so today. We seek to explain how and why the federal government got into the electric utility business. The convergence of technological, economic, and political forces paved the way for federal participation. The growth of long-distance transmission networks and the success of the Progressive movement were important factors. Because so many dam sites with hydroelectric potential were on public lands in western states, and because hydroelectricity could help pay for those dams, even conservative Republicans like Herbert Hoover came to accept the involvement of the federal government. After the election of Franklin D. Roosevelt in 1932, the federal government accepted the task with enthusiasm as part of a plan for the economic development of entire river basins.

Size and Profitability of English Colliers in the Eighteenth Century

Taking a fresh look at the factors bearing on profitability of carrying coal from Newcastle to London in the eighteenth century, Professor Hausman finds that average ship loads rose and technology improved during the period. He notes that this is consistent with Adam Smiths dictum that Englands effort to monopolize the colonial carrying trade, through the Navigation Acts, would divert capital from domestic to colonial shipping, thereby raising rates of return in the former and lowering them in the latter.

Howard Hopson’s billion dollar fraud: The rise and fall of associated gas & electric company, 1921–1940

Abstract This is a case study of financial fraud. The Associated Gas & Electric Company (AG&E), controlled by Howard C. Hopson, was one of the largest utility holding companies of the ‘Roaring 20s’. Hopson’s AG&E rose spectacularly in the market boom and fell hard following the 1929 crash. Hopson tried unsuccessfully to save the company, while simultaneously enriching himself, using financial transactions that ultimately were determined to be illegal. The major policy reaction to the financial manipulations of the period, for which Hopson became a public symbol, was passage of the Public Utility Holding Company Act, which mandated the ‘death’ of most electric utility holding companies.

Energy and Electricity in Industrial Nations: The Sociology and Technology of Energy by Allan Mazur (review)

Hausman reviews Energy and Electricity in Industrial Nations: The Sociology and Technology of Energy by Allan Mazur