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Problem Statement
When we examine the world broadly, we see a growing issue of aging infrastructure. Unfortunately, service providers governing infrastructure assets have not always adequately maintained and renewed the facilities they manage. Take, for example, the aging water infrastructure of the United States, where it is estimated that approximately 1 trillion USD in capital investment will be required to replace water pipes that are at the end of their useful life by the year 2050 (AWWA). Most water pipe infrastructure in the United States was installed between the late 1800s and 1970s, so most of it is at least 40 years old, with a large fraction being 60-80 years old. With the useful life of most types of water pipes somewhere in the range of 60-100 years, increasingly more of the existing pipes will have to be replaced. Most citizens, however, are not fully aware of this situation or the reality that they will carry the burden of this cost in the form of increased water bills. This problem is not unique to the US; most of Europe has even older pipe systems, and similar issues exist in most countries worldwide.
Upon further examination of this problem, two fundamental characteristics specific to public infrastructure become apparent:
  1. 1.
    Imbalanced access to information between service providers and citizens
  2. 2.
    The lack of general incentive among parties to challenge the status quo
Infrastructure service providers are often managed by public institutions or are tightly regulated by government agencies; they often lack incentives to invest resources to incorporate effective and more efficient business practices. On the other hand, the general public, who are the beneficiaries of these services, have no means to be informed of the status of the infrastructure they utilize and have little incentive to prompt service providers or participate in activities to help them operate more effectively. These problems, if left unaddressed, can lead to significant disruptions in communities and result in substantial loss of valuable resources.

The Age of U.S. Water Pipes

From pre-Civil War to Civil Rights era, U.S water systems reflect a range of ages.
Each year about 240,000 water main breaks result in lost water and disruptions to daily life. (U.S Environmental Protection Agency)
Each year about 240,000 water main breaks result in lost water and disruptions to daily life.
America’s municipal water systems are responsible for more than 1.2 Millions miles of water mains.
Repairing and replacing old water pipes could cost more that $US 1 Trillion over the next two decades.
(U.S Environmental Protection Agency)
(Utah State University)
(American Water Works Association)
America’s municipal water systems are responsible for more than 1.2 Millions miles of water mains. (Utah State University)
Repairing and replacing old water pipes could cost more that $US 1 Trillion over the next two decades. (American Water Works Association)
The question of how to efficiently manage public goods such as water and air has been studied for a long time in economics. It is generally believed that markets fail to allocate resources for public goods efficiently. Highly public activities are not always valued economically and are exchanged outside the market. Consequently, the general public has no incentive to engage in activities such as providing information about the status of infrastructure to service providers. If, however, these activities performed by the general public could be appropriately valued and attributed to them, it may be possible to manage public goods efficiently (Coase Theorem, 1960).
Source: Average Distribution Losses in Percentages. Adapted from Europe’s water in figures
Last modified 2mo ago