Shepard, W. M.

English

University of New Mexico

Volume 4 
Issue 2 Spring 1964 
Spring 1964 
Garfield, Paul J. and Lovejoy, Wallace F., Public Utility Economics 
W. M. Shepard 
Recommended Citation 
W. M. Shepard, Garfield, Paul J. and Lovejoy, Wallace F., Public Utility Economics, 4 Nat. Resources J. 424 
(1964). 
Available at: https://digitalrepository.unm.edu/nrj/vol4/iss2/13 
This Book Review is brought to you for free and open access by the Law Journals at UNM Digital Repository. It has 
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Public Utility Economics
By
PAUL J. GARFIELD AND WALLACE F. LOVEJOY
Englewood Cliffs: Prentice-Hall, Inc. 1964
Pp. xvi, 505, $10.00
This is an important and ambitious text, full of useful informa-
tion and analysis. Since the War there has been a decline in teach-
ing and research in the field, though in the last few years there have
been signs of a revival of research. The two most recent texts with
which Garfield and Lovejoy's will compete do not reflect some of
the newer economic findings and debates.1 Therefore, there is a wide
opening for a text which, as the present one sets out to do, em-
phasizes economic issues of pricing, allocation and regulatory
policy.
It might be fair to say that the book achieves some success in
this regard, but that the book is most useful-very useful indeed-
with its descriptive material. Four introductory chapters introduce
the traditional background material on "the public utility concept,"
economic characteristics of public utilities, and the history and pro-
cesses of regulatory action. The first five chapters in Part II present
the calculations and concepts of rate cases, with extended treatment
of the intricacies of expenses, rate base, valuation, depreciation and
rates of return. This is the most solid and complete major part of
the book; legal and accounting issues are well presented and illus-
trated-though there is some wordiness.
The next two chapters ( 10 and 11), on Pricing Policies, are the
main effort of the book to grapple with genuine economic issues.
This discussion has the great merit of integrating the general issues
with a close attention to actual rate systems. Moreover, water sup-
ply and urban transit are included, as well as the more usual elec-
tricity, telephone, gas distribution and pipeline rates. Unfortunately
the economic analysis is neither original nor penetrating. The rate
schedules are more described than analyzed, and the controversies
and conflicts they represent-value of service, cost of service, fair
1. These are Glaeser, Public Utilities in American Capitalism (1957), and Bon-
bright, Principles of Public Utility Rates (1961).
return, comparable earnings, and especially marginal conditions of
allocation-are often glossed over.
Much of the treatment of telephone rates, for example, appears
to be drawn from Bell System presentations. In such cases, the
problem this raises is not so much one-sidedness; it is rather that the
genuine unsettled economic questions are often not even acknowl-
edged at all. For another example, the exhaustive descriptive sur-
vey of electricity rate schedules-from Hopkinson on-contains
only vague mention of the peak-load pricing problem which econ-
omists have been hammering at for years, and in which progress is
being made abroad. Houthakker, Steiner, Vickrey and especially
Davidson are not even mentioned. To take other areas, the oc-
casional mentions of risk-return conditions are entirely superficial;
the conflicts between value-of-service and cost-of-service are noted,
not analyzed; and the notion of "incentive regulation" is not given
any adequate discussion.
Chapter 12 gives a useful case study of an actual rate case. Part
III (Chapter 13) surveys and appraises the regulatory agencies,
but only from a legal-administrative viewpoint. Part IV (and
Chapter 21) survey natural gas regulation and energy trends with
uncommon thoroughness. The remaining four chapters offer inter-
esting discussions of tax, labor, financing and structural problems
of utilities-subjects not found in most utility textbooks.
The descriptive merits of this book are least affected by the evi-
dent approval of public regulation which the authors entertain
throughout. On this ground alone the book deserves the widespread
adoption it will no doubt get. Yet the volume represents a defeat for
economic analysis and teaching in the field. One finds here a faithful
mirror-in many respects an improved mirror-of the field as it
has been. But many of the old economic issues, and almost all of
the new questions, are slighted or ignored. Despite its important
merits, the book can be recommended for courses in the economics
of public utilities and public utility policy only with reservations.
WILLIAM G. SHEPHERD*
*Assistant Professor of Economics, The University of Michigan, Ann Arbor,
Michigan.
OCTOBER, 1964] BOOK REV/IEWFS


Garfield, Paul J. and Lovejoy, Wallace F., Public Utility Economics

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