American Journal of Law & Medicine

Firm-Led Malaria Prevention in the United States, 1910-1920

In the absence of capable government services, a railroad company in Texas and multiple cotton mills in North Carolina successfully prevented malaria in the early twentieth century. This Article looks through the lens of economics to understand how and why people had the incentive to privately coordinate malaria prevention during this time, but not after. These firms, motivated by increases in productivity and profit, implemented extensive anti-malaria programs and used their hierarchical organizational structures to monitor performance. The factors underlying the decline of private prevention include a fall in the overall rate of malaria, the increasing presence of the federal government, and technological innovations that lowered exposure to mosquitoes. Understanding how, why, and when firms can prevent diseases has important implications for current disease policy, especially where governments, international organizations, and technologies are not enough.

I. INTRODUCTION
II. PROPERTY RIGHTS, DISEASE PREVENTION, AND THE FIRM
III. FIRM-LED MALARIA PREVENTION
    A. THE MILLS OF ROANOKE RAPIDS, NORTH CAROLINA
    B. THE ST. LOUIS SOUTHWESTERN RAILROAD
IV. ANALYSIS
V. THE DECLINE OF PRIVATELY COORDINATED MALARIA PREVENTION.
    A. THE DECLINE OF MALARIA
    B. INCREASING GOVERNMENT INVOLVEMENT
VI. CONCLUSION

I. INTRODUCTION

Why did cotton mills in Roanoke Rapids, North Carolina, and one railroad in eastern Texas prevent malaria between 1910 and 1920? As local and federal anti-malarial services were either lacking or inadequate, theses firms realized that malaria imposed significant financial and physical costs on their workers and local communities, and implemented their own anti-malarial programs. (1) Motivated by increases in labor productivity and profit, the firms transformed their normal production processes in order to organize the labor and resources necessary to eliminate mosquitoes, drain bodies of water, and ultimately disrupt malaria's transmission cycle. (2) In this way, the firms alleviated the commons-like problems associated with malaria prevention, issues of externalities, and free-riding.

These efforts deserve analysis for a number of reasons. First, standard economic theory focuses scholarly attention away from firm-led prevention because of positive externalities and the resulting free-rider problem. Gordon Tullock, (3) in reference to a community-wide mosquito spray, argues that it is not rational for individuals, or firms for that matter, to voluntarily contribute to a collective good like malaria prevention when free-riding is possible. (4) Furthermore, Pauline Allen, Bronwyn Croxson, (5) and Azameen Jamasji-Pavri (6) suggest that contracts are not effective means for governing disease control because contracts are fundamentally incomplete in situations of infectious diseases due to uncertainty and because of the externalities associated with prevention. Firm-led malaria prevention is likely to be underexplored given that economists have theoretically grounded reasons to expect malaria prevention to be provided by governments. (7)

Second, the federal government in the United States became a larger force preventing, and eventually eliminating, the disease in the twentieth century. Federal involvement with malaria prevention began in 1914 through the administration of the Public Health Service ("PHS"), which operated through World War I, the Great Depression, World War II, and beyond. Accordingly, epidemiologists, medical historians, and other public health scholars usually attribute the decline of malaria to increased federal intervention. (8) State and local governments were another source of malaria prevention, but to a lesser extent. While the Constitution granted legal authority of disease coordination to individual states, they were rarely capable of fulfilling this role. (9) According to J.A. LePrince,

   Previous to 1914 probably less than six communities had undertaken
   malaria-control measures, and the results of such limited effort
   were unsatisfactory. Up to that time, not a single State health
   department was taking any action toward malaria elimination,
   although in many counties malaria was the most important health
   problem. No State or county had made any appropriation for malaria
   reduction. (10)

Thus, any economic or medical history dealing with malaria in the United States is likely to focus on the role played by the federal government. (11)

This Article does not deny the historical trend of increasing government involvement; rather, it shifts the focus to alternative means of prevention, or private malaria prevention through the firm, and develops an economic theory explaining this behavior. As such, it draws from and complements the large body of literature on the private provision of public goods. (12) Prior to the development of extensive federal and state malaria prevention, private malaria prevention was a significant alternative for mitigating the burden of malaria. Without recourse to governmental public health services, private individuals sought, found, and relied upon private malaria prevention. (13) In the two case studies below, firms asserted control over disease prevention and mitigated the burden of malaria for their employees and local communities. Ownership over these programs was valuable because malaria prevention was directly related to productivity. Furthermore, the firms' hierarchical structure lowered the cost of monitoring and organization.

Furthermore, the firms did not prevent malaria during the rest of the twentieth century because ownership over malaria prevention became less valuable. The benefit of firm-led malaria prevention declined with the declining overall rate of malaria, thee increasing role of the federal government, and technological innovations that limited exposure to mosquitoes.

Developing a better appreciation for firm-led malaria prevention is important for a number of reasons. First of all, this kind of malaria prevention suggests that, for many people in parts of the developing world where malaria is still a significant burden and where anti-malarial public health services are weak, firms can help to lower the burden of malaria. (14) Second, economists should find this of interest because it complements the standard theory by showing some of the conditions under which firms provide goods typically considered to be public goods. That is, the firm is one organization with the interest and capability to resolve complex problems associated with infectious diseases.

This Article proceeds as follows: Part II explains the theory of firm-led disease prevention; Part III describes two cases where firms led successful anti-malaria campaigns; Part IV discusses the main factors that facilitated malaria prevention in the cases; and Part V shows why private efforts were less valuable during the mid-twentieth century.

II. PROPERTY RIGHTS, DISEASE PREVENTION, AND THE FIRM

In addition to problems of uncertainty and information asymmetry between people who prevent an infection and those who benefit, one of the fundamental problems associated with infectious diseases is that property rights over prevention and control are held in common. (15) People facing this initial allocation of rights have little incentive to provide disease prevention; as a result, people face a higher probability of infection than if property rights were clearly defined and enforced. As Harold Demsetz and Yoram Barzel show, the initial assignment of property rights can change, particularly when the costs and benefits of having private property rights change. (16) Thus, disease prevention can be aided by a reassignment of property rights, such as the substitution of common property towards private property, which gives the parties involved incentives to prevent disease.

Following Demsetz's logic regarding the formation of property rights, the owners and managers of firms will create property rights over disease prevention and control when the prevention benefits to the firm outweigh the costs of prevention. Allen, Croxson, and Jamasji-Pavri focus on the costs of uncertainty, the external effects of prevention, and the difficulty of assigning property rights, which may deter firms from prevention and control. (17) However, in certain circumstances, the benefits of prevention could outweigh these costs, which will lead the firms to provide disease prevention. The discussion below describes the benefits and costs firms may face regarding disease prevention and control.

Firms can invest in their workers by providing disease prevention and control; the return is directly related to the size of their workforce. The more a disease burdens a population, the more a firm has the opportunity to improve labor productivity through prevention. Firms face similar incentives if the public good of disease prevention can be tied to a private good. (18) For example, clearing a swamp from infectious mosquitoes influences the value of houses in the swamp's vicinity. To the extent firms own physical and human capital, the value of which is determined by malaria prevention, the firm can exclude others from free-riding by offering these relatively private goods.

Firm-led prevention is also likely to take place when a firm faces an inframarginal externality, that is, an externality where the size of the external costs or benefits imposed on consumers is not dependent on the quantity of the good demanded by consumers when near market equilibrium levels of production. (19) Private benefits are obtained from a good regardless of whether or not other firms or other parties are affected. For example, a firm may screen the buildings where its workers work or it may clear swampland. While this activity benefits the local population by decreasing the probability of infection, it primarily benefits the firm in the form of higher productivity and higher profits.

Complementary goods are another way to internalize the benefits of production. (20) When complementary goods are produced together, firms can often internalize the positive externalities of one good by producing another good, as Steven Cheung demonstrated with his example of bees and apple orchards. (21) Producers thus have an incentive to produce more than would be the case otherwise, and two firms can thus engage in joint production whereby one produces disease prevention and the other compensates.

Firms may face a variety of costs regarding disease prevention. There are production costs of actually preventing the spread of disease, and there are transaction costs dealing with organizing the campaign and monitoring the behavior of subordinates. The nature of the disease may also preclude available means of prevention techniques. For example, while malaria can be prevented by draining swampland, among other measures, Ebola requires limiting physical contact with potentially infected people. Furthermore, both of these diseases are easily prevented when compared to a disease like measles, which spreads quickly through human populations. (23)

Organization and monitoring costs arise because disease prevention and control requires input from multiple people, each of whom are self-interested and may own different resources. Known simply as a principal-agent problem, the issue is that when one person desires malaria prevention and hires others to perform, the workers have an opportunity to shirk responsibilities because it may be difficult to monitor their behavior. (24) There are a variety of situations where monitoring costs are particularly burdensome. For example, when a group of people are tasked with clearing a large plot of land that has varying terrain, from flat, grassy areas, to swampy areas, it may be costly to learn which people actually did their jobs. In this example, not only is there the cost of monitoring a large tract of land, but it may be difficult to compare the work of laborers clearing weeds and underbrush with those working in the swamp. This problem is exacerbated when there is considerable time between the preventative activity and its expected outcome. If a group of workers is hired to clear a parcel of land in the fall in an attempt to prevent malaria in the following spring, it is more difficult to attribute specific inputs with the actual disease prevention outcomes.

Thus, the residual claimant of prevention and control, the owner of a firm, must allocate a share of total resources towards monitoring the performance of others in order to successfully prevent infectious diseases. …

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