Market Mechanics 59 



which service irrigation projects. By virtue of the indivisibihty 

 present in utility enterprises, their decreasing-cost nature is recog- 

 nized by legal arrangements granting them monopoly status in the 

 areas which they serve. Profits of railroad enterprises, particularly, 

 are affected favorably by the increase in load factor attending 

 irrigation development. ^^ Since freight rates are generally set lor 

 wide areas and are unlikely to be altered by the regulatory bodies 

 as a result of an increased volume of freight from one relative 

 small area, the "pecuniary external economies" to railroads serving 

 farmers become significant.^' This doubtless accounts for the sup- 

 port given reclamation projects by western railroads — but also 

 accounts in part for the divergence between financial and economic 

 returns to irrigation enterprises. 



Perhaps of greater practical importance, however, is the superior 

 bargaining position enjoyed by the irrigation farmers vis-a-vis the 

 irrigation enterprise. Teele has recounted the difficulties arising 

 from the ability of water users to wait out the water supjilicr in 

 some cases and to buy out the bankrupt facilities on their own 

 terms. ^^ Reliance, during agricultural depressions, on the political 

 process to scale down repayment obligation and water charges on 

 federal reclamation projects has further affected the financial 

 returns to investment for the provision of irrigation water. 

 Improved incomes during prosperous periods, however, are capi- 

 talized in the value of the land and associated investments when 

 ownerships are transferred. As a consccpience, the returns asso- 

 ciated with employment of water on reclamation farms tend to be 



"Decreasing costs in tlic case of utilities and processing industries undoubtedly 

 account for tiie interest taken in inigation development. Tlie Northern Pacific 

 Railroad and the Holly Sugar Coi pc^ration, for example, were instrmnental in 

 importing irrigation farmers to the Yellowstone irrigation project. 1 he sugar 

 company, in fact, achanced loans to farmers to facilitate the settlement prci)ara- 

 toiy to establishing a sugar refinery. Sec H. C. Hoje, R. E. Huffman, and 

 C. F. Kraen/el, IncUrccl lirncfits of Irrit^ntion Dei'c!oj)incnt, Bidletin 517 (Boze- 

 man: Montana State College, IO.'jG), p. 51. 



" Peciniiary external economies are distinguished from technological external 

 economies by the fact that they arise out of market, rather than physical, inter- 

 dependence. Such external economies ha\e been represented as the increase in 

 profits whith accrue to an enteri)risc as a result of the manner in which other 

 independent pai ties engage their resources. See Tibor Scitovsky, o[). ril. 



" R. P. Teele, op. cit., pp. 430-31. 



