How many of you guys can remember the days when an outside third rail was the standard of operating "0" scale layouts? This era took place during the formative years of the hobby and probably had fallen away quite a bit by 1940 or certainly during WWII. But before that time, most "0" scale engines, steam, diesel (in their infancy) or electric mostly picked up their power from a shoe that ran on a small rail, placed about a half an inch outside of one of the running rails, and perhaps a quarter inch above the running rail.
Frank Ellison, the writer, model maker and innovator, who wrote articles and books, often about his huge and well presented "Delta Lines" was an advocate of outside third rail power distribution. In Milwaukee, where the oldest model railroad club in America is built into a former Milwaukee Road station located under the main line, I can still recall the operation there using an outside third rail and DC wet cell, storage batteries for power. Often thought of what might happen if a derailment occurred and shorted out that outside rail if they didn't have proper circuit breaker protection. There was so much available amperage, at about 18 volts, that you could have welded the wheels to the rail!
My guess for the reason for the outside 3rd rail system might have been two fold: In the beginning days, tinplate toy trains often formed the basis for scale (semi-scale?) engines. Of course, these trains were inside 3rd rail, right from 1906 on. The "scale guys" probably objected to the middle rail and, since a number of electric railroads, including the NYC out of New York City, were actually equipped with an outside third rail. It would have been easy to follow this practice. And also, during those days, the development of electrical insulating materials was far more crude than present day materials. It would have been a challenge to insulate every wheel set on every car or engine, especially those that were made from modified toy trains.
Recently a friend gave me several portions of an old, outside third rail layout. I'm not intending to use any of it on my layout, but, instead I intend to mount it in a display with my old RR lanterns, signals, signs and etc., as a way of showing some of the younger guys: "the way it used to be."
Paul Fischer