Privatization

Paul Melendez

Privatization has been the subject of ongoing public policy debates for decades. In a broad sense, privatization involves transferring the production and delivery of a wide range of services from the government to the private sector and/or contracting with private companies to handle public services (e.g., solid waste collection, fire fighting, and the management of jails and prisons). Proponents of privatization favor issues of efficiency and accountability, whereas critics of privatization favor issues of social justice and equity. The theoretical support for privatization is grounded in (a) market theory, (b) public choice theory, and (c) property rights theory. Key tenets of each theory are as follows: Market theory speaks to the virtues of competition, efficiency, and consumers exercising utility preferences in the private markets and the lack of such market forces in public monopolies. Public choice theory explains that government inefficiency is the result of incentive structures of public agencies ...

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