ABSTRACT
This contribution focuses on the basic assumption that lies behind the present dominant tendency to privatise and deregulate, namely the belief that public ownership leads to inefficiency, in particular if there is a monopoly. While there are strong incentives to cut costs in a firm which is managed by its owner and exposed to competition, the notion of private sector cost efficiency does not stand up to critical examination under other and more realistic conditions. For example, large companies or organisations in both private and public ownership are in general led by a manager whose efforts may or may not conform to the targets set by the owners. The way in which this delegation problem is affected by privatisation and deregulation has not always been understood properly.
