ABSTRACT
This chapter discusses that people should assign the obligation to provide any particular service to whichever sector, public or private, is more likely to provide an efficient amount of that service. It explores some of the assumptions that underlie the belief that privatization will best achieve this objective. The chapter suggests that, even accepting the efficiency objective, wholesale adoption of either public or private provision of goods is inappropriate. It explains that the proper bench mark is efficient provision, even within government agencies there is bound to be disagreement about what policy satisfies that criterion. The chapter reviews the economic argument for government participation in the marketplace. The issue, again, is not one of how public inefficiencies are magically translated into private efficiencies. The owners, therefore, have self-interested incentives to create as much residual value as possible. The inability to define a uniquely proper objective for public officials may inhibit the constituents' ability to monitor public officials.
