ABSTRACT
This chapter begins by examining the concept of the pure market as a benchmark for determining the role of government, i.e., what constitutes rent or transfer seeking. It investigates the economics of government enterprise, to judge the problems involved and the motivation for privatization. Privatization is not an isolated process, but is intimately tied to liberalization, including tax reform, because most broadly, government ownership includes not just particular enterprises owned by government, but also government control over nominally private enterprise, property, and income. Marketization includes liberalization and privatization. Marketization consists of two elements: the creation and enforcement of the legal preconditions of the market, and the transfer of enterprise from government controls to the market process. A ‘market’ consists of voluntary exchange in some context. The key to understanding the ‘market’ process is the meaning of ‘voluntary’ acts. Government enterprises and programs can be considered as various units of a conglomerate, run by a bureaucracy.
