Introduction

“Public enterprise” is sometimes viewed as an oxymoron—an internal contradiction in terms. This characterization is based more on emotion than on logic, but contains enough truth to motivate an overview of two of the central issues in public enterprise economics. Private production of private goods seems intuitively appealing, as does public production of public goods. In developing countries public enterprises are often purposefully located in particularly backward areas so that they provide for infrastructure to attract other industries. The main consequence of “privateness” of the public enterprise’s offerings is the possibility of using the pricing mechanism. Public enterprises can be found in almost all economic sectors including forestry and agriculture. Their main activities, however, are concentrated in highly capital intensive monopolistic and oligopolistic industries in services and in mining and manufacturing. The chapter also presents an overview of the key concepts discussed in this book.