ABSTRACT
Positive theory describes what they actually do. In case of normative theory the economist imposes on public enterprise managers the objective to maximize welfare. From a formal institutional point of view public enterprises are a more direct political instrument than government regulation of private firms. Most important for a political theory of public enterprise behavior relative to a political theory of regulation is the difference in the composition of relevant interest groups. Aside from this remote possibility actual public enterprise behavior is likely to differ from welfare maximizing behavior. This will happen for at least two reasons. First, the public enterprise may have welfare maximization as its official objective, but government can only implement it imperfectly. This would be in line with a public interest theory of public enterprises. Second, the public enterprise objectives may result from individual utility maximization of the actors influencing public enterprise behavior.
