Public Versus Private Ownership

Disappointment with insider trading in Russia, with voucher privatization in the Czech Republic, and with the privatization of infrastructure in many developing countries in many developing countries has spawned new critiques of privatization. How do theory and empirical evidence answer the much-debated questions, which is more important to performance, competition or private ownership? Are state enterprises more subject to welfare-reducing interventions by government than private firms are? Do state enterprises suffer more from problems of corporate governance?

Disappointment with insider trading in Russia, with voucher privatization in the Czech Republic, and with the privatization of infrastructure in many developing countries has spawned new critiques of privatization. How do theory and empirical evidence answer the much-debated questions, Which is more important to performance, competition or private ownership? Are state enterprises more subject to welfare-reducing interventions by government than private firms are? Do state enterprises suffer more from problems of corporate governance? At the heart of the debate about public versus private ownership lie three questions: · Does competition matter more than ownership? · Are state enterprises more subject to welfare-reducing interventions by government than private firms are? · Do state enterprises suffer more from governance problems than private firms do? Even if the answers to these questions favor private ownership, the question must still be asked: Do distortions in the process of privatization mean that privatized firms perform worse than state enterprises? Shirley and Walsh's review found greater ambiguity about the merits of privatization and private ownership in the theoretical literature than in the empirical literature. In most cases, empirical research strongly favors private ownership in competitive markets over a state-owned counterfactual (although construction of the counterfactual is itself a problem). Theory's ambiguity about ownership in monopoly markets seems better justified. Since the choice confronting governments is between state ownership and privatization rather than between privatization and optimality, theory has left a gap that empirical work has tried to fill. Further research is needed. This paper - a product of Regulation and Competition Policy, Development Research Group - is part of a larger effort in the group to analyze the effects of privatization and the role of regulation and politics.

Disappointment with insider trading in Russia, with voucher privatization in the Czech Republic, and with the privatization of infrastructure in many developing countries has spawned new critiques of privatization. How do theory and empirical evidence answer the much-debated questions, which is more important to performance, competition or private ownership? Are state enterprises more subject to welfare-reducing interventions by government than private firms are? Do state enterprises suffer more from problems of corporate governance?

When it comes to urban planning, to what extent and under what conditions should the community’s interest prevail over the rights of private property owners? Public Interest, Private Property addresses this question at a time when pollution, urban sprawl, and condo booms are forcing municipal governments to adopt prescriptive laws and regulations. Case studies focus on spheres in which public values and private property rights collide – expropriation law, natural resources regulation, green development, and water provision – laying the groundwork for more active debates on the issues currently shaping our cities.

What, exactly, is private property? Or, to ask the question another way, what rights to intrude does the public have in what is generally accepted as private property? The answer, perhaps surprisingly to some, is that the public has not only a significant interest in regulating the use of private property but also in defining it, and establishing its contour and texture. In The Public Nature of Private Property, therefore, scholars from the United States and the United Kingdom challenge traditional conceptions of private property while presenting a range of views on both the meaning of private property, and on the ability, some might say the requirement, of the state to regulate it.

Private ownership should generally be preferred to public ownership when the incentives to innovate and to contain costs must be strong. In essence, this is the case for capitalism over socialism, explaining the dynamic vitality' of free enterprise. The great economists of the 1930s and 1940s failed to see the dangers of socialism in part because they focused on the role of prices under socialism and capitalism and ignored the enormous importance of ownership as the source of capitalist incentives to innovate. Moreover, many of the concerns that private firms fail to address social goals' can be addressed through government contacting and regulation without resort to government ownership. The case for private provision only becomes stronger when competition between suppliers, reputational mechanisms, and the possibility of provision by private not-for-profit firms, as well as political patronage and corruption, are brought into play

In this book, the author argues that private ownership is more efficient than public ownership. He presents three major theories that support private enterprise: the property rights theory, the public choice theory, and the Austrial school. Their advantages and drawbacks are examined in theoretical terms and are supported by the evidence of working examples. From this, conclusions are drawn about privatization and the validity of the considered theories.