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State versus Private Ownership

Author Info

Listed author(s):
  • Andrei Shleifer

Abstract

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, the concern that private firms fail to address 'social goals' can be addressed through government contracting and regulation, without resorting to government ownership. The case for private provision only becomes stronger when competition between suppliers, reputational mechanisms, the possibility of provision by private not-for-profit firms, as well as political patronage and corruption, are brought into play.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.12.4.133
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 12 (1998)
Issue (Month): 4 (Fall)
Pages: 133-150

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Handle: RePEc:aea:jecper:v:12:y:1998:i:4:p:133-50
Note: DOI: 10.1257/jep.12.4.133
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Find related papers by JEL classification:
  • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
  • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
  • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
  • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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  1. Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1997. "Privatization in the United States," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 447-471, Autumn.
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  3. Morten Bennedsen, 1998. "Political Ownership," CIE Discussion Papers 1998-17, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
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  20. James M. Poterba, 1996. "Government Intervention in the Markets for Education and Health Care: How and Why?," NBER Chapters,in: Individual and Social Responsibility: Child Care, Education, Medical Care, and Long-Term Care in America, pages 277-308 National Bureau of Economic Research, Inc.
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  27. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-991, September.
  28. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  29. Ehrlich, Isaac & Georges Gallais-Hamonno & Zhiqiang Liu & Randall Lutter, 1994. "Productivity Growth and Firm Ownership: An Analytical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 1006-1038, October.
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  32. Lott, John R, Jr, 1990. "An Explanation for Public Provision of Schooling: The Importance of Indoctrination," Journal of Law and Economics, University of Chicago Press, vol. 33(1), pages 199-231, April.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Prison economic illiteracy
    by Eric Crampton in Offsetting Behaviour on 2012-03-19 00:00:00
  2. Prison cost minimization
    by Eric Crampton in Offsetting Behaviour on 2011-08-09 21:34:00
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