The Two Different Concepts of Privatization

The usefulness of much of the current discussion about privatization is impaired by a basic confusion about definitions and concepts. In particular, many observers fail to distinguish between the primary policy decision of government to provide a service and the secondary decision to produce a service. Either function or both may be turned over to private parties. In the latter case, the efficiency and effectiveness of government may be improved. In the former, the objective of social equity may be put seriously at risk.