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Abstract disponibile solo in lingua inglese
Privatisation has been justified as a process which will lead to an increase in efficiency via the advent of greater competition. However, privatisation may, itself, create property rights which dampen the problem of raising finance and offsetting the "free-rider" problem typically requires that producers be given monopoly influence in the provision of goods and services. In the case of private goods a similar tendency toward monopoly rights has been evident. When public sector agencies are to be privatised, producers in the public sector lobby government to ensure that privatisation means simply a transfer of public monopoly to private monopoly.
It can be demonstrated that there is no reason, a priori, to expect that there will be an increase in welfare as a result of the replacement of public monopoly with private monopoly. Therefore those rent-seeking expenditures, which are experienced when producers lobby government for the retention of monopoly rights, may be a deadweight loss associated with the act of privatisation. It is argued, however, that, despite this loss, privatisation may still be carried out if governments are motivated by other considerations.
Any government will have a vested interest in privatisation if it is likely to increase electoral support. Asymmetry in fiscal awareness on the part of the consumer-taxpayer suggests that privatisation may be a vote-winner. Paradoxically then, policies which are recommended as a consequence of perceptions of government failure may, themselves, not be efficienty enacted precisely because of government failure. This conclusion creates a dilemma for those who would advise governments. Should policies be recommended on a "second best" basis, so as to allow for the failings of government, or will constitutional constraints prove a more appropriate solution?