Document Type

Article

Publication Title

Marquette Law Review

Abstract

With characteristic comprehensiveness, Professor Ronald Cass has provided us with a compendium of mechanisms for privatization and a justification of their use. Eschewing the easy lure of binary choices, he suggests that the decision to employ public or private avenues to accomplish optimal allocation of public goods and services must ultimately rest on a variety of factors. Captured within the rubric of comparative advantage, these factors demand that we assign any particular activity that affects the public interest to the sector that best navigates between the Scylla of rent-seeking and the Charybdis of agency costs. I have little disagreement with this general approach to the issue of privatization. I want to focus, however, on some tendencies that might undermine initial assumptions about the advantages of private and public sectors in particular situations. Towards this end, I want to concentrate on the allocation function of government. Of the functions government serves, efficiently allocating resources would appear most susceptible to some measure of privatization. Government intervention in this area is largely intended to compensate for the failure of private markets to overcome problems of free riding and nonrival consumption. Only the most fanatical adherents to the theory of the night watchman state would deny a governmental role in this task. But one may be far more of a statist and still believe that government could satisfy its obligations to ensure optimal allocation of goods and services without direct involvement in their production. Government may instead assign the relevant production task to private enterprise. Alternatively, government may intervene to replace a failed market for production, but replicate private pricing mechanisms by charging beneficiaries of the service on a marginal or opportunity cost basis rather than financing the service through general tax revenues. At the local level, both private service provision and market pricing are common place. If there remain reasons for concern about privatization in the allocation area, all the more concern may be appropriate in the privatization of distributional functions that Professor Cass warily suggests might be attempted.

First Page

534

Volume

71

Publication Date

1988

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