SFB 303 Discussion Paper No. A - 164
Author: Bös, Dieter
Title: Arguments on Privatization
Abstract: Large-scale privatization of public firms changes the distribution of power within an economy. Therefore,
the primary reasons for privatization are ideological in nature: political power of entrenched bureaucracies, and
of labor unions is reduced; more widespread ownership of shares, in particular of people with modest means, is
strived for. Economic reasoning has to emphasize the allocational trade-off between higher efficiency, lower
quality, and monopolistic or oligopolistic profits of the privatized firms. Adherents to traditional public
enterprise economics will deplore the loss of the pursuit of distributional and stabilizational objectives, which
results from privatization.
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