You Don’t Always Get What You Pay for: The Economics of Privatization PDF
Preview You Don’t Always Get What You Pay for: The Economics of Privatization
THE ECONOMICS OF PRIVATIZATION A CENTURY FOUNDA TION ROOK I - • \ •. ' ■ KI ■J - yi ■ . ■' ^ r . X YOU DON’T ALWAYS GET WHAT YOU PAY FOR THE ECONOMICS OF PRIVATIZATION ELLIOTT D. SCLAR •• ■" ... - X 7 ' - , ■ ■ ".w<: ; Today, nearly all public services—schools, hospitals, prisons, fire departments, sanitation— • . . - ■ • t/" -I are considered fair game for privatization. Proponents of privatization argue that private firms »» will respond to competitive market pressures and provide better service at lower cost. While this assertion has caused much controversy, the debate between both sides has consisted mainly M of impassioned defenses of entrenched positions. M ■ • - .J u in YOU DON'T ALWAYS GET WHAT YOU PAY FOR, r m Elliott D. Sclar offers a balanced look at the pitfalls i and promises of public sector privatization in the w United States. By describing the underlying m economic dynamics of how public agencies and private organizations actually work together, he provides a rigorous analysis of the assumptions . . x .-1 . ' behind the case for privatization. The competitive-market model may seem appealing, but Sclar warns that it does not address the complex reality of contracting for government services. Using specific examples, such as mail service and urban transportation, he shows that privatization ironically does not shrink ■ * . ’ V \ ' V N , | government—the broader goal of many of its own champions. He also demonstrates that there ■* / < - -A. V»,S V « You Don’t Always Get What You Pay For Digitized by the Internet Archive in 2017 with funding from Kahle/Austin Foundation https://archive.org/details/youdontalwaysgetOOscla You Don’t Always Get What You Pay For The Economics of Privatization Elliott D. Sclar A Century Foundation Book Cornell University Press Ithaca and London The Century Foundation, formerly the Twentieth Century Fund, sponsors and supervises timely analyses of economic policy, foreign affairs, and domestic political issues. Not-for- profit and nonpartisan, it was founded in 1919 and endowed by Edward A. Filene. Board of Trustees of The Century Foundation Morris B. Abram James A. Leach H. Brandt Ayers Richard C. Leone Peter A. A. Berle Alicia H. Munnell Alan Brinkley, Chairman P. Michael Pitfield Jose A. Cabranes Richard Ravitch Joseph A. Califano,Jr. Arthur M. Schlesinger, Jr. Alexander Morgan Capron Harvey I. Sloane, M.D. Hodding Carter III Theodore C. Sorensen Edward E. David, Jr. Kathleen M. Sullivan Brewster C. Denny James Tobin Charles V. Hamilton David B. Truman Matina S. Horner Shirley Williams Lewis B. Kaden William Julius Wilson Richard C. Leone, President Copyright © 2000 by The Century Foundation, Inc. All rights reserved. Except for brief quotations in a review, this book, or parts thereof, must not be reproduced in any form without permission in writing from the publisher. For information, address Cornell University Press, Sage House, 512 East State Street, Ithaca, New York 14850. First published 2000 by Cornell University Press Printed in the United States of America Library of Congress Cataloging-in-Publication Data Sclar, Elliott. You don’t always get what you pay for : the economics of privatization / Elliott D. Sclar. p. cm. Includes bibliographical references and index. ISBN 0-8014-3733-4 (cloth) 1. Privatization—United States. 2. Privatization—United States—Case studies. I. Title. HD3888 .S35 2000 338.973'05—dc21 99-055904 Cornell University Press strives to use environmentally responsible suppliers and materi¬ als to the fullest extent possible in the publishing of its books. Such materials include vegetable-based, low-VOC inks and acid-free papers that are recycled, totally chlorine- free, or partly composed of nonwood fibers. Books that bear the logo of the FSC (Forest Stewardship Council) use paper taken from forests that have been inspected and certi¬ fied as meeting the highest standards for environmental and social responsibility. For fur ther information, visit our website at www.cornellpress.cornell.edu Cloth printing 10 987654321 Contents Foreword vii Acknowledgments xi Chapter 1 The Urge to Privatize: From the Bureaucratic State to the Contract State 1 Chapter 2 What Is the Public Buying? Identifying the Contracted Public Good 20 Chapter 3 Public vs. Private Production: Is One Better and How Would You Know? 47 Chapter 4 What’s Competition Got to Do with It? Market Structures and Public Contracting 69 Chapter 5 All in the System: Organizational Theories and Public Contracting 94 Chapter 6 Restructuring Work: The Relational Contract 130 Chapter 7 The Privatization of Public Service: Economic Limits of the Contract State 151 Bibliography 169 Index 177
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