Privatization and Economic Efficiency.

• Author: Porter, Philip K.

This edited volume presents a range of theoretical and empirical studies of privatization and its consequences for economic efficiency. Work by Professor Ott and colleagues at the Institute for Economic Studies (IES) at Clark University and by Professor Hartley and colleagues at University of York account for two-thirds of the book. The research papers that make up the volume were presented at an IES sponsored conference in 1988. In 1989 the editors met to transcribe and integrate the papers for this volume. At the meeting the analytical threads that are common in many of the papers were identified and modelled. This model is presented as a unified theory of privatization in the first section of the book.

These were fortuitous circumstances for the evolution of Privatization and Economic Efficiency, for it is a well organized book. The papers seem to complement each other and the book has a strong internal structure that is uncommon in most edited volumes. I attribute this to the efforts of the editors to develop a common model and the fact that many of the authors knew of each other's work prior to the conference. If the book has a drawback it is that most of the empirical research is inconclusive. Evidence of productive efficiency gains and allocative efficiency losses are generally mixed. Of course, if privatization has no efficiency consequences this is important information, but the lack of a conclusive difference is not headline material. After an introductory chapter there follows three chapters outlining the conceptual and analytical framework of privatization. Hartley and David Parker (Chapter 2) present a model of the business enterprise that focuses on three relevant dimensions for efficiency: market structure, firm control and firm objectives. Dieter Bos and Wolfgang Peters (Chapter 3) present the control problem in a principal-agent framework. Leroy Jones, Pankaj Tandon and Ingo Vogelsang (Chapter 4) consider the private sale and valuation of public firms in light of social and private objectives. These chapters offer insights for the theorist and present models that are adaptable to a variety of settings. As pure theory there is interesting reading here.

Section Two (four chapters) presents case studies of developed countries. Ronald Utt (Chapter 5) details federal privatization initiatives during the Reagan Administration. As the Associate Director for Privatization at OMB during the Reagan years he is able to offer unique...