Theory of privatization

Vladimiras Obrazcovas, Emanuel Steve Savas

Abstract


The article presents the theoretical basis for privatisation. The vast jumble of goods and services can be sorted and classified according to two characteristics: exclusion and consumption. Goods and services are subject to exclusion if the potential user of the goods can be denied the goods or excluded from using them unless he meets the conditions set by the potential suppliers. The other relevant characteristic of goods and services has to do with consumption. Some goods may be used or consumed jointly and simultaneously by many customers without being diminished in quality or quantity, while other goods are available only for individual (rather then joint) consumption; that is, if they are used by one consumer, they are not available for consumption by other. Goods can be classified according to the degree to which they possess these two properties. The result is four idealised kinds of goods: individual goods (characterised by exclusion and individual consumption), toll goods (exclusion and joint consumption), common-pool goods (nonexclusion and individual consumption), and collective goods (nonexclusion and joint consumption).
The resulting classification determines the roles of government and of the nongovernmental (private) institutions of society in supplying the goods and services. It examines the basic goods and services that people want and need and discusses the intrinsic characteristics that permit them to be categorised usefully as private, toll, common- pool, or collective goods. It clarifies the role of collective action in supplying each of these kinds of goods.

Keywords


privatization; theory; exclusion; consumption; toll goods; common-pool goods; goods and services; collective goods; worthy goods

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"Public Policy and Administration" ISSN online 2029-2872 / ISSN print 1648-2603