Public versus regulated private enterprise

A comparison of public enterprise with regulated private enterprise shows that the efficiencies of privatization stem from the insulation it brings from arbitrary political and self-serving influences. The critical insulation springs from the costliness of interventions when there is a regulatory compact in place that protects private property from expropriation while it also corrects for market failures. That same insulation means that public enteprise is a better form of organization for activities that call for a response to public interest exigencies which cannot be specified in advance or reliably adjudicated after the fact. The analysis emphasizes that an appropriate regulatory compact requires institutional support. International organizations that seek to implement privatization should consider promoting credible regulatory commitment by requiring countries to execute explicit regulatory compacts and by bringing to bear the weight of their continuing relationship as a means of motivating the countries to conform to such strictures.