The concept of public goods is often forgotten and what of the argument that the private sector
is more efficient at running things because of competition?
The Guardian: When privatisation doesn't work
The economist's notion of public goods has lost currency in this age of commodities, not just in the EU but particularly in the Anglo-Saxon world. Unlike today, two generations ago, economics undergraduates were taught that such goods were different from soap flakes and hamburgers. Public goods and services are things which need to be supplied – or at least regulated – by the public sector because they are by their very nature collective. Clean water, unpolluted air, education and law and order are obvious examples; there is no doubt that everybody should have such goods, not merely those who can afford to buy them privately.
These days, however, the distinction between "public" and "private" has become blurred, and among mainstream economists the consensus appears to be that because the private sector is more efficient than the state, we should limit the public role almost entirely to that of supervision...
snip
What of the argument that the private sector is more efficient at running things because of competition? Although this may hold true for the production of many commodities (as we know from the sad experience of Soviet-style central planning), it is by no means a universal principle.
It used to be argued that publicly owned industries are necessary in the case of "natural monopolies"; ie, where long-term economies of scale in production make for "monopoly profits". It is only fair that government – through ownership or regulation – captures such revenues for the public benefit. Also, because natural monopolies (eg, water, energy, transport) typically require very large initial capital outlays, often the state alone is in a position to finance them. What has happened in recent decades to many public utilities is that, having been established and run by the state often with a strong element of public subsidy, they have been sold to private interests at knockdown prices on the grounds of fiscal rectitude (and with the blessing of the IMF).
http://www.guardian.co.uk/commentisfree/2012/mar/27/when-privatisation-doesnt-work
