Privatization occurs when the government assigns one of their primary responsibi

Question

Privatization occurs when the government assigns one of their primary responsibilities to a privately owned "for-profit" or "non-profit" firm. Our federal government regulates many things such as K-12 education, public colleges and universities, tax collection efforts, the ports, the highways, the Federal Bureau of Investigation, the Food& Drug Administration, the VA hospital system, Medicare for the elderly and the public retirement plan known as Social Security -just to name of few. 1. Can you think of any government service that can be privatized? 2. What is wrong with the government program or service right now? 3. Can a “for-profit" or "non-profit” entity probably run the program or service with more efficiency, at a lower cost and with better results? 4. Would the private entity still need tax dollars from the government or could they become self-sufficient and run the program or service without any more government involvement?

Explanation / Answer

1. Some of the government service that can be privatized include railways.

2. It is not running efficiently to its full capacity as total average cost of production is high and no economies of scale exist.

3. Yes, this will result in increasing efficiency of railways as the firm will solely focus on improving the efficiency of the firm and reducing the total average cost of production by investing in technological development.

4. Initially they will need some dollars from the government to invest in research and development but once that investment is made, then dependence on government will fall and they will become self sufficient and run the program or service without any more government involvement.

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