Posted on by Art Powell

In discussions on the pros and cons of private versus public ownership one should consider competition, decision-making and the dynamics of relationships between firms and governments.

I figure the people who run firms behave in similar ways regardless of who owns the firm. Most of us most of the time think and act in our own short-term interests. This applies to most the people in government and business and makes for interesting dynamics where people do not always behave according to what they say.

Generally people in business dislike competition and try to limit it. One way to restrict competition is to get governments to pass legislation which interferes with the operation of markets. licensing, tariffs, subsidies, patents and copyright all restrict competition and allow some firms to obtain profits they otherwise would not have. This creates dynamics between firms (or business associations) and governments as firms want to ensure they have sympathetic governments and governments want business to support them..

The people in charge of governments generally want to remain in power and therefore most of their decision-making is to this end. Thus the main difference between private and public ownership is in decision-making. Private owners want to make profits while government owners want to remain in power. They want businesses under their control to make management decisions which will help in a reelection (Or in the case of dictatorships to limit uprisings) and they also want to reward supporters with plum jobs.

All of this is further complicated by the fact that managers and owners (private or public) may have different goals. Managers may want to build empires rather than maximise profits.

Where do us consumers fit into this? There are always people in government and industry who say they are working for our best interests but most of the time I don’t believe them. Generally our best interest is served when there is competition. However, as noted above governments and industry work hard to restrict competition. When we have competition we get the best prices and a generally efficient economy. In a competitive economy consumers get to make decisions according to their values.

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Filed under: Economics | Tagged: Competition, Economics, government, governments, private ownershipm, public ownership, relationships |