Explaining Privatization Failure: The Vice of Sweet Carrots and Hard Sticks

Abstract

Why does contracting underperform in the production of publicly financed goods? Producers for private markets survive through marketism, defined as the strategic exclusion of segments of a community, whereas producers of publicly financed goods are pressured to be inclusive. Inclusivity is achieved through universalism, an operational mode with three requisites: (1) a workforce with lateral competency to respond to contingencies, (2) interfunction asset sharing and coordination, and (3) an environment that protects professional discretion. Universalism and marketism are divergent strategies, and public-private contracts cannot cost-effectively resolve their incongruities. JEL Classification: L330, H410, P260

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