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Private And Public Sector Essay

4529 words - 19 pages

TABLE OF CONTENTS

TOPIC PAGE

• INTRODUCTION 1

• DEFINITIONS AND CHARACTERISTICS

-PRIVATE SECTOR 1-2

-PUBLIC SECTOR 2-3

• INTERACTION BETWEEN PRIVATE & PUBLIC SECTORS 3-4

• EFFECT OF PUBLIC SECTOR ON PRIVATE SECTOR 4-5

• PRIVATE AND PUBLIC MARKETS FAILURE IN THE PROVISION

OF GOODS & SERVICES 5-7

• PRIVATIZATION AND NATIONALIZATION 7-10

• WHY CERTAIN COMPANIES REMAIN EITHER PARTIALLY OR

FULLY STATE-OWNED 10-13

• CONCLUSION 13

• APPENDIX: GRAPHS 14

• BIBLIOGRAPHY 15

INTRODUCTION

The purpose of ...view middle of the document...

Private sector

Anon (2011) states that in economics, the private sector is that part of the economy that is not state controlled (which is run by private individuals and companies), and encompasses all for-profit businesses that are not owned or operated by the government.

Bailey (1995:97) gave the characteristics of a private good as both excludability and rival in consumption, for example commodities that are physically consumed or where property rights confer exclusive use. We must also note that when we talk about private sector, we find that there are goods that are purely private goods and their outputs would normally increase in proportion to the population because of the their exclusive property rights, and then we find certain goods that are necessarily initially private, for example water has the economic characteristics of a private good in that its use is both rival and excludable( in that, subject to any legal constraints, water supply can be disconnected if consumers refuse to pay charges) and is also the same for sewerage service.

The disadvantages of private firms according to Stiglitz (1988:203) are that they fail to take into account the costs that their pollution imposes on others; they fail to take onto account the social gains from employment (and thus may replace men with machines, when to do so is not socially desirable); they fail to take into account the congestion costs associated with locating in the crowded urban area; and they attempt to take advantage of uninformed and unwary consumers. These allegations are serious, but unfortunately, it is difficult to assess their quantitative importance, or the extent to which public production would alleviate these problems, or at least alleviate them better than appropriately designed regulatory and tax-subsidy policies.

Public sector

According to BusinessDictionary.com (2010) the public sector is part of national economy providing basic goods or services that are not, or can not be, provided by the private sector. It comprises of national and local governments, public corporations, and quasi-autonomous non-government organizations (QUANGO).
The composition of the public sector varies by country but in most countries the public sector includes such services as the police, military, public roads, public transport, primary education and healthcare for the poor. These are monitored on three levels: central government, general government and local government (Anon, 2011).
Burger (2010) noted that the public sector is the biggest part of the economy as by the end of March 2008, it had over 1.2 million people in its employ.
According to Stiglitz (1988:24) the main function of the public sector is to provide the legal framework within which all economic activities occur. This can be divided into three sub-divisions, namely: production, purchase and redistribution. That is a) the production of goods and services, along with the regulation and subsidization of...

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