Privatization is government outsourcing of services or functions to private firms. These services often include, revenue collection, law enforcement and prison management.
In competitive industries with well-informed consumers, privatization consistently improves efficiency. The more competitive the industry, the greater the improvement in output, profitability and efficiency. Such efficiency gains mean a one-off increase in GDP, but improved incentives to innovate and reduce costs also tend to raise the rate of economic growth. Although typically there are many costs associated with these efficiency gains, many economists argue that these can be dealt with by appropriate government support through redistribution and perhaps retraining.
Capitol Hill
Capitol Hill, where bills become laws.
Studies show that private market factors can more efficiently deliver many goods or service than governments due to free market competition. Over time this tends to lead to lower prices, improved quality, more choices, less corruption, less red tape and/or quicker delivery. Many proponents do not argue that everything should be privatized. Market failures and natural monopolies could be problematic.
Opponents of certain privatizations believe that certain public goods and services should remain primarily in the hands of government in order to ensure that everyone in society has access to them. There is a positive externality when the government provides society at large with public goods and services such as defense and disease control. Some national constitutions in effect define their governments' core businesses as being the provision of such things as justice, tranquility, defense and general welfare. These governments' direct provision of security, stability and safety is intended to be done for the common good with a long-term perspective. As for natural monopolies, opponents of privatization claim that they aren't subject to fair competition and are better administrated by the state. Likewise, private goods and services should remain in the hands of the private sector.