Discuss the conditions under which the public sector would be preferred to the private sector in the production of public services.
INTRODUCTION
Why does the public sector engage in some activities and not others? Why has the scope of its activities changed over the past hundred years, and why does it have different roles in different countries? Does it do it well what it attempts to do? Could it perform its economic role more efficiently? These are the central questions with which the economics of public sector is concerned. My main focus is addressing the conditions under which the public sector would be preferred to the private sector in the production of public services.
The public sector is playing an ever growing, diversified and control role in the production of public services. My essay shows that there are good theoretical conditions for which the public sector is preferred in the production of public services. To map out this discussion, it is important I distinguish the ‘public sector’ and ‘public services’ although it is difficult to provide a sound definition.
The public sector comprises the economic activities controlled by the government. Hence it is not subject to a competitive market and may lack incentives to control cost, provide good quality service and respond to customers’ needs. On the other hand, public services can be the set of services provided for a large numbers of citizens in which there are potentially significant market failures (broadly interpreted to include equity as well as efficiency) that justify government involvement, whether in production, finance or regulation (Grout and Stevens (2003).
Conditions under which the public sector would be preferred to the private sector in the production of public services, which can be said to be the reasons for government provision/production varies for a number of reasons : * Market