Abstract:
Whether to provide services by the public or the private sector has been at the center of
debates within governments and those in the international aid industry for decades.
Unfortunately, this debate has often been cast in terms of absolutes with the private
sector either as savior or demon. Casting the issue in this light simply can’t be correct. It
cannot be the case that either is appropriate for every service and with every government
regardless of its capability to the exclusion of the other. In every case, policy makers
need to ask “how can the government improve the well-being of citizens with the
constraints and tools at hand?” Those constraints include the ability to implement and
monitor policy.
This paper outlines how limitations of the market can be matched to appropriate
interventions by government as it actually performs, not as it is hoped to perform. This
matching will, by necessity, vary with country circumstance. While pure public goods
must be provided by government regardless of its weaknesses and pure private goods
should generally be left to the market, most serious policies operate in between. The
balance of the limitations of the sectors needs careful analysis. The welfare costs of
private market failure are rarely measured and the difficulties of implementing different
policies are rarely discussed let alone quantified. Policies that are sensitive to deviations
from perfect implementation should be avoided in preference to those that are more
robust to circumstances. Further, every policy will generate interest groups that will
constrain future decisions through political pressure.
Examples from various sectors include health, where interventions vary from nearly pure
public goods through nearly pure private goods to the complicated set of issues raised by
insurance market breakdowns. Education, particularly in Pakistan, should challenge
government to question fundamental assumptions concerning its responsibility.
Infrastructure can often be subdivided into core public responsibilities and those that can
admit competition – circumstances varying with technological change. Finally, questions
regarding the sensitive topic of police services are raised.
