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Book Summary

Savas, E. S. 1987. Privatization: The Key to Better Government. Chatham, NJ: Chatham House.

Savas is a proponent of privatization and this book provides a theoretical basis and a positive review of strategies to achieve privatization. Savas views privatization as a strategy to bring about lasting improvements in the management and performance of government. The nature of public goods and services limits the ability to privatize delivery, but Savas provides evidence of when this is possible (Chapter 3).

The author then reviews alternative service arrangements for providing goods and services. Distinctive attributes of goods and of the market of potential service providers are used to demonstrate conditions under which each privatization alternative works best (Chapter 4, 5).

In the second half of the book, Savas provides an extensive literature review (as of 1987) of empirical studies that compare different service delivery arrangements and describe particularly interesting or thought-provoking examples of privatization (Chapter 6, 7). For a conscientious public official, four broad strategies are suggested to implement privatization; load shedding, adopting arrangements that have minimal government involvement, instituting user charges, and introducing competition (Chapter 8, 9, 10).

The book is divided into four parts; the background, theory, and practice of privatization, and steps toward successful privatization. The problems with privatization are not given major attention since Savas is an advocate.

Part One: The Background for Privatization

Chapter 1: Introduction
This chapter defines privatization and discusses several major forces leading to privatization

Chapter 2: The Growth of Government
The size and growth of government in the U.S. are discussed in this chapter along with reasons why governments grow.

Part Two: The Theory of Privatization

Chapter 3: Basic Characteristics of Goods and Services
Good and services can be classified by two important concepts, exclusion (exclusion or nonexclusion) and consumption (joint or individual). Understanding the type of good (private, toll, common-pool, collective goods) helps to determine the proper roles of government and private sector. While private and toll goods can be supplied by the market, common-pool and collective goods require collective action more appropriate to the public sector.

Chapter 4: Alternative Arrangements for Providing Goods and Services
Ten different arrangements of service delivery are analyzed; direct government provision, intergovernmental provision, franchising, contracting, vouchers, grants, self-service, marketplace, government vending.

Chapter 5: An Analysis and Comparison of Alternative Arrangements
Advantages and disadvantages of each arrangement are pointed out, and the question of which arrangement to use when there is a choice is decreased.

Part Three: Privatization in Practice

Chapter 6: Applications in Physical and Commercial Services
Privatized arrangements like contracts are more efficient in solid waste collection, transportation, and street services, as these are private or toll goods. Water supply, communication, or state owned property, even though historically public goods, may be provided efficiently through private provision.

Chapter 7: Applications in Protective and Human Services
Although government is interested in the fundamental safety of citizens, privatization has been successfully applied to protective and human services, such as public safety, national defense, health care, education, and social services. Vouchers, market arrangements, and contracting have been used. Contracting is the most common.

Part Four: Toward Successful Privatization

Chapter 8: How to Privatize
Four broad strategies are introduced to implement privatization: load shedding, adopting arrangements that have minimal government involvement, instituting user charges, and introducing competition.

Chapter 9: Problems with Privatization
Each privatized arrangement requires certain conditions in order to be successful and fully effective. Many of the problems reported for human service contracts result from the difficulty of specifying the desired results of the services and from faulty implementation. Political, bureaucratic, and employee resistance must be overcome. There may be legal impediments to novel arrangements and problems with long term contracts.

Chapter 10: Conclusion