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Book Summary

Sclar, Elliot, 2000. You Dont Always Get What You Pay For: The Economics of Privatization. Ithaca, NY: Cornell University Press.

Today, nearly all public services schools, hospitals, prisons, fire departments, sanitation are considered fair game for privatization. Proponents of privatization argue that private firms will respond to competitive market pressures and provide better service at lower cost. While this assertion has caused much controversy, the debate between both sides has consisted mainly of impassioned defenses of entrenched positions.


In You Dont Always Get What You Pay For, Elliot D. Sclar offers a balanced look at the pitfalls and promises of public sector privatization in the United States. By describing the underlying economic dynamics of how public agencies and private organizations actually work together, he provides a rigorous analysis of the assumptions behind the case for privatization.

The competitive-market model may see appealing, but Sclar warns that it does not address the complex reality of contracting for government services. Using specific examples, such as mail service and urban transportation, he shows that privatization ironically does not shrink government the broader goal of many of its own champions. He also demonstrates that there is more to consider in providing public services than trying to achieve efficiency; there are issues of equity that cannot be ignored.


Sclar believes that public officials and voters will soon realize the limitations of contracting out just as private corporations have come to understand the drawbacks of outsourcing. After examining the effectiveness of alternatives to privatization, he offers suggestions for improving public sector performance advice he hopes will be heeded before it is too late.


Chapter 1: The Urge to Privatize:
Sclar gives us a comprehensive overview of the history of privatization, the standard market model and theconnections between competition and privatization.

Chapter 2: What is the Public Buying? Identifying the Contracted Public Good:
Sclar addresses the fundamental choice between the public supply of private goods versus the private supply of public goods.

Chapter 3: Public vs. Private Production: Is One Better and How Would You Know?
This chapter analyzes the cost structure of public and private production using empirical data from Canada, California and Ohio to dispell the myth that private production is more efficient and cost-effective than public production.

Chapter 4: What's Competition Got to Do With It? Market Structures and Public Contracting:
Sclar illustrates aspects of the real-world play of markets and politics that confront efforts to privatize serviceswith examplesthat showthecomplexity of the marketplace in which privatization contracts must be written.

Chapter 5: All in the System: Organizational Theories and Public Contracting:
Sclar addresses three key topics: transaction-cost economics, the new institutional economics and contract theory and practice to suggest a more robust and practical approach to contracting.

Chapter 6: Restructuring Work: The Relational Contract:
Sclar uses the Indianapolis Fleet Service example to demonstrate that a clearer understanding of the problems of public work can lead to reform strategies other than privatization.

Chapter 7: The Privatization of Public Service: Economic Limits of the Contract State:
Sclar brings all of his points together in an attempt to summarize all of the problems with privatization.