PUBLIC SECTOR

PUBLIC SECTOR V PRIVATE SECTOR Public sector: Public sector: everything that is... owned by the g____ for the benefit of all c____. Private sector: everything that is... owned by private i____ for the benefit of the o____.

Discuss the size of public sector in the three types of economies.

Read p 20 (RB) Make word partnerships Public (6) Nationalised (1) Enterprise (2) Goods (2) P. sector, p. goods, p. corporations, utilities, p. ownership, p. service Nationalised industry business enterprise, municipal e. Public g., merit g.

Answer these questions (RB, p 20) 1. What is the public sector (def.) and what does it consist of? 2. Define: a) public goods b) merit goods 3. What is the difference between public corporations and municipal enterprises?

2. a) PUBLIC GOOD: Goods and services provided by the state that can be consumed by everybody in a society. They are 1. Non-rival: (to rival = to compete) 2. Non-excludable: (to exclude somebody = to leave somebody out) one person consuming them doesn’t decrease the amount available to others. if one person can consume them, it is impossible to stop another person from consuming them.

Why does the state have to provide public goods? Non-rival + non-excludable Hard to get people to pay to consume them. Private sector cannot make profit on them. Unprovided by private sector.

ARE THE FOLLOWING PUBLIC OR PRIVATE GOODS? EXPLAIN BY USING THE CONCEPTS: NON-RIVAL & NON-EXCLUDABLE ! Street lights Fireworks Electricity National defence Public roads A hamburger

HOW ARE PUBLIC GOODS PAYED FOR? Taxes (most often) Own profit/surplus (sometimes) Philantropy: donations (rarely)

2. b) MERIT (n., v.) Noun: If sg. has merit, it has good or worthwhile qualities. The film had artistic merit. Verb: Deserve, earn. Such ideas merit careful consideration.

MERIT GOODS: fill in the gaps encourage, private, public, education, consume, consumers, provides Commodities that the ___ sector ___ free or cheaply because the government wishes to ___ their consumption. They are considered to be desirable, uplifting or socially valuable for people to ___. It is thought that ____ would not consume them in sufficent amounts if left to decide for themselves. Underprovided by the ___ sector. E.g.: subsidized housing, higher ____, the opera.

MERIT GOODS: fill in the gaps encourage, private, public, education, consume, consumers, provides Commodities that the public sector provides free or cheaply because the government wishes to encourage their consumption. They are considered to be desirable, uplifting or socially valuable for people to consume. It is thought that consumers would not consume them in sufficent amounts if left to decide for themselves. Underprovided by the private sector. E.g.: subsidized housing, higher education, the opera.

1. Public Corporations 2. Municipal Enterprises Which is run/ owned by... A. local government? B. central government?

PRIVATISATION

Unscramble the definition to state-owned investors selling businesses private Solution: Selling state-owned businesses to private investors.

Resource bank, p. 27 Make notes on sections A, C and D Forms of privatization (A) Ex-Soviet bloc: “mass privatization”  vouchers  Ownership given to workers, managers Capitalist countries:  Auctions  broad public stock offerings  Privatization to lower-income people: e.g., Chile

C and D Advantages of privatization (C, D) Achieve more efficiency in companies More productive economy Raise money for gov. Invigorate, expand local capital markets Attract foreign capital Positive impact on economy: more jobs (D) Disadvantages (D) Layoffs

What are important issues to consider when talking about privatization? The way privatization happens – Corruption? The effects of privatization:  More efficient companies  More productive national economy  A way to raise funds by the government  Loss of jobs, unemployment, workers rights unprotected  Important industries get out of gov. control  Are the interests of the public protected? Which sections on p. 28 discuss these?

Answer these questions (RB, p. 28): 1. What are the “disciplines of the market”? 2. What does “to diversify” mean? 3. What does it mean that the “industry is no longer ‘feather-bedded’?” 4. What did Lord Stockton mean by saying: “selling the family fortune to pay the butcher’s bill”?