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2 INTRODUCTION
countries. Privatization programs were also systematically criticized for
the rents they generated among the acquirers of state assets. Mass privati-
zation in Rus sia, for example, fell under attack for fabulously enriching a
small group of very powerful oligarchs in a very short period. Accusations
of corruption and cronyism have stained the reputation of privatization
programs in many countries. More blandly, the effi ciency improvements
expected from privatization have often been hard to detect or altogether
absent.
In the spirit of the mission of the Initiative for Policy Dialogue (IPD),
this volume, developed by the IPD Privatization Task Force, brings together
some of the world’s foremost experts on the subject. In the following es-
says, the contributors present their knowledge about privatization not just
for an academic world, but also for a far wider audience. It would be pre-
sumptuous to assert that every single topic is covered, but the reader of
this volume will fi nd a comprehensive overview of the issues associated
with privatization as well as coverage of specifi c privatization projects un-
dertaken in different continents.
One of the main reasons that privatization programs were fi rst pushed
forward is the disappointment with the economic per for mance of SOEs.
The proposition that private ownership is eco nom ical ly more effi cient
than state ownership might appear uncontroversial to the outside ob-
server, yet this has not been the case in economic theory. In chapter 1,
Gérard Roland reviews the economic literature on private and public own-
ership. Citing in par tic u lar general equilibrium theory—one of the cen-
tral components of economic theory—Roland explains how own ership of
fi rms act in a manner that maxi- rms plays no role at all, provided the fi
mizes their profi rms face a perfectly com- ts. What matters most is that fi
petitive environment. In traditional industrial or ga niza tion theory, there
is a priori not much difference between a natural monopoly under gov-
ernment own ership and one under private ownership with government
regulation. It has really only been in the last decades—with the advent of
contract theory—that one has been able to pin down differences between
private and public own ership in the context of imperfect competition.
One branch of contract theory, complete contract theory, emphasizes the
differences in information under public and private own ership and how
they affect the incentives of the fi rms. Incomplete contract theory at-
taches great importance to own ership as residual rights of control in situa-
tions not provided for by the contract. The picture that emerges is that
private ownership gives better incentives to invest, to innovate, to reduce
