The Control and Performance of State-Owned Enterprises

Abstract

Society organizes economic activity in different forms chosen in response to varying transaction costs. If owners of enterprises could choose freely among organizational forms, we might expect that the forms observed in particular areas — say between partnership and corporation or small business and monolithic enterprise — were well chosen. Even if such choices were not made consciously, but any form could compete in any arena, forces of natural selection would push toward optimality.¹

Darryll Hendricks and Scott Feira provided able research assistance. Nancy Jackson, Kevin J. Murphy, Sam Peltzman and participants in the Conference on Privatization in Britain and North America (Washington, D.C., November 1987) gave us helpful comments. We would also like to thank Preston Robert Tisch (Postmaster General, U.S. Postal Service) and W. Graham Claytor, Jr. (Chairman and President of Amtrak), both of whom we interviewed in November 1987 as part of this research. Zeckhauser’s more general research on business-government relationships is sponsored by the Business and Government Center, Harvard University.