nationalisation

• what is nationalisation?

  the process of taking an industry into public ownership by the government where they run the industry
• arguments in favour of nationalisation?

  • greater economies of scale > productive efficiency >lower costs>lower prices>higher surplus
  • more focus on service provision > allocative efficiency > maximising consumers interest
  • less likely to be market failure from externalities
• arguments against nationalisation

  • risk of diseconomies of scale if government is dominating a large state run monopoly
  • lack of incentive to minimise costs > risk of waste > higher costs > x inefficiency
  • higher prices due to low competition ( monopoly outcome that we are trying to avoid )
  • no innovation as there is no supernormal profit > dynamic inefficiency
  • greater risk of moral hazard ( when individuals that take the risks do not bear the costs of risk but rather by third party)
• evaluation points

  • depends upon funding vs delivery it is expensive however the public gets better delivery of key public services