Public ownership, privatisation, de/regulation of markets

• Nationalisation


  When private sector assets are sold to the public sector, i.e. the government gains control of an industry.
• By nationalising an industry, natural monopolies are created. It is inefficient otherwise. (e.g. more ideal to have one set of water pipes)
• Social welfare might be a priority of a nationalised industry.
• Privatisation 


  Assets are transferred from the public sector to the private sector, i.e. the government sells a firm so that it is no longer in their control.
• Privatisation

  The firm is left to the free market and private individuals.
• Free market economists will argue that the private sector gives firms incentives to operate efficiently, which increases economic welfare. This is due to their profit incentive.
• In the free market, firms want to produce what consumers demand. This increases allocative efficiency and maybe even quality.
• Competition in a free market could result in lower prices.
• By selling an asset, revenue is raised for the government. However, this is only a one-off payment.
• By using regulation, the government could use laws to ban consumers from consuming a good. 


  E.g. minimum school leaving age means young people need to be in education till 16 and education or training till 18; this has positive externalities in the form of a higher skilled workforce.
• Firms which fail to follow regulations could face heavy fines, which acts as a disincentive to break the rule.
• Deregulation


  Act of reducing how much an industry is regulated.
• Deregulation


  Decreases government power and enhances competition.
• Excessive regulation is also called 'red tape'. 


  It can limit the quantity of output that a firm produces.
• Excessive taxes, such as high rate of corporation tax, might discourage firms earning above a certain level of profit, since they do not keep as much of it. This might limit the size that a firm chooses, or is able to, grow to.
• Regulatory capture


  When regulators start acting in the interests of the company, due to impartial information, rather than in consumer interests.
• Without sufficient information, governments could make poor decisions and it could lead to a waste of scarce resources.