Economics and Management of Privatization (Econ. 3511/1), Spring 2012.

Tuesday, Thursday 2:00-3:20, Titleman 400AB

Instructor: Professor Simon Hakim

  1. Description of the Course

The course centers on the contemporary trend of government shedding non-public services and contracting-out (outsourcing) public services to competitive markets. This is part of the general trend where business and non-business entities concentrate on their main mission while contracting out peripheral services to companies that concentrate on those specific services. By so doing, greater competition in the provision of these peripheral services leads to more efficient production, technological and managerial innovations, and economies of scale of the producing firms. Privatization and Public Private Partnerships (PPP) enable better utilization of the financial markets, expertise of private providers, and dissemination of innovations from the private to the public sector.

The course incorporates both public finance theory and case studies in the security industry, transportation, water and wastewater, education, prisons, and welfare services.

  1. Goals of Course, and methods to Achieve them
  1. Learn the theory and practices for government’s role in the economy

Methods: Lectures. Exams include case studies, Harvard Style) for public decision-making.

  1. Improve students’ independent research ability.

Methods: Introduce the students to a research process, and a planning style structure of paper. See, Economics and Management of Privatization (#4 from top).

  1. Objectives of the Course
  • Introducethe attributes of services where shedding, contracting out, and PPP are possible, and the financial and managerial nature of such reorganizations. The theory will guide in the selection of efficient reorganization models.
  • Review ‘best practices’ of the shift from public to private ownership, finance, and/or delivery of services.
  • Help students conduct independent assessment of a public service reorganization effort.
  1. Subjects of the Course
  • Public Finance theory on the attributes of public goods, and criteria for privatization.
  • Managerial and financial methods on efficient transfer of services and the choice of the preferred PPP model.
  • Review of privatization and PPP case studies. Evaluation of successful and unsuccessful experiences, and lessons for public and private policy makers.
  1. Bibliography

E. S. Savas, 2000. Privatization and Public-Private Partnerships. Seven Bridges Press, Chatham House Publishers, New York.

Our publications and Power Point presentations: and on Blackboard for the course.

Also, see the presentations: (under Economics 3511)

  1. Course Requirements

Requirements include one major paper, presentation of the paper, participation in the debates, and an exam. Attendance is required. In case that a student misses a class it is his/her responsibility to contact another student or the instructor to get the noted of the missed class, and the requirements for the forthcoming meetings. The final grade depends upon the completion of all requirements.

The paper should deal with a particular field of privatization. Joint work in teams of 2-4 students is welcomed. "Power Point" presentations are most desired. I suggest choosing a subject matter from the Center’s publication list. Final paper is required in hardcopyby December 1, 2011. No extensions will be offered.

The teams must present the research findings in class. The paper should be structured as a regular scientific article including division to sections, informative title for the paper and for all sections, fully cited references, and footnotes. The paper should be 8 to 14 pages, and double spaced.

  1. Structure of Paper:
  1. Cover page: Name, course, term, contact information
  2. Abstract: problem, significance of problem, client, research question, major findings
  3. Introduction: problem, significance of problem, client, research questions, contents of sections.
  4. Background or literature review or historical review.
  5. Description of alternatives. Include a summary table.
  6. Evaluation of alternatives. Include a summary table with costs and benefits.
  7. Summary and conclusions. Include the choice of the preferred alternative and rationale. Summary and policy implications.
  8. References used in the paper.

Within two weeks, students are required to submit a proposal for the term paper which includes

  • The subject of the paper. 5 to 10 sentences that summarize the paper.
  • The planned sections of the paper and 2-3 sentences outlying the contents of each section.

-Fully cited references that will be used.

The structure of the paper, the references can be changed in the course of the work.

  1. Debates

Two debates will take place. The suggested topics are exposing schools to markets (contracting out school management, vouchers, educational alternatives, charter schools etc.) and privatization of prisons. Ground rules for the debate:

  • Dividing the class to three teams: for and against privatization, and the court.
  • Each side prepares the opening statement which is e-mailed at least two days prior to the debate to the entire class.
  • The court may establish its own rules and e-mail it to the class.
  • Evidence should be prepared and submitted to the other side and the court after made at the debate.
  • The court has complete control of the debate. It starts with the opening statements of each side, followed by the arguments that appeared in the opening statement, concluding statements by each side.
  • The court prepares and sends e-mail with its:

1.Summary of the main issues raised by both sides

2.The winner by two categories—the issue and the level of preparation and presentations by both teams

3.An e-mail to the instructor with grades for each participant in the debate.

  1. Schedule of Classes

First week

In the first meeting the requirements of the course will be discussed. Suggestions will be made for the required papers.

Roland, Gerard, 2008. Privatization: Success or Failure, Columbia University Press, New York, New York. Read the Forward by Joseph Stieglitz, and the Introduction by Gerard Roland.

Second Week

Principles of privatization: Public Finance theory. Characteristics of public goods, when and at what level is government intervention necessary. Introduction of Bowman et al.1992. Chapters 1 through 3 in Savas, 2000.

Third week

Dichotomy of privatization. Savas,E.S. 1992. "Privatization", in Encyclopedia of Government and Politics, vol. 2, New York: Routledge, pp. 821-836. The process held for privatization. U.S. General Accounting Office, Privatization: lessons learned by State and Local Governments, March 1997 (on reserve).

Forth Week

Public-private Partnerships, Contracting out

Fifth Week

Review of privatization efforts

Privatizing transportation systems: airports, water ports, highways, and mass transit.

Highways: Peter Samuel, "Highway Aggravation: The case for privatizing the highways. Eduardo Engel, A new Approach to Private Roads, Regulation Magazine, 2002.

Buses:

Seventh Week

Educational choice: theory, types of choice, experiences, and lessons. Reference 4. Chapters 1,6, and 15.

Ref.:

Herbert Walberg, School Choice: The Findings, Cato Institute, Washington, D.C. 2007.

Debate: Public - private educational choice, voucher system, privatization of schools, state’s take-over of schools.

Midterm exam

Eighth Week

Review of privatization efforts

Child Welfare: See our two articles in the Publications section on the Center’s web Page: The Cato Journal, and Children and Youth Services Review. See also at the bottom of website the links to other articles on adoption and foster care.

  • U.S. Department of Health and Human Services, Administration for children and Families, The AFCARS Report, June 2001.
  • U.S. Department of Justice, Office of Juvenile Justice and Delinquency Prevention, “Family Disruption and Delinquency”, Juvenile Justice Bulletin, September 1999.
  • Richard P. Barth, “Effects of Age and Race on the Odds of Adoption versus Remaining in Long-Term Out-Of-Home Care,” Child Welfare, March/April 1997.
  • The Evan B. Donaldson Adoption Institute, Adoption in the U.S., October 2000.
  • Conna Craig et al., “Blueprint for the Privatization of Child Welfare”, Reason Public Policy Institute, Policy Study No. 248, December 1998.

Ninth-tenth-Eleventh Weeks

Review of privatization efforts: police, correctional institution, homeland security

Privatizing the justice system-- police, adjudication, and corrections. False alarm and private response. See on our web site under publications the articles in Regulation, the Cato Review of Business and Government, Privatization Watch, Evaluation and Program Planning, and the Milken Review: A Journal of Economic Policy. Also see the discussion Papers under Publications, Articles:

Police:Bowman, Hakim, and Seidenstat. Privatizing the US Justice System. See,

Erwin Blackstone, and Simon Hakim. 1996 Police Services: The Private Challenge. Independent Institute Report, Oakland, CA.

Erwin Blackstone, and Simon Hakim. 1996. "Crying wolf with public safety". AmericanCity and CountyMagazine. August: 54-64.

Homeland Security: First chapter: Safeguarding the Homeland: Governors & Mayors Speak Out.

The rest of the semester is devoted to students' presentations of their long-term papers.

  1. Course Requirements

Midterm Exam 35 percent

Debates, class participation15

Presentation of final paper10

Final paper40

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