PUBLIC PRODUCTION & BUREUCRACY
Market Failure Government intervention Government production? Privatization? Market not competitif Public production of private goods
Alasan incompetitive market Increasing NATURAL MONOPOLY: Public production of private goods Alasan incompetitive market Increasing return to scale only 1 firm natural monopoly, misalnya air (biaya utama: pipa) Price Profit maximizing quantity for monopolist Q* Efficiency competitive market P = MC Qo Tapi timbul masalah subsidi atau P = AC (zero profit point) Demand P Profit per unit = selisih P dg AC Monopolist’s profit AC MC MR Output Q* Q1 Qo
EFFECTS OF SUNK COSTS Sunk costs dpt berfungsi sbg barrier to entry shg monopolist tdk peduli dg new entry dan membebankan P yg max. profit pd MR = MC MULTIPRODUCT NATURAL MONOPOLY P bisa seragam cross subsidy, atau Tdk seragam P lebih tinggi pd demand elasticity rendah dan P yg rendah pd demand elasticity tinggi (lih. Figure 8.2)
REGULATION AND TAXATION (SUBSIDY) Masalah produksi brg publik: Pemerintah Swasta? Dg swasta regulation and subsidy (tax): Kebijakan nasional yg konsisten & efisien Dg pajak dan subsidi dpt memberikan estimasi yg jelas ttg biaya utk mencapai st tujuan. Swasta lbh efisien dibanding pemerintah
SUMBER INEFISIENSI SEKTOR PUBLIK Organizational incentives - Not driven by profit motive - Personnel restrictions: sulit di PHK Procurement restrictions: Pesanan pem. sering ber-tele2 Individual differences - Bureucratic behaviour - Principle-agent problems Bureucratic procedures & risk aversion
CORPORATIZION Government corporation Performance-based organization A GROWING CONCENSUS ON GOVERNMEN ROLE IN PRODUCTION Government should not be involved in the production of ordinary private goods