Publish or perish

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Publish_or_perish

"Publish or perish" is an aphorism describing the pressure to publish academic work in order to succeed in an academic career. Such institutional pressure is generally strongest at research universities. Some researchers have identified the publish or perish environment as a contributing factor to the replication crisis.

Successful publications bring attention to scholars and their sponsoring institutions, which can help continued funding and their careers. In popular academic perception, scholars who publish infrequently, or who focus on activities that do not result in publications, such as instructing undergraduates, may lose ground in competition for available tenure-track positions. The pressure to publish has been cited as a cause of poor work being submitted to academic journals. The value of published work is often determined by the prestige of the academic journal it is published in. Journals can be measured by their impact factor (IF), which is the average number of citations to articles published in a particular journal over the last two years.

Academic opinion

The pressure to publish has been strongly criticized on the basis that over-emphasis on publishing may decrease the value of resulting scholarship, as scholars must spend more time scrambling to publish whatever they can get into print, rather than spending time developing significant research agendas. Similarly, humanities scholar Camille Paglia has described the publish or perish paradigm as "tyranny" and further writes that "The [academic] profession has become obsessed with quantity rather than quality. ... One brilliant article should outweigh one mediocre book."

The pressure to publish or perish also detracts from the time and effort professors can devote to teaching undergraduate courses and mentoring graduate students. The rewards for exceptional teaching rarely match the rewards for exceptional research, which encourages faculty to favor the latter whenever they conflict.

Also, publish-or-perish is linked to scientific misconduct or at least questionable ethics. It has also been argued that the quality of scientific work has suffered due to publication pressures. Physicist Peter Higgs, namesake of the Higgs boson, was quoted in 2013 as saying that academic expectations since the 1990s would likely have prevented him from both making his groundbreaking research contributions and attaining tenure: "It's difficult to imagine how I would ever have enough peace and quiet in the present sort of climate to do what I did in 1964 ... Today I wouldn't get an academic job. It's as simple as that. I don't think I would be regarded as productive enough."

According to some researchers, the publish or perish culture might also perpetuate bias in academic institutions. Overall, women publish less frequently than men, and when they do publish their work receives fewer citations than their male counterparts, even when it is published in journals with significantly higher impact factors. Furthermore, one study pointed out that gaps in the promotion and progress of women in academic medicine may be significantly influenced by gender-based variances in article citations.

Research-oriented universities may attempt to manage the unhealthy aspects of the publish or perish practices, but their administrators often argue that some pressure to produce cutting-edge research is necessary to motivate scholars early in their careers to focus on research advancement, and learn to balance its achievement with the other responsibilities of the professorial role. The call to abolish tenure is very much a minority opinion in such settings.

Variants

The MIT Media Lab's director Nicholas Negroponte instituted the motto "demo or die", privileging demonstrations over publication. Another director, Joi Ito, modified this to "deploy or die", emphasizing the adoption of the technology.

In popular culture

In 2024, card game "Publish or Perish" attracted more that 280,000 dollars founding at Kickstarter. In this game players are aimed to publish articles of moderate quality to get more citations.

More Information

The earliest known use of the term in an academic context was in a 1928 journal article. The phrase appeared in a non-academic context in the 1932 book, Archibald Cary Coolidge: Life and Letters, by Harold Jefferson Coolidge. In 1938, the phrase appeared in a college-related publication. According to Eugene Garfield, the expression first appeared in an academic context in Logan Wilson's book, "The Academic Man: A Study in the Sociology of a Profession", published in 1942. Others have attributed the phrase to Columbia University geneticist Kimball C. Atwood III.

Dunning–Kruger effect

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect

Relation between average self-perceived performance and average actual performance on a college exam. The red area shows the tendency of low performers to overestimate their abilities. Nevertheless, low performers' self-assessment is lower than that of high performers.

The Dunning–Kruger effect is a cognitive bias that describes the systematic tendency of people with low ability in a specific area to give overly positive assessments of this ability. The term may also describe the tendency of high performers to underestimate their skills. It was first described by the psychologists David Dunning and Justin Kruger in 1999. In popular culture, the Dunning–Kruger effect is sometimes misunderstood as claiming that people with low intelligence are generally overconfident, instead of describing the specific overconfidence of people unskilled at particular areas.

The Dunning–Kruger effect has been demonstrated across multiple studies in a wide range of tasks from fields such as business, politics, medicine, driving, aviation, spatial memory, examinations in school, and literacy. The original study by Dunning and Kruger focused on logical reasoning, grammar, and social skills. The effect is usually measured by comparing self-assessment with objective performance. For example, participants may take a quiz and estimate their performance afterward, and their estimates are then compared to their actual results.

A number of explanations for, and criticisms of, the Dunning–Kruger effect have been proposed. The metacognitive explanation holds that poor performers misjudge their abilities because they lack the ability to recognize the qualitative difference between their performances and the performances of others. The statistical explanation holds that the empirical effect may largely be the result of a mere statistical effect and the fact that people have a general tendency to think that one is better than average. The rational explanation holds that overly positive prior beliefs about one's skills are the source of false self-assessment. Another explanation claims that self-assessment is more difficult and error-prone for low performers because many of them have very similar skill levels.

There is also disagreement about where the effect applies and about how strong it is, as well as about the practical consequences of the effect. Inaccurate self-assessment could potentially lead people to making bad decisions, such as choosing a career for which they are unfit, engaging in dangerous behavior, and inhibiting people from addressing their shortcomings to improve themselves.

Definition

The Dunning–Kruger effect is the tendency of people with low ability in a specific area to give overly positive assessments of this ability. This is often seen as a cognitive bias, that is, a systematic tendency to engage in erroneous forms of thinking and judging. In the case of the Dunning–Kruger effect, the systematic error concerns people with low skill in a specific area trying to evaluate their competence within this area and their tendency to greatly overestimate their competence.

The Dunning–Kruger effect is usually defined specifically for the self-assessments of people with a low level of competence. But some theorists do not only restrict it to the bias of people with low skill but also use it to describe the reverse effect, the tendency of highly skilled people to underestimate their abilities relative to the abilities of others. In this case, the source of the error may not be the self-assessment of one's skills, but an overly positive assessment of the skills of others. This phenomenon can be understood as a form of the false-consensus effect, the tendency to "overestimate the extent to which other people share one's beliefs, attitudes, and behaviours".

Not knowing the scope of your own ignorance is part of the human condition. The problem with it is we see it in other people, and we don't see it in ourselves. The first rule of the Dunning–Kruger club is you don't know you're a member of the Dunning–Kruger club.

David Dunning

Some researchers include a metacognitive component in their definition. In this view, the Dunning–Kruger effect is the thesis that those who are incompetent in a given area tend to be ignorant of their incompetence; they lack the metacognitive ability to become aware of their incompetence. As incompetence often includes being unable to tell the difference between competence and incompetence, it is difficult for the incompetent to recognize their incompetence. This is sometimes termed the "dual-burden" account, since low performers are affected by two burdens: they lack a skill and they are unaware of this deficiency. Other definitions focus on the tendency to overestimate one's ability and see the relation to metacognition as a possible explanation that is not part of the definition. This contrast is relevant since the metacognitive explanation is controversial. Many criticisms of the Dunning–Kruger effect target this explanation but accept the empirical findings that low performers tend to overestimate their skills.

Among laypeople, the Dunning–Kruger effect is often misunderstood as the claim that people with low intelligence are more confident in their knowledge and skills than people with high intelligence. According to psychologist Robert D. McIntosh and his colleagues, it is sometimes understood in popular culture as the claim that "stupid people are too stupid to know they are stupid". But the Dunning–Kruger effect applies not to intelligence in general but to skills in specific tasks. Nor does it claim that people lacking a given skill are as confident as high performers. Rather, low performers overestimate themselves but their confidence level is still below that of high performers.

Measurement, analysis, and investigated tasks

Performance at an exam with 45 questions, measured first in relation to the peer group (top) and then in relation to the number of questions answered correctly (bottom). The diagram shows the average performance of the groups corresponding to each quartile.

The most common approach to measuring the Dunning–Kruger effect is to compare self-assessment with objective performance. The self-assessment is sometimes called subjective ability in contrast to the objective ability corresponding to the actual performance. The self-assessment may be done before or after the performance. If done afterward, the participants receive no independent clues during the performance as to how well they did. Thus, if the activity involves answering quiz questions, no feedback is given as to whether a given answer was correct.

The measurement of the subjective and the objective abilities can be in absolute or relative terms. When done in absolute terms, self-assessment and performance are measured according to objective standards, e.g. concerning how many quiz questions were answered correctly. When done in relative terms, the results are compared with a peer group. In this case, participants are asked to assess their performances in relation to the other participants, for example in the form of estimating the percentage of peers they outperformed. The Dunning–Kruger effect is present in both cases, but tends to be significantly more pronounced when done in relative terms; people are usually less accurate when assessing how well they did relative to their peer group than when simply predicting their raw score.

The main point of interest for researchers is usually the correlation between subjective and objective ability. To provide a simplified form of analysis of the measurements, objective performances are often divided into four groups. They start from the bottom quartile of low performers and proceed to the top quartile of high performers. The strongest effect is seen for the participants in the bottom quartile, who tend to see themselves as being part of the top two quartiles when measured in relative terms.

The initial study by David Dunning and Justin Kruger examined the performance and self-assessment of undergraduate students in inductive, deductive, and abductive logical reasoning; English grammar; and appreciation of humor. Across four studies, the research indicates that the participants who scored in the bottom quartile overestimated their test performance and their abilities. Their test scores placed them in the 12th percentile, but they ranked themselves in the 62nd percentile. Other studies focus on how a person's self-view causes inaccurate self-assessments. Some studies indicate that the extent of the inaccuracy depends on the type of task and can be improved by becoming a better performer.

Overall, the Dunning–Kruger effect has been studied across a wide range of tasks, in aviation, business, debating, chess, driving, literacy, medicine, politics, spatial memory, and other fields. Many studies focus on students—for example, how they assess their performance after an exam. In some cases, these studies gather and compare data from different countries. Studies are often done in laboratories; the effect has also been examined in other settings, including assessments of hunters' knowledge of firearms and large Internet surveys.

Explanations

Various theorists have tried to provide models to explain the Dunning–Kruger effect's underlying causes. The original explanation by Dunning and Kruger holds that a lack of metacognitive abilities is responsible. This interpretation is not universally accepted, and many alternative explanations have been proposed. Some of them focus only on one specific factor, while others see a combination of various factors as the cause.

Metacognitive

The metacognitive explanation rests on the idea that part of acquiring a skill consists in learning to distinguish between good and bad performances of the skill. It assumes that people of low skill level are unable to properly assess their performance because they have not yet acquired the discriminatory ability to do so. This leads them to believe that they are better than they actually are because they do not see the qualitative difference between their performance and that of others. In this regard, they lack the metacognitive ability to recognize their incompetence. This model has also been called the "dual-burden account" or the "double-burden of incompetence", since the burden of regular incompetence is paired with the burden of metacognitive incompetence. The metacognitive lack may hinder some people from becoming better by hiding their flaws from them. This can then be used to explain how self-confidence is sometimes higher for unskilled people than for people with an average skill: only the latter are aware of their flaws.

Some attempts have been made to measure metacognitive abilities directly to examine this hypothesis. Some findings suggest that poor performers have reduced metacognitive sensitivity, but it is not clear that its extent is sufficient to explain the Dunning–Kruger effect. Another study concluded that unskilled people lack information but that their metacognitive processes have the same quality as those of skilled people. An indirect argument for the metacognitive model is based on the observation that training people in logical reasoning helps them make more accurate self-assessments. Many criticisms of the metacognitive model hold that it has insufficient empirical evidence and that alternative models offer a better explanation.

Statistical and better-than-average effect

Simulated data of the relation between subjective (self-assessed) and objective IQ. The upper diagram shows the individual data points and the lower one shows the averages of the different IQ groups. This simulation is based only on the statistical effect known as the regression toward the mean together with the better-than-average effect. Proponents of the statistical explanation use it to support their claim that these two factors are sufficient to explain the Dunning–Kruger effect.

A different interpretation is further removed from the psychological level and sees the Dunning–Kruger effect as mainly a statistical artifact. It is based on the idea that the statistical effect known as regression toward the mean explains the empirical findings. This effect happens when two variables are not perfectly correlated: if one picks a sample that has an extreme value for one variable, it tends to show a less extreme value for the other variable. For the Dunning–Kruger effect, the two variables are actual performance and self-assessed performance. If a person with low actual performance is selected, their self-assessed performance tends to be higher.

Most researchers acknowledge that regression toward the mean is a relevant statistical effect that must be taken into account when interpreting the empirical findings. This can be achieved by various methods. Some theorists, like Gilles Gignac and Marcin Zajenkowski, go further and argue that regression toward the mean in combination with other cognitive biases, like the better-than-average effect, can explain most of the empirical findings. This type of explanation is sometimes called "noise plus bias".

According to the better-than-average effect, people generally tend to rate their abilities, attributes, and personality traits as better than average. For example, the average IQ is 100, but people on average think their IQ is 115. The better-than-average effect differs from the Dunning–Kruger effect since it does not track how the overly positive outlook relates to skill. The Dunning–Kruger effect, on the other hand, focuses on how this type of misjudgment happens for poor performers. When the better-than-average effect is paired with regression toward the mean, it shows a similar tendency. This way, it can explain both that unskilled people greatly overestimate their competence and that the reverse effect for highly skilled people is much less pronounced. This can be shown using simulated experiments that have almost the same correlation between objective and self-assessed ability as actual experiments.

Some critics of this model have argued that it can explain the Dunning–Kruger effect only when assessing one's ability relative to one's peer group. But it may not be able to explain self-assessment relative to an objective standard. A further objection claims that seeing the Dunning–Kruger effect as a regression toward the mean is only a form of relabeling the problem and does not explain what mechanism causes the regression.

Based on statistical considerations, Nuhfer et al. arrive at the conclusion that there is no strong tendency to overly positive self-assessment and that the label "unskilled and unaware of it" applies only to few people. Science communicator Jonathan Jarry makes the case that this effect is the only one shown in the original and subsequent papers. Dunning has defended his findings, writing that purely statistical explanations often fail to consider key scholarly findings while adding that self-misjudgements are real regardless of their underlying cause.

Rational

The rational model of the Dunning–Kruger effect explains the observed regression toward the mean not as a statistical artifact but as the result of prior beliefs. If low performers expect to perform well, this can cause them to give an overly positive self-assessment. This model uses a psychological interpretation that differs from the metacognitive explanation. It holds that the error is caused by overly positive prior beliefs and not by the inability to correctly assess oneself. For example, after answering a ten-question quiz, a low performer with only four correct answers may believe they got two questions right and five questions wrong, while they are unsure about the remaining three. Because of their positive prior beliefs, they will automatically assume that they got these three remaining questions right and thereby overestimate their performance.

Distribution of high and low performers

Another model sees the way high and low performers are distributed as the source of erroneous self-assessment. It is based on the assumption that many low performers' skill levels are very similar, i.e., that "many people [are] piled up at the bottom rungs of skill level". This would make it much more difficult for them to accurately assess their skills in relation to their peers. According to this model, the reason for the increased tendency to give false self-assessments is not a lack of metacognitive ability but a more challenging situation in which this ability is applied. One criticism of this interpretation is directed against the assumption that this type of distribution of skill levels can always be used as an explanation. While it can be found in various fields where the Dunning–Kruger effect has been researched, it is not present in all of them. Another criticism holds that this model can explain the Dunning–Kruger effect only when the self-assessment is measured relative to one's peer group, but that it may fail when it is measured relative to absolute standards.

Lack of incentive

A further explanation, sometimes given by theorists with an economic background, focuses on the fact that participants in the corresponding studies lack incentive to give accurate self-assessments. In such cases, intellectual laziness or a desire to look good to the experimenter may motivate participants to give overly positive self-assessments. For this reason, some studies were conducted with additional incentives to be accurate. One study gave participants a monetary reward based on how accurate their self-assessments were. These studies failed to show any significant increase in accuracy for the incentive group in contrast to the control group.  

Practical significance

There are disagreements about the Dunning–Kruger effect's magnitude and practical consequences as compared to other psychological effects. Claims about its significance often focus on how it causes affected people to make decisions that have bad outcomes for them or others. For example, according to Gilles E. Gignac and Marcin Zajenkowski, it can have long-term consequences by leading poor performers into careers for which they are unfit. High performers underestimating their skills, though, may forgo viable career opportunities matching their skills in favor of less promising ones that are below their skill level. In other cases, the wrong decisions can also have short-term effects. For example, Pavel et al. hold that overconfidence can lead pilots to operate a new aircraft for which they lack adequate training or to engage in flight maneuvers that exceed their proficiency.

Emergency medicine is another area where the correct assessment of one's skills and the risks of treatment matters. According to Lisa TenEyck, the tendencies of physicians in training to be overconfident must be considered to ensure the appropriate degree of supervision and feedback. Schlösser et al. hold that the Dunning–Kruger effect can also negatively affect economic activities. This is the case, for example, when the price of a good, such as a used car, is lowered by the buyers' uncertainty about its quality. An overconfident buyer unaware of their lack of knowledge may be willing to pay a much higher price because they do not take into account all the potential flaws and risks relevant to the price.

Another implication concerns fields in which researchers rely on people's self-assessments to evaluate their skills. This is common, for example, in vocational counseling or to estimate students' and professionals' information literacy skills. According to Khalid Mahmood, the Dunning–Kruger effect indicates that such self-assessments often do not correspond to the underlying skills. It implies that they are unreliable as a method for gathering this type of data. Regardless of the field in question, the metacognitive ignorance often linked to the Dunning–Kruger effect may inhibit low performers from improving themselves. Since they are unaware of many of their flaws, they may have little motivation to address and overcome them.

Not all accounts of the Dunning–Kruger effect focus on its negative sides. Some also concentrate on its positive sides, e.g. that ignorance is sometimes bliss. In this sense, optimism can lead people to experience their situation more positively, and overconfidence may help them achieve even unrealistic goals. To distinguish the negative from the positive sides, two important phases have been suggested to be relevant for realizing a goal: preparatory planning and the execution of the plan. According to Dunning, overconfidence may be beneficial in the execution phase by increasing motivation and energy. However it can be detrimental in the planning phase since the agent may ignore bad odds, take unnecessary risks, or fail to prepare for contingencies. For example, being overconfident may be advantageous for a general on the day of battle because of the additional inspiration passed on to his troops. But it can be disadvantageous in the weeks before by ignoring the need for reserve troops or additional protective gear.

Historical precursors of the Dunning–Kruger effect were expressed by theorists such as Charles Darwin ("Ignorance more frequently begets confidence than does knowledge") and Bertrand Russell ("...in the modern world the stupid are cocksure while the intelligent are full of doubt"). In 2000, Kruger and Dunning were awarded the satirical Ig Nobel Prize in recognition of the scientific work recorded in "their modest report".

Privatization

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Privatization 

Privatization (rendered privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when a heavily regulated private company or industry becomes less regulated. Government functions and services may also be privatised (which may also be known as "franchising" or "out-sourcing"); in this case, private entities are tasked with the implementation of government programs or performance of government services that had previously been the purview of state-run agencies. Some examples include revenue collection, law enforcement, water supply, and prison management.

Another definition is that privatization is the sale of a state-owned enterprise or municipally owned corporation to private investors; in this case shares may be traded in the public market for the first time, or for the first time since an enterprise's previous nationalization. This type of privatization can include the demutualization of a mutual organization, cooperative, or public-private partnership in order to form a joint-stock company.

Separately, privatization can refer to the purchase of all outstanding shares of a publicly traded company by private equity investors, which is more often called "going private". Before and after this process the company is privately owned, but after the buyout its shares are withdrawn from being traded at a public stock exchange.

Etymology

The term privatizing first appeared in English, with quotation marks, in the New York Times, in April 1923, in a translation of a German speech referring to the potential for German state railroads to be bought by American companies. In German, the word Privatisierung has been used since at least the 19th century. Ultimately, the word came to German through French from the Latin privatus.

The term reprivatization, again translated directly from German (Reprivatisierung), was used frequently in the mid-1930s as The Economist reported on Nazi Germany's sale of nationalized banks back to public shareholders following the 1931 economic crisis.

The word became common in the late 1970s and early 1980s as part of UK prime minister Margaret Thatcher's economic policies. She was drawing on the work of the pro-privatization Member of Parliament David Howell, who was himself drawing on the Austrian-American management expert Peter Drucker's 1969 book, The Age of Discontinuity.

Definition

The word privatization may mean different things depending on the context in which it is used. It can mean moving something from the public sphere into the private sphere, but it may also be used to describe something that was always private, but heavily regulated, which becomes less regulated through a process of deregulation. The term may also be used descriptively for something that has always been private, but could be public in other jurisdictions.

There are also private entities that may perform public functions. These entities could also be described as privatized. Privatization may mean the government sells state-owned businesses to private interests, but it may also be discussed in the context of the privatization of services or government functions, where private entities are tasked with the implementation of government programs or the performance of government services. Gillian E. Metzger has written that: "Private entities [in the US] provide a vast array of social services for the government; administer core aspects of government programs; and perform tasks that appear quintessentially governmental, such as promulgating standards or regulating third-party activities." Metzger mentions an expansion of privatization that includes health and welfare programs, public education, and prisons.

Privatization can also refer to the transfer of something out of other forms of collective or communal ownership besides state ownership, such as occurs in enclosure of manorial land.

History

See also: List of privatizations

Pre-20th century

The history of privatization dates from Ancient Greece, when governments contracted out almost everything to the private sector. In the Roman Republic private individuals and companies performed the majority of services including tax collection (tax farming), army supplies (military contractors), religious sacrifices and construction. However, the Roman Empire also created state-owned enterprises—for example, much of the grain was eventually produced on estates owned by the Emperor. David Parker and David S. Saal suggest that the cost of bureaucracy was one of the reasons for the fall of the Roman Empire.

Perhaps one of the first ideological movements towards privatization came during China's golden age of the Han dynasty. Taoism came into prominence for the first time at a state level, and it advocated the laissez-faire principle of Wu wei (無為), literally meaning "do nothing". The rulers were counseled by the Taoist clergy that a strong ruler was virtually invisible.

During the Renaissance, most of Europe was still by and large following the feudal economic model. By contrast, the Ming dynasty in China began once more to practice privatization, especially with regards to their manufacturing industries. This was a reversal of the earlier Song dynasty policies, which had themselves overturned earlier policies in favor of more rigorous state control.

In Britain, the privatization of common lands is referred to as enclosure (in Scotland as the Lowland Clearances and the Highland Clearances). Significant privatizations of this nature occurred from 1760 to 1820, preceding the Industrial Revolution in that country.

20th century onwards

The first mass privatization of state property occurred in Nazi Germany between 1933 and 1937: "It is a fact that the government of the National Socialist Party sold off public ownership in several state-owned firms in the middle of the 1930s. The firms belonged to a wide range of sectors: steel, mining, banking, local public utilities, shipyard, ship-lines, railways, etc. In addition to this, delivery of some public services produced by public administrations prior to the 1930s, especially social services and services related to work, was transferred to the private sector, mainly to several organizations within the Nazi Party."

Great Britain privatized its steel industry in the 1950s, and the West German government embarked on large-scale privatization, including sale of the majority stake in Volkswagen to small investors in public share offerings in 1961. However, it was in the 1980s under Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States that privatization gained worldwide momentum. Notable privatizations in the UK included Britoil (1982), the radioactive-chemicals company Amersham International (1982), British Telecom (1984), Sealink ferries (1984), British Petroleum (gradually privatized between 1979 and 1987), British Aerospace (1985 to 1987), British Gas (1986), Rolls-Royce (1987), Rover Group (formerly British Leyland, 1988), British Steel Corporation (1988), Girobank (1989), and the regional water authorities of England and Wales (mostly in 1989). After 1979, council house tenants in the UK were given the right to buy their homes at a heavily discounted price; one million had purchased their residences by 1986.

Such efforts culminated in 1993 when British Rail was privatized under Thatcher's successor, John Major. British Rail had been formed by prior nationalization of private rail companies. The privatization was controversial, and its impact is still debated today, as doubling of passenger numbers and investment was balanced by an increase in rail subsidy.

These privatizations received mixed views from the public and the parliament. Even former Conservative prime minister Harold Macmillan was critical of the policy, likening it to "selling the family silver". There were around 3 million shareholders in Britain when Thatcher took office in 1979, but the subsequent sale of state-run firms saw the number of shareholders double by 1985. By the time of her resignation in 1990, there were more than 10 million shareholders in Britain.

Privatization in Latin America was extensive in the 1980s and 1990s, as a result of a Western liberal economic policy. Companies providing public services such as water management, transportation, and telecommunications were rapidly sold off to the private sector. In the 1990s, privatization revenue from 18 Latin American countries totaled 6% of gross domestic product. Private investment in infrastructure from 1990 and 2001 reached $360.5 billion, $150 billion more than in the next emerging economy.

While economists generally give favorable evaluations of the impact of privatization in Latin America, opinion polls and public protests across the countries suggest that a large segment of the public is dissatisfied with or have negative views of privatization in the region.

In the 1990s, the governments in Eastern and Central Europe engaged in extensive privatization of state-owned enterprises in Eastern and Central Europe and Russia, with assistance from the World Bank, the U.S. Agency for International Development, the German Treuhand, and other governmental and non-governmental organization.

Nippon Telegraph and Telephone's privatization in 1987 involved the largest share offering in financial history at the time. 15 of the world's 20 largest public share offerings have been privatizations of telecoms.

In 1988, the perestroika policy of Mikhail Gorbachev started allowing privatization of the centrally planned economy. Large privatization of the Soviet economy occurred over the next few years as the country dissolved. Other Eastern Bloc countries followed suit after the Revolutions of 1989 introduced non-communist governments.

Freedom House's privatization index, 1998 and 2002
Freedom House's privatization index rated transition countries from 1 (maximum progress) to 7 (no progress). The table below shows the privatization index for various Eastern European countries in 1998 and 2002:

Privatization index	1998	2002
Bulgaria	4.0	3.0
Czech Republic	2.0	1.75
Hungary	1.5	1.5
Poland	2.25	2.25
Romania	4.5	3.75
Slovakia	3.25	2.0
Slovenia	2.5	2.5
Russia	3.0	3.5

The largest public shares offering in France involved France Télécom.

Egypt undertook widespread privatization under Hosni Mubarak. Following his overthrow in the 2011 revolution, most of the public began to call for re-nationalization, citing allegations of the privatized firms practicing crony capitalism under the old regime.

Reasons for privatization

There are various reasons why a government may decide to privatize; commonly due to economic reasons. The economic factors that influence a government's decision to privatize assume this will lower government debt. Studies have shown that governments are more likely to privatise with higher public debt, typically because governments do not have the needed time to wait for a return. Another economic factor that influences this area is the resulting efficiency of SOEs once privatised. Commonly, governments aren’t able to provide the required investments required to ensure profitability for various reasons. These factors may lead to a government deciding to privatize.

Forms of privatization

There are several main methods of privatization:

1. Share issue privatization: shares sale on the stock market.
2. Asset sale privatization: asset divestiture to a strategic investor, usually by auction or through the Treuhand model.
3. Voucher privatization: distribution of vouchers, which represent part ownership of a corporation, to all citizens, usually for free or at a very low price.
4. Privatization from below: start of new private businesses in formerly socialist countries.
5. Management buyout: purchase of public shares by management of the company, sometimes by borrowing from external lenders
6. Employee buyout: distribution of shares for free or at a very low price to workers or management of the organization.

The choice of sale method is influenced by the capital market and the political and firm-specific factors. Privatization through the stock market is more likely to be the method used when there is an established capital market capable of absorbing the shares. A market with high liquidity can facilitate the privatization. If the capital markets are insufficiently developed, however, it would be difficult to find enough buyers. The shares may have to be underpriced, and the sales may not raise as much capital as would be justified by the fair value of the company being privatized. Many governments, therefore, elect for listings in more sophisticated markets, for example, Euronext, and the London, New York and Hong Kong stock exchanges.

Governments in developing countries and transition countries more often resort to direct asset sales to a few investors, partly because those countries do not yet have a stock market with high capital.

Voucher privatization occurred mainly in the transition economies in Central and Eastern Europe, such as Russia, Poland, the Czech Republic, and Slovakia. Additionally, privatization from below had made important contribution to economic growth in transition economies.

In one study assimilating some of the literature on "privatization" that occurred in Russian and Czech Republic transition economies, the authors identified three methods of privatization: "privatization by sale", "mass privatization", and "mixed privatization". Their calculations showed that "mass privatization" was the most effective method.

However, in economies "characterized by shortages" and maintained by the state bureaucracy, wealth was accumulated and concentrated by "gray/black market" operators. Privatizing industries by sale to these individuals did not mean a transition to "effective private sector owners [of former] state assets". Rather than mainly participating in a market economy, these individuals could prefer elevating their personal status or prefer accumulating political power. Instead, outside foreign investment led to the efficient conduct of former state assets in the private sector and market economy.

Through privatization by direct asset sale or the stock market, bidders compete to offer higher prices, generating more revenue for the state. Voucher privatization, on the other hand, could represent a genuine transfer of assets to the general population, creating a sense of participation and inclusion. A market could be created if the government permits transfer of vouchers among voucher holders.

Secured borrowing

Some privatization transactions can be interpreted as a form of a secured loan and are criticized as a "particularly noxious form of governmental debt". In this interpretation, the upfront payment from the privatization sale corresponds to the principal amount of the loan, while the proceeds from the underlying asset correspond to secured interest payments—the transaction can be considered substantively the same as a secured loan, though it is structured as a sale. This interpretation is particularly argued to apply to recent municipal transactions in the United States, particularly for fixed term, such as the 2008 sale of the proceeds from Chicago parking meters for 75 years. It is argued that this is motivated by "politicians' desires to borrow money surreptitiously", due to legal restrictions on and political resistance to alternative sources of revenue, viz, raising taxes or issuing debt.

Results of privatization

Privatization had different outcomes around the world. Results of privatization may vary depending on the privatization model employed. According to Irwin Stelzer, "it is somewhere between difficult and impossible to separate the effects of privatisation from the effects of such things as trends in the economy".

According to research performed by the World Bank and William L. Megginson in the early 2000s, privatization in competitive industries with well-informed consumers, consistently improved efficiency. According to APEC, the more competitive the industry, the greater the improvement in output, profitability, and efficiency. Such efficiency gains mean a one-off increase in GDP, but through improved incentives to innovate and reduce costs also tend to raise the rate of economic growth.

More recent research and literature review performed by Professor Saul Estrin and Adeline Pelletier concluded that "the literature now reflects a more cautious and nuanced evaluation of privatization" and that "private ownership alone is no longer argued to automatically generate economic gains in developing economies". According to a 2008 study published in Annals of Public and Cooperative Economics, liberalization and privatization have produced mixed results.

Although typically there are many costs associated with these efficiency gains, many economists argue that these can be dealt with by appropriate government support through redistribution and perhaps retraining. Yet, some empirical literature suggests that privatization could also have very modest effects on efficiency and quite regressive distributive impact. In the first attempt at a social welfare analysis of the British privatization program under the Conservative governments of Margaret Thatcher and John Major during the 1980s and 1990s, Massimo Florio points to the absence of any productivity shock resulting strictly from ownership change. Instead, the impact on the previously nationalized companies of the UK productivity leap under the Conservatives varied in different industries. In some cases, it occurred prior to privatization, and in other cases, it occurred upon privatization or several years afterward.

A 2012 study published by the European Commission argues that privatisation in Europe had mixed effects on service quality and has achieved only minor productivity gains, driven mainly by lower labour input combined with other cost cutting strategies that led to a deterioration of employment and working conditions. Meanwhile, a different study by the commission found that the UK rail network (which was privatized from 1994 to 1997) was most improved out of all the 27 EU nations from 1997 to 2012. The report examined a range of 14 different factors and the UK came top in four of the factors, second and third in another two and fourth in three, coming top overall. Nonetheless, the impact of the privatisation of British Rail has been the subject of much debate, with the stated benefits including improved customer service, and more investment; and stated drawbacks including higher fares, lower punctuality and increased rail subsidies.

Privatizations in Russia and Latin America were accompanied by large-scale corruption during the sale of the state-owned companies. Those with political connections unfairly gained large wealth, which has discredited privatization in these regions. While media have widely reported the grand corruption that accompanied those sales, according to research released by the World Bank there has been increased operating efficiency, daily petty corruption is, or would be, larger without privatization, and that corruption is more prevalent in non-privatized sectors. Furthermore, according to the World Bank extralegal and unofficial activities are more prevalent in countries that privatized less. Other research suggests that privatization in Russia resulted in a dramatic rise in the level of economic inequality and a collapse in GDP and industrial output.

Russian President Boris Yeltsin's IMF-backed rapid privatization schemes saw half the Russian population fall into destitution in just several years as unemployment climbed to double digits by the early to mid 1990s. A 2009 study published in The Lancet medical journal has found that as many as a million working men died as a result of economic shocks associated with mass privatization in the former Soviet Union and in Eastern Europe during the 1990s, although a further study suggested that there were errors in their method and "correlations reported in the original article are simply not robust." A subsequent body of scholarship, while still controversial, demonstrates that rapid privatization schemes associated with neoliberal economic reforms did result in poorer health outcomes in former Eastern Bloc countries during the transition to markets economies, with the World Health Organization contributing to the debate by stating "IMF economic reform programs are associated with significantly worsened tuberculosis incidence, prevalence, and mortality rates in post-communist Eastern European and former Soviet countries." Historian Walter Scheidel, a specialist in ancient history, posits that economic inequality and wealth concentration in the top percentile "had been made possible by the transfer of state assets to private owners."

In Latin America, on the one hand, according to John Nellis's research for Center for Global Development, economic indicators, including firm profitability, productivity, and growth, project positive microeconomic results. On the other hand, however, privatisation has been largely met with a negative criticism and citizen coalitions. This neoliberal criticism highlights the ongoing conflict between varying visions of economic development. Karl Polanyi emphasizes the societal concerns of self-regulating markets through a concept known as a "double movement". In essence, whenever societies move towards increasingly unrestrained, free-market rule, a natural and inevitable societal correction emerges to undermine the contradictions of capitalism. This was the case in the 2000 Cochabamba protests.

Privatization in Latin America has invariably experienced increasing push-back from the public. Mary Shirley from The Ronald Coase Institute suggests that implementing a less efficient but more politically mindful approach could be more sustainable.

In India, a survey by the National Commission for Protection of Child Rights (NCPCR) – Utilization of Free Medical Services by Children Belonging to the Economically Weaker Section (EWS) in Private Hospitals in New Delhi, 2011–12: A Rapid Appraisal – indicates under-utilization of the free beds available for EWS category in private hospitals in Delhi, though they were allotted land at subsidized rates.

In Australia a "People's Inquiry into Privatisation" (2016/17) found that the impact of privatisation on communities was negative. The report from the inquiry "Taking Back Control" made a range of recommendations to provide accountability and transparency in the process. The report highlighted privatisation in healthcare, aged care, child care, social services, government departments, electricity, prisons and vocational education featuring the voices of workers, community members and academics.

Some reports show that the results of privatization are experienced differently between men and women for numerous reasons: when public services are privatized women are expected to take on the health and social care of dependents, women have less access to privatized goods, public sector employs a larger proportion of women than does the private sector, and the women in the public sector are more likely to be unionized than those in the private sector. In Chile, women are disproportionately affected by the privatization of the pension system because factors such as "women's longer life expectancy, earlier retirement age, and lower rates of labor-force participation, lower salaries" affect their ability to accumulate funds for retirement which leads to lower pensions. Low-income women face an even greater burden; Anjela Taneja, of Oxfam India says "The privatization of public services...implies limited or no access to essential services for women living in poverty, who are often the ones more in need of these services."

The increase in privatization since the 1980s has been a factor in rising income and wealth inequality in the United States.

Foreign privatization

Due to low levels of native capital accumulation in the former Central and Eastern Europe, the rapid privatization preferred by international institutions (EBRD, IMF, World Bank) and other foreign banks was a de facto call for international bidding, reflecting the assumption that foreign investment would play a major role.

Contrasting cases in Eastern Europe: Romania and East Germany

In post-reunification East Germany, by the end of June 1992, the Treuhandanstalt had privatized 8,175 companies, with 5,950 left on hand (4,340 remaining to be sold and the remainder to be liquidated). June 1992 was also when the last East German on the board of the Treuhand left. By the end of 1994, Treuhand had sold almost everything, having only 65 firms left to privatize as of December 1994. More than 80% of the privatized businesses were bought by foreigners (chiefly West Germans – 75%).

Romania's first privatization took place on 3 August 1992. There was "very little" privatization during 1992: only 22 state-owned enterprises were privatized. The pace picked up throughout the following year, with more than 260 companies privatized. Four of the 22 enterprises privatized in 1992 were sold to foreign investors. In 1993, 265 companies were privatized, followed by 604 in 1994. Two companies were sold to foreign investors during this period, one each in 1993 and 1994. At the start of 1999, 4,330 companies were left to be privatized, with 5,476 having been sold during 1993–1998. At the end of 1998, only 2.4% of privatized companies had foreign participation.

Opinion

Arguments for and against the controversial subject of privatization are presented here.

Support

Proponents of privatization argue that, over time, this can lead to lower prices, improved quality, more choices, less corruption, less red tape, and/or quicker delivery. Many proponents do not argue that everything should be privatized. According to them, market failures and natural monopolies could be problematic. However, anarcho-capitalists prefer that every function of the state be privatized, including defense and dispute resolution.

Proponents of privatization make the following arguments:

• Performance: state-run industries tend to be bureaucratic. A political government may only be motivated to improve a function when its poor performance becomes politically sensitive.
• Increased efficiency: private companies and firms have a greater incentive to produce goods and services more efficiently to increase profits.
• Specialization: a private business has the ability to focus all relevant human and financial resources onto specific functions. A state-owned firm does not have the necessary resources to specialize its goods and services as a result of the general products provided to the greatest number of people in the population.
• Improvements: conversely, the government may put off improvements due to political sensitivity and special interests—even in cases of companies that are run well and better serve their customers' needs.
• Corruption: a state-monopolized function is prone to corruption; decisions are made primarily for political reasons, personal gain of the decision-maker (i.e. "graft"), rather than economic ones. Corruption (or principal–agent issues) in a state-run corporation affects the ongoing asset stream and company performance, whereas any corruption that may occur during the privatization process is a one-time event and does not affect ongoing cash flow or performance of the company.
• Accountability: managers of privately owned companies are accountable to their owners/shareholders and to the consumer, and can only exist and thrive where needs are met. Managers of publicly owned companies are required to be more accountable to the broader community and to political "stakeholders". This can reduce their ability to directly and specifically serve the needs of their customers, and can bias investment decisions away from otherwise profitable areas.
• Civil-liberty concerns: a company controlled by the state may have access to information or assets which may be used against dissidents or any individuals who disagree with their policies.
• Goals: a political government tends to run an industry or company for political goals rather than economic ones.
• Capital: a privately held companies can sometimes more easily raise investment capital in the financial markets when such local markets exist and are suitably liquid. While interest rates for private companies are often higher than for government debt, this can serve as a useful constraint to promote efficient investments by private companies, instead of cross-subsidizing them with the overall credit-risk of the country. Investment decisions are then governed by market interest rates. State-owned industries have to compete with demands from other government departments and special interests. In either case, for smaller markets, political risk may add substantially to the cost of capital.
• Security: governments have had the tendency to "bail out" poorly run businesses, often due to the sensitivity of job losses, when economically, it may be better to let the business fold.
• Lack of market discipline: poorly managed state companies are insulated from the same discipline as private companies, which could go bankrupt, have their management removed, or be taken over by competitors. Private companies are also able to take greater risks and then seek bankruptcy protection against creditors if those risks turn sour.
• Natural monopolies: the existence of natural monopolies does not mean that these sectors must be state owned. Governments can enact or are armed with anti-trust legislation and bodies to deal with anti-competitive behavior of all companies public or private.
• Concentration of wealth: ownership of and profits from successful enterprises tend to be dispersed and diversified—particularly in voucher privatization. The availability of more investment vehicles stimulates capital markets and promotes liquidity and job creation.
• Political influence: nationalized industries are prone to interference from politicians for political or populist reasons. Examples include making an industry buy supplies from local producers (when that may be more expensive than buying from abroad), forcing an industry to freeze its prices/fares to satisfy the electorate or control inflation, increasing its staffing to reduce unemployment, or moving its operations to marginal constituencies.
• Profits: corporations exist to generate profits for their shareholders. Private companies make a profit by enticing consumers to buy their products in preference to their competitors' (or by increasing primary demand for their products, or by reducing costs). Private corporations typically profit more if they serve the needs of their clients well. Corporations of different sizes may target different market niches in order to focus on marginal groups and satisfy their demand. A company with good corporate governance will therefore be incentivized to meet the needs of its customers efficiently.
• Job gains: as the economy becomes more efficient, more profits are obtained and no government subsidies and less taxes are needed, there will be more private money available for investments and consumption and more profitable and better-paid jobs will be created than in the case of a more regulated economy.

Opposition

Opponents of privatization in general—or of certain privatizations in particular—believe that public goods and services should remain primarily in the hands of government in order to ensure that everyone in society has access to them (such as law enforcement, basic health care, and basic education). There is a positive externality when the government provides society at large with public goods and services such as defense and disease control. Some national constitutions in effect define their governments' "core businesses" as being the provision of such things as justice, tranquility, defense, and general welfare. These governments' direct provision of security, stability, and safety, is intended to be done for the common good (in the public interest) with a long-term (for posterity) perspective. As for natural monopolies, opponents of privatization claim that they aren't subject to fair competition, and better administrated by the state.

Although private companies may provide a similar good or service alongside the government, opponents of privatization are critical about completely transferring the provision of public goods, services and assets into private hands for the following reasons:

• Performance: a democratically elected government is accountable to the people through a legislature, Congress or Parliament, and is motivated to safeguarding the assets of the nation. The profit motive may be subordinated to social objectives.
• Improvements: the government is motivated to performance improvements as well run businesses contribute to the State's revenues.
• Corruption: government ministers and civil servants are bound to uphold the highest ethical standards, and standards of probity are guaranteed through codes of conduct and declarations of interest. However, the selling process could lack transparency, allowing the purchaser and civil servants controlling the sale to gain personally.
• Accountability: the public has less control and oversight of private companies although these remain answerable to various stakeholders, including shareholders, clients, suppliers, regulators, employees and collaborators.
• Civil-liberty concerns: a democratically elected government is accountable to the people through a parliament, and can intervene when civil liberties are threatened.
• Goals: the government may seek to use state companies as instruments to further social goals for the benefit of the nation as a whole.
• Capital: governments can raise money in the financial markets most cheaply to re-lend to state-owned enterprises, although this preferential access to capital markets risks undermining financial discipline because of the assurance of a bailout from the government.
• Cuts in essential services: if a government-owned company providing an essential service (such as the water supply) to all citizens is privatized, its new owner(s) could lead to the abandoning of the social obligation to those who are less able to pay, or to regions where this service is unprofitable.
• Natural monopolies: privatization will not result in true competition if a natural monopoly exists.
• Concentration of wealth: profits from successful enterprises end up in private hands instead of being available for public use.
• Political influence: governments may more easily exert pressure on state-owned firms to help implement government policy.
• Profit: private companies do not have any goal other than to maximize profits.
• Privatization and poverty: it is acknowledged by many studies that there are winners and losers with privatization. The number of losers—which may add up to the size and severity of poverty—can be unexpectedly large if the method and process of privatization and how it is implemented are seriously flawed (e.g. lack of transparency leading to state-owned assets being appropriated at minuscule amounts by those with political connections, absence of regulatory institutions leading to transfer of monopoly rents from public to private sector, improper design and inadequate control of the privatization process leading to asset stripping).
• Job loss: due to the additional financial burden placed on privatized companies to succeed without any government help, unlike the public companies, jobs could be lost to keep more money in the company.
• Reduced wages and benefits: a 2014 report by In the Public Interest, a resource center on privatization, argues that "outsourcing public services sets off a downward spiral in which reduced worker wages and benefits can hurt the local economy and overall stability of middle and working class communities."
• Inferior quality products: private, for-profit companies cut corners on providing quality goods and services in order to maximize profit.

Economic theory

In economic theory, privatization has been studied in the field of contract theory. When contracts are complete, institutions such as (private or public) property are difficult to explain, since every desired incentive structure can be achieved with sufficiently complex contractual arrangements, regardless of the institutional structure. All that matters is who are the decision makers and what is their available information. In contrast, when contracts are incomplete, institutions matter. A leading application of the incomplete contract paradigm in the context of privatization is the model by Hart, Shleifer, and Vishny (1997). In their model, a manager can make investments to increase quality (but they may also increase costs) and investments to decrease costs (but they may also reduce quality). It turns out that it depends on the particular situation whether private ownership or public ownership is desirable. The Hart-Shleifer-Vishny model has been further developed in various directions, e.g. to allow for mixed public-private ownership and endogenous assignments of the investment tasks.

Privatization of private companies

Privatization can also refer to the purchase of all outstanding shares of a publicly traded private company by private equity investors, which is more often called "going private". The buyout withdraws the company's shares from being traded at a public stock exchange. Depending on the involvement of internal and external investors, it may occur through a leveraged buyout or a management buyout, tender offer, or hostile takeover.