Nationalisation

Question 1

Nationalisation definition

Answer 1

the process of taking an industry into public ownership

Question 2

Arguments for nationalisation

Answer 2

• greater EOS (productive efficiency)
• more focus on service provision (allocative efficiency)
• fewer market failures from externalities (consider full social cost/benefit of decisions)
• public sector can help macro objectives (manipulate wages to control inflation)

Question 3

Arguments against nationalisation (1-4)

Answer 3

• DEOS
• small incentive to minimise costs
• complacent/wasteful production (x-inefficiency)
• lack of SNP

Question 4

Arguments against nationalisation (5-8)

Answer 4

• expensive = burden on tax payer
• higher prices, lower comp
• moral hazard risk (taxpayer pays consequence not politician or whoever made decision)
• political priorities override main issues