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© 2012 Pearson Education, Inc. Publishing as Prentice Hall

Private ownership provides a strong incentive for efficient operation, innovation, and hard work that is lacking when ownership is centralized and profits are distributed to the people.

The Transition to a Market Economy

Six Basic Requirements for Successful Transition

Privatization

tragedy of commons  The idea that collective ownership may not provide the proper private incentives for efficiency because individuals do not bear the full costs of their own decisions but do enjoy the full benefits.

In addition to increasing accountability, privatization means creating a climate in which new enterprises can flourish and that many protected enterprises unable to compete at world prices will go out of business.

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