The Logic of Public–Private Partnerships
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The Logic of Public–Private Partnerships

The Enduring Interdependency of Politics and Markets

Graeme A. Hodge and Carsten Greve

This book examines Public–Private Partnerships (PPP), and tracks the movement from early technical optimism to the reality of PPP as a phenomenon in the political economy. Today's economic turbulence sees many PPP assumptions changed: what contracts can achieve, who bears the real risks, where governments get advice and who invests. As the gap between infrastructure needs and available financing widens, governments and businesses both must seek new ways to make contemporary PPP approaches work.
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Chapter 4: The economic art of public-private partnerships

Graeme A. Hodge and Carsten Greve

Abstract

In this chapter we first put forward some of the key economic arguments for PPPs. Rather than being a systematic treatment of the economics literature, we base much of it on the work of colleagues or finance academics we have met or have read. We highlight some of the scholarly economic arguments favouring PPPs and articulate crucial dimensions contained in these arguments. In particular, we highlight the opposing views of scholars where these exist, and point to any big gaps between what is argued at a theoretical level and what appears to be known at an empirical level. What we find is that economists generally tend to agree on the potential for PPPs to provide efficiencies compared to the public sector alternative. Less agreement, and indeed, strong disagreement exists, however, between economists on the conceptual manner through which rigorous evaluation of PPPs ought to be undertaken. These disagreements, along with a paucity of empirical data supporting PPP superiority, leave a surprisingly wide gap in our knowledge. So, in common with the privatizations undertaken by Thatcher during the 1980s_1990s, there remain huge differences between what is theorized on the one hand about aspects of PPP performance and what is proved empirically on the other.

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