Privatization cuts costs and improves service because of key differences between incentives and management in the public and private sectors. Government officials are accountable to the coalitions that elected them, which may or may not represent the broader interests of taxpayers. In contrast, private firms are directly accountable to their customers, who can reject a certain company's services if it fails to offer an attractive combination of price and quality.
Privatization can also generate significant savings and benefits for state and local taxpayers.
When state and local governments contract out services, they save between 16 and 77 percent, depending on the service. When they sell assets, they receive a one-time cash windfall, new investments in infrastructure, cost savings for taxpayers, and a new stream of tax revenues. This makes privatization more expensive and encourages continued government control. Regulatory Requirements inhibit private investment. For example, tolls are prohibited on most interstate highways.