In Western countries the privatization phenomenon suggests some tension, if not a paradox, in positive theories of public choice. Many, although not all, accounts of how the government takes over a function from the private sector, whether by direct ownership or through pervasive regulation, incorporate a tale of rent seeking by discrete interest groups, either within the state (bureaucrats) or without (clients). But most accounts of privatization, whether by divestment or deregulation, assume that decision makers are public-regarding, in the sense that the story treats the choice to privatize as motivated by a search for optimal production of the good at issue.

At least some analysts recognize the implicit contradiction and attempt to explain why government can facilitate rent seeking on some occasions and counter it on others. One plausible reconciliation of these opposing perspectives is that in democratic societies, governmental decision makers get mixed signals due to a dynamic political process. Interest groups can steal a march on the general public due to their informational advantages and lower organizational costs, but a process of exposure and political competition can induce politicians, and the bureaucrats who answer to them, to put an end to some instances of rent seeking.

But then what explains privatization in Soviet-type economies? In those countries, does the decision to transfer firms from the state sector to the private stem primarily from a conversion to a new faith about how to attain a good and just society?