The DifferenceAll economic activity can be classified as either public or private sector. The public sector is funded, controlled and/or derives its authority from a government or governments. For example, an airport authority that is funded by airport fees that derives its authority from the power of government. The private sector includes businesses and non-profit organizations that are controlled and primarily funded by people who don't work for a government.
Role of Public SectorThe public sector provides foundational systems and infrastructure that are the basis for the quality of life, risk management, resilience and economic efficiency of a nation. A society typically designates services public sector where they are considered above the profit motive such that they are to be governed according to the values of society. This typically applies to areas that relate to morals and the human experience. For example, a disability pension program that is funded and run according to the values of society as opposed to the profit motives of a company. The public sector also plays a critical role in regulating the private sector in areas such as competition, standards, consumer protection and environment. Without these regulations the private sector would cease to function as firms would adopt anti-competitive practices or create more economic bads than economic goods.
Role of the Private SectorThe private sector is the productive engine of a society driven by market forces such as the profit motive and customer needs. It is far more productive than the public sector and is able to allocate resources efficiently to produce the goods that people want. The private sector also provides economic freedoms such as the ability to start a business or buy what you want.
NotesA communist society has no private sector such that economic freedom and efficiency is replaced with a large and typically inefficient bureaucracy that centrally plans every aspect of life.
Economic activity controlled by government.
Economic activity controlled by individuals.
InfrastructureRisk managementResilienceQuality of LifeJusticeRegulation of private sector
Economic freedomEfficient productionEfficient allocationInnovation
A society that is efficient, innovative and free.
Public ServicesPublic Enterprises