Legislators make very deliberate choices about the boundary between private and public sectors and the institutional characteristics of the many different types of organization that make up the modern public sector. They typically take an active and detailed interest in the specific institutional arrangements they will employ in any given situation, like governance, financing, and employment arrangements; the extent to which decision making is delegated to the administrative level; and the procedures governing private participation in this decision making.

The controversy often associated with these institutional issues suggests that much is at stake in how they are resolved. Their importance is demonstrated time and again in those areas where concentrated private interests are affected by a particular piece of legislation. Wider institutional questions can also be among the most important of their time; witness, for example, the controversy in many countries at different times about civil service reform and about nationalization and, latterly, privatization. For many, these institutional questions are the key to determining “who gets what” from legislation.

These decisions are made at the political level and are driven by a common underlying political calculus. Electoral competition encourages legislators to take decisions that will increase their net political support and to protect their preferred policies from administrators and future legislators. It is no surprise that regularities appear in the way legislators draw the boundary between public and private sectors and in the institutional arrangements they impose across the public sector.