Privatization is often based on the misconception that government programs are inherently inefficient, suggesting that private sector alternatives must be superior. However, evidence shows that the transaction costs associated with government-run programs like Social Security and Medicare are significantly lower than those found in private companies that offer similar services. This indicates that government operations can be more efficient than their private counterparts.

The rationale behind private firms is profit maximization, where higher transaction costs can benefit the business model. In essence, private companies thrive on the difference between their intake and outgoings, often leading to inefficiencies. The belief that privatization is universally better overlooks these fundamental differences in objectives and operational efficiency, challenging the narrative that government-run programs are less effective.