A critical assessment of the incomplete contracts theory for private participation in public services: the case of the water sector in Ghana

This paper provides a critical analysis of the recent developments in the incomplete contracts theory and its conclusions for privatisation of public services. Drawing on a case study of management contract for urban water services in Ghana and highlighting the flaws in the theory, the article argues that contractual incompleteness does not provide a uniform guidance on efficient forms of ownership. We argue that methodological individualism utilised in the theory is particularly ineffective for its application to public services where direct or indirect contractual role of the state cannot be eliminated. The sterility of the theory with respect to political, institutional and distributional context of public service delivery is identified as an important weakness.