Part 3: The Norwegian Dilemma

The Norwegian railway reform highlights a fundamental tension between profit maximization and public service provision. Since profit maximization is not the primary goal for public services, conflicts of interest frequently arise between principals (government) and agents (private operators). The Norwegian government's stated intention was to increase social welfare by exposing the industry to competition while maintaining state responsibility for the railway system, creating an inherent contradiction.

This dilemma manifests in several ways:

• Private operators naturally focus on profitable routes while neglecting less lucrative but socially necessary connections
• Non-profit public values like safety, accessibility, and environmental benefits risk being overshadowed by cost minimization and profit maximization
• Most Norwegian railway routes operate under public purchase obligations because revenues simply don't cover costs, undermining the economic rationale for privatization
• The reform created a complex system where the government attempts to grant operational autonomy to private firms while simultaneously ensuring they remain "appropriately regulated"

The Norwegian case demonstrates that railway privatization creates a structural conflict between socioeconomic welfare maximization (the public sector's goal) and profit maximization (the private sector's imperative). This tension remains unresolved, with critics arguing that monetizing infrastructure primarily benefits private operators rather than passengers or the broader transportation system.

Written with AI assistance