Privatization is often linked with innovation—new ideas the private sector brings to service delivery to cut costs and/or improve quality. But most discussions do not delve into what innovation means in the context of privatization nor into how important it is. Is innovation in privatization merely the replacement of staid government practices with more dynamic private practices? Or is there actual discovery of new practices previously not thought of, or at least not put into practice?; I extend the Hayekian/Kirznerian theory of entrepreneurial discovery and develops a theory of discovery in the privatization process. A detailed discussion of privatization of prisons and fire protection services in the United States, reveals that privatization does provide scope and motivation for discovery. These insights are used to show that policy makers, in the course of creating law and policy regarding privatization, should consider the discovery benefits of privatization in their deliberations.
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