Cost inefficiency and second best pricing

It is a wellknown and widespread opinion that public production in reality is neither cost nor production efficient, i.e. the commodities are not produced at minimum costs, and additionally, the realized production plan will lie below the production possibility frontier. Such an initial situation is undoubtedly perceived as suboptimal. And as welfare maximization contradicts any kind of waste, most politicians believe in the necessity of cost efficient public production. But the welfare oriented policy only implies technically efficient production. As this paper shows, advising the management of public enterprises to produce at minimum costs, leads to welfare losses.