The system in the Netherlands of "privatization," a government policy of financially supporting private schools and encouraging people to use them, depends on conditions in Dutch society that are conducive to a large nongovernment, nonprofit sector. These include cultural heterogeneity, coupled with the lack of a single dominant culture and class parity among the various groups; organized religion as a basis for establishing nongovernment nonprofit organizations with a predetermined clientele; an influential historical legacy, featuring a shift from secular public monopoly to a highly pluralistic church-based system in the 19th century (due to a religious schism); and stringent selectivity in the public sector, giving rise to broad based cross-sectional support for private education. The economics of this system are analyzed in depth, including the issues of entrepreneurship and entry of new private schools, the public financing system for private education, and consumer fees and preferences. Finally, its social consequences are discussed, such as the increasing impact of the policy on supply of schools, cost efficiency, political support for school budgets; and social segmentation along religious, class, and other lines. Statistical tables are provided. (TE)