Most media sources, and NPR in particular, are quick to blame the Enron problems on too free a market. The thought is the capitalism produces only greed and dishonesty. But, is this the case?
I have reason to think that this scandal is a result of the gov't doing too much, and the market not being free enough. The gov't requires publically traded firms to be honest and upfront with their financial situation. This gives firms more of an incentive to cheat (if everyone is honest, the benefits of not being honest increase- this, I guess, is similar to the incentive to sell drugs brought upon by the prohibition of drugs) and consumers(investors) less of a reason to distrust firms (if the law says they must be honest, they must be). If corporations did not have to be open, there would be a market incentive for them to do so (why give your money to someone if you don't know if they can repay) and accounting firms would have even more of an incentive to be very honest and objective in their work. Corporations could gain a comparative advantage by being very transparent with their financials, where now, the only room for a comparative advantage (with regard to honesty and gaining investment) is through being extra sly in their dealings. Similar arguments could be used against other paternalist laws and gov't branches such as the FDA and OSHA. Thoughts? Jason
