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Jeeeez....where to start.....
First place, most of you are barking up the wrong tree about Enron. The failure of Enron was not caused by the relationship between Enron and the government. The problem is the relationship between the management of Enron and its stockholders / owners. Enron management was robbing the company blind with various pyramid scheems designed to book profits and hide losses, and the owners, in whose interest management is supposedly working, apparently did not have sufficient information about operations to detect, prevent, or correct this. This is what is known in economics as an agency problem. How do the owners get their agents (management) to act in the owner's interests (long term profits) rather than in mangement's interests (high salaries, big offices, fast cars, whatever)? Government agencies such as the SEC are one step removed from the source of theproblem, making it even harder for them to get information than it is for the shareholders, as Roland's post suggests. Active involvement by large, interested shareholders such as large retirement systems and mutual funds is a step in the right direction.
Second, Adam Smith argued for laissez faire in preference to the existing mercantilist system. He specifically recognized that market failures may exist in a laissez faire economy. Monopolies, defense, and pollution from neighbors chimneys (IIRC) are specifically mentioned in Wealth of Nations. Smith argued against government involvement in many of these cases due to his views on personal liberty, not on the grounds that it would make the economy less efficient.
Third, the statement that the advent of corporations limited personal liability is literally correct, but the effect is exactly the opposite of what people are arguing. Corporations were developed in order to make it easier to raise capital. They do this in two ways. First, the corporation survives the death of any individual person associated with it, meaning that existing contracts need not be renegotiated. Second, if a tort is committed, the corporation is sued not the individual. While this lets the individual off the hook for liability, it exposes the corporation, which has much larger assets than any individual, to liability. By allowing the corporation to be sued, plaintifs are more likely to recieve compensation than if only individuals could be sued. Investors are more likely to recover their money, again making it easier to raise capital.
Lastly, who says markets cant work with respect to schools, airline security, HMO'S? HMO's have worked very well in certain areas. Western New York, Wisconsin, and Northern California come to mind. IIRC, Harvard, Yale, Princeton, Stanford, Chicago are all for-profit schools, not to mention many outstanding private primary and secondary schools. As for airline security, El Al is probalby target number on e on every hijackers list, but has never had a hijack. Why? Their customers demand, and are willing to pay for, a very high level of security. (edit: the addional security is provided primarily by the airline, not by the government. In other words, El AL provides a much higher level of security than other carries have at JFK or other major airports outside Israel.)
I probably forgot six other points to make, but that's enough for now.
First place, most of you are barking up the wrong tree about Enron. The failure of Enron was not caused by the relationship between Enron and the government. The problem is the relationship between the management of Enron and its stockholders / owners. Enron management was robbing the company blind with various pyramid scheems designed to book profits and hide losses, and the owners, in whose interest management is supposedly working, apparently did not have sufficient information about operations to detect, prevent, or correct this. This is what is known in economics as an agency problem. How do the owners get their agents (management) to act in the owner's interests (long term profits) rather than in mangement's interests (high salaries, big offices, fast cars, whatever)? Government agencies such as the SEC are one step removed from the source of theproblem, making it even harder for them to get information than it is for the shareholders, as Roland's post suggests. Active involvement by large, interested shareholders such as large retirement systems and mutual funds is a step in the right direction.
Second, Adam Smith argued for laissez faire in preference to the existing mercantilist system. He specifically recognized that market failures may exist in a laissez faire economy. Monopolies, defense, and pollution from neighbors chimneys (IIRC) are specifically mentioned in Wealth of Nations. Smith argued against government involvement in many of these cases due to his views on personal liberty, not on the grounds that it would make the economy less efficient.
Third, the statement that the advent of corporations limited personal liability is literally correct, but the effect is exactly the opposite of what people are arguing. Corporations were developed in order to make it easier to raise capital. They do this in two ways. First, the corporation survives the death of any individual person associated with it, meaning that existing contracts need not be renegotiated. Second, if a tort is committed, the corporation is sued not the individual. While this lets the individual off the hook for liability, it exposes the corporation, which has much larger assets than any individual, to liability. By allowing the corporation to be sued, plaintifs are more likely to recieve compensation than if only individuals could be sued. Investors are more likely to recover their money, again making it easier to raise capital.
Lastly, who says markets cant work with respect to schools, airline security, HMO'S? HMO's have worked very well in certain areas. Western New York, Wisconsin, and Northern California come to mind. IIRC, Harvard, Yale, Princeton, Stanford, Chicago are all for-profit schools, not to mention many outstanding private primary and secondary schools. As for airline security, El Al is probalby target number on e on every hijackers list, but has never had a hijack. Why? Their customers demand, and are willing to pay for, a very high level of security. (edit: the addional security is provided primarily by the airline, not by the government. In other words, El AL provides a much higher level of security than other carries have at JFK or other major airports outside Israel.)
I probably forgot six other points to make, but that's enough for now.
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