Empty causes: the enterprise agenda

Democratic decision-making is difficult for many procedural reasons. It proceeds by slow debate, compromises and logrolling. Additional difficulties stem from deficient knowledge. Social-scientific data is often vague, open to varying interpretations and vulnerable to sceptical objections. Data gathering is far too slow for political challenges which demand swift responses. And the long-term consequences of many decisions can only be guessed.

But specific political agendas also face their own typical knowledge-related challenges. In this essay I will discuss the epistemological challenge of the enterprise agenda, which promotes the virtues of competitive markets. The backbone of the enterprise agenda is its defence of free economic enterprise as the primary source of societal well-being. The agenda promotes individualism and low levels of economic redistribution because well-motivated actors pursuing their own interests will, with limited state guidance, form patterns of economic co-operation which are beneficient to all. The enterprise agenda welcomes all entrants to a global competition where successful effort and ingenuity are rewarded while poorly executed attempts are deservedly eliminated. This agenda aims to expand market exchange in society.

The epistemological challenges of the enterprise agenda are the challenges of the market. The market system works through distributed knowledge, as Hayek explains in his paper The Use of Knowledge in Society (Hayek 1945). Charles Lindblom has recently treated the same subject more broadly (Lindblom 2001). The coordination mechanism for social interaction in markets is price. Innumerable decisions to purchase or not to purchase at a given price convey all the necessary information.

Since the enterprise agenda is considered as an agenda of government in this essay, and not as an individual agenda, it is by definition concerned with the common good of all citizens. Its promoters expect to achieve societal benefits from free competition. It is generally not their concern which enterprises and individuals succeed and which do not. The assumption is that all citizens benefit in any case. This might seem to nullify the epistemological challenges of the enterprise agenda. If all the work is done by enterprises competing against one another, the state can merely watch from the sidelines and tax the winners. If markets would  need no control, there would be no need for knowledge on the part of the state.

But markets do need enforced rules, at a minimum, to function well. If dishonesty runs rampant or  monopolies get to set prices, markets will not serve their participants well and they will certainly not work for the common good. The fair-play rules of the market might thus be conceived as an epistemological challenge for the state.

However, state involvement in markets goes far beyond refereeing. The state has to provide the infrastructure for impersonal social relations in all larger markets. Market participants must have certifiable identities and backgrounds. Ownership, payments and deliveries must be protected by law. If the object being traded is not material (such as insurance, intellectual property, bonds), its very existence depends on government fiat.

Lindblom describes the dependence of the market on the state as follows:

The state establishes liberties, property rights, and obligations of contract without which people cannot buy and sell. It makes great efforts, not always highly successful, to curb hijacking and pirating. It builds docks, canals, highways and railroads. It maintains a monetary system (…) It also commonly offers businesses the privilege of declaring bankruptcy to escape creditors. It joins with other states (…) (Lindblom 2001 p.42)

In other words, impersonal markets (any market larger than a face-to-face market between buyers and producers) cannot form or function spontaneously. States institute and institutionalize markets. This raises their epistemological challenges far beyond rule-making and -enforcement. Since the existence of a market depends on the state (or league of states), the responsibility of assessing whether free competition in a given institutional setting will produce public benefits rests on the state.

This is a daunting problem whose difficulty often seems to be underestimated, or even brushed aside, by promoters of the enterprise agenda. They tend to equate market expansion with automatic “growth” (see my essay Things That Grow) and leave it at that. But it is by no means obvious that all markets work for the general good. The bigger the market, the harder it becomes to establish with any certainty how much illegality (tax evasion, private appropriation of public funds, or exploitation of cheap labour) the market institutions foster. Governments that drive the enterprise agenda are usually much more eager to open markets than to provide costly oversight.

But the epistemological challenges of the market run deeper. The basic premise of a beneficial market is that the knowledge distributed among its participants, when aggregated through the medium of prices, coordinates their behaviour towards achieving a good result. But the right degree and kind of distributed knowledge might not exist among potential participants when a new market is instituted. The task of providing market participants with the requisite information, or forcing enterprises or individuals to reveal it, falls on the state. The state doesn’t have to be the sole producer of information – news media and non-profit organization also contribute information to the market. And more importantly, the information produced by all of these outlets is not the sole basis of market decisions. Ordinary knowledge distributed among market participants is an important component of most markets.

Stock markets are a good example of this epistemological challenge. The basic idea (from a government perspective) in an institutionalized stock market is risk distribution. Publicly owned companies do not face the same financial constraints that private companies, which are owned by a small group of individuals, do. The risk of bankruptcy is shared by all stockholders, none of whom needs to face financial ruin if things go bad. The public gauge of the risk / reward ratio is the stock price of the company in question. Great calamities can ensue if the prices are inaccurate, as the history of stock market crashes attests.

If the operations of a publicly traded company would completely opaque, so that investors received their yearly dividends but no information about anything going on inside the company, its stock market price would be inaccurate. Neither average citizens nor professionals investors would possess enough knowledge to accurately assess how much the company is worth. This is why stock market regulations instituted by the state require all publicly traded companies to disclose very specific and detailed information about their operations. If investors can link this information to other idiosyncratic pieces of expert knowledge and ordinary knowledge that they possess, their group judgment which the stock price reflects should be accurate. Whether the required information disclosure is really sufficient is very hard to say, but stock market regulations are at least adjusted after each crash to approximate the ideal more closely.

Other cases of deficient distributed knowledge include buyers who remain ignorant of “externalities” such as the environmental consequences of their decisions or the child labourers who have made the products they buy. The state needs to take action to provide market participants with this information too, so that market participants can compare products can weigh the consequences of their decision to buy or not to buy. In globalized commodity markets, where production chains extend across the world, each decision seems to become hopelessly complex if we try to compare every imaginable aspect of competing products. This is symptomatic of markets which expanded too quickly without requisite epistemological responsibility on the part of the responsible governments.

States produce useful knowledge for markets in the form of various statistics. They also provide public records containing, for example, the financial or criminal histories of enterprises and individuals  The state provides guarantees which contribute trustworthiness and predictability to markets. These include various forms official certificates and standards. All of this creates epistemological challenges. Which kinds of data should the state collect and publish, which should be kept secret or not be collected at all? Which data should private entities be required to publish? What should the state fix by guarantees, what should freely take its course without interference?

This essay has raised more questions than it has answered, but it can be summarized quite simply. Promoters of the enterprise agenda should not be allowed to parrot their meaningless “more markets, more growth” mantra and leave it at that. They should be challenged to explain, first, which forms of market abuse they expect to encounter in their proposed new market and what the rules will be. How will the governing body know what goes on in the market and how will violators be sanctioned? Second, they should provide a reasonable argument for how distributed knowledge will function in the proposed market. What information will the state provide to market participants, what relevant information will they gain from other sources, and how will these pieces of information link to the ordinary knowledge of individual participants? The epistemological challenge for the enterprise agenda lies in answering these questions.


Hayek, Friedrich. The Use of Knowledge in Society American Economic Review XXXV (1945), No. 4. pp. 519-30. American Economic Association.

Lindblom, Charles. The Market System. Yale University Press 2001.


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