Assessing Private Enterprise: An Exegesis of Tangled Doctrine

This paper proposes that the twin theorems of welfare economics provide an insubstantial basis for the faith of many economists that private enterprise is a good way of organizing production. Most economists implicitly recognize this. A reading of the literature in advocacy of private enterprise suggests that administrative parsimony, responsiveness, and innovativeness often are ascribed as virtues of the enterprise form of economic organization. The argument that private enterprise has these virtues has, however, no basis in orthodox microeconomic theory. This essay is concerned with considering arguments for those alleged virtues, and sketching some of the theoretical and empirical questions that are opened when these are scrutinized.