Prior to the demise of Arthur Andersen, the “Big 5” firms seemed to have a “lock” on reputation. It is possible that these firms may have felt free to trade on their names in search of additional sources of revenue. If this is what happened, this was a big mistake. In a free market, nobody has a lock on anything.
The recent rebound in some key economic indicators has prompted many economists to suggest that the aggressive lowering of interest rates by the Fed is starting to “grow” the economy. Notwithstanding this success, they contend, the central bank must remain on guard in order to prevent inflation getting out of control.
It may seem paradoxical that we work so hard all year so we can sleep on the beach for a week, but there is a method to our madness. As we work harder, leisure time for others increases in both quality and quantity, and we can assume that everyone else is returning the favor. Everyone else, that is, except the government.
What may be the more important factor in manufacturing future Enrons is the role of government in fostering the boom-bust cycle. Enron, then, is just one casualty of many--albeit the largest so far--of massive credit expansion and of manipulation of interest rates by the central bank.
While living near Greenville, South Carolina, a couple of years ago, I attended a dinner that featured the late Sherwin Rosen of the University of Chicago as its speaker. Rosen, who had been a colleague of F.A. Hayek’s at Chicago, spoke that evening on Austrian economics--or, at least, he attempted to talk about Austrian economics. In a short time, he had clearly demonstrated that he understood very little about that discipline, and he wound up giving a caricature of Austrianism.
Hey, accountants are people, too, and they’re not very happy ones these days. Arthur Andersen’s accountants--not unjustifiably--think that they are unfairly being made the scapegoats for much of Enron’s unreported sins, and the consequences could be devastating for the accounting concern’s survival.
While it is morally reprehensible to hate, in a true free market the freedom of citizens to associate with whom they wish must be upheld and private property rights must be enforced. There should be neither forced association nor forced disassociation. This is the social foundation of the free-market economy.
Typical Ph.D. economics student may be able to tell you lots about Kuhn-Tucker conditions, Hamiltonians, optimal control theory, undetermined coefficients, differential equations, and the like. They may speak fluently the language of mathematics and speak of sophisticated programs in GAUSS, SAS, and STATA. They may look at you with a curious bewilderment, however, upon the mention of Adam Smith. Perhaps you know of him.
