Enron and the Free Market System
ENRON AND THE FREE MARKET SYSTEM
1. ABSTRACT
The Enron scandal was a financial scandal that was revealed in late 2001. After a series of revelations involving irregular accounting procedures bordering on fraud, perpetrated throughout the 1990s, involving Enron and its accounting firm Arthur Andersen, it stood at the verge of undergoing the largest bankruptcy in history by mid-November 2001. Enron filed for Bankruptcy on December 2, 2001.
2. FREE MARKET SYSTEM
A free market describes a theoretical, idealised, or actual market where the price of an item is arranged by the mutual non-coerced consent of sellers and buyers, with the supply and demand of that item not being regulated by a government. While a free market necessitates that government does not regulate supply, demand, and prices, it also requires the traders themselves do not coerce or mislead each other, so that all trades are morally voluntary.
In other words, a free market economy is "an economic system in which individuals, rather than government, make the majority of decisions regarding economic activities and transactions. In social philosophy, a free market economy is a system for allocating goods within a society: purchasing power mediated by supply and demand within the market determines who gets what and what is produced, rather than the state.
The free market system is based on risk. It is impossible to maintain free markets without risk, so we must accept and manage it. The alternative—eliminating risk from the system—is a “planned” economy. Managing risk depends on transparent, honest systems for transmitting information.
3. THE ENRON STORY
3.1 BACKGROUND OF COMPANY
Enron was a Houston-based natural gas and energy company. It delivered commodities and financial and risk management services worldwide. In late 1999, the company launched EnronOnline, trading everything from weather derivatives to coal. Enron's CEO Mr. Lay was quoted in 2000 as saying "We're an energy and
1. ABSTRACT
The Enron scandal was a financial scandal that was revealed in late 2001. After a series of revelations involving irregular accounting procedures bordering on fraud, perpetrated throughout the 1990s, involving Enron and its accounting firm Arthur Andersen, it stood at the verge of undergoing the largest bankruptcy in history by mid-November 2001. Enron filed for Bankruptcy on December 2, 2001.
2. FREE MARKET SYSTEM
A free market describes a theoretical, idealised, or actual market where the price of an item is arranged by the mutual non-coerced consent of sellers and buyers, with the supply and demand of that item not being regulated by a government. While a free market necessitates that government does not regulate supply, demand, and prices, it also requires the traders themselves do not coerce or mislead each other, so that all trades are morally voluntary.
In other words, a free market economy is "an economic system in which individuals, rather than government, make the majority of decisions regarding economic activities and transactions. In social philosophy, a free market economy is a system for allocating goods within a society: purchasing power mediated by supply and demand within the market determines who gets what and what is produced, rather than the state.
The free market system is based on risk. It is impossible to maintain free markets without risk, so we must accept and manage it. The alternative—eliminating risk from the system—is a “planned” economy. Managing risk depends on transparent, honest systems for transmitting information.
3. THE ENRON STORY
3.1 BACKGROUND OF COMPANY
Enron was a Houston-based natural gas and energy company. It delivered commodities and financial and risk management services worldwide. In late 1999, the company launched EnronOnline, trading everything from weather derivatives to coal. Enron's CEO Mr. Lay was quoted in 2000 as saying "We're an energy and