Private Enterprise Definition
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Define Private Enterprise: Entity vs Economic System
The term “Private Enterprise” is typically in reference to either a privately owned and operated entity or an economic system.
Private Enterprise as an Entity
When referred to as an entity, a private enterprise is a business that is not controlled or owned by the government.
Everything, including the means of production, is owned by an individual or group of individuals.
The term “private enterprise” stands in contrast with a “private company,” which is a company not traded on any public stock exchanges and is privately held.
Private Enterprise as an Economic System
When referred to as an economic system, private enterprise is a capitalist, market-based economy, rather than a command economy.
Like other market economies, in theory, it allows the demand of consumers to operate as the “invisible hand” dictating the prices at which a product or service is sold; however, government intervention is still allowed in a private enterprise economy, even though the businesses are privately held.
A private enterprise is a type of free enterprise system whose goal is to allow for “perfect competition.”
In theory, removing all government intervention should allow for economies to create perfect competition.
In reality, this is not the case.
Monopolies often form and larger, more established enterprises will often squash new entrants to a market.
Some government regulation is therefore necessary to allow an economy to operate as efficiently as possible.
Private Enterprise Case Study: United States
The United States is thought of as a private enterprise, market economy, but in reality, it is a mixed economy with elements of both a market and command economy.
Mild government regulation is necessary to protect public interest and promote the flourishing of private businesses.