Hossein Jorjani
First publication: 2026 – 08 – 22
Governments are expected to regulate enterprises, evaluate their claims, design economic policies, and respond when important sectors encounter difficulties. To perform these functions competently, public institutions require knowledge of how enterprises actually operate. Statistics, economic models, regulatory reports, audits, and consultation with private firms provide indispensable information. Yet they may not provide all the knowledge that is acquired through the practical operation of an enterprise.
This distinction raises an epistemological problem. A government that possesses no practical experience of operating enterprises may become dependent upon the organizations it regulates for its understanding of operational realities. Regulators may know reported costs, productivity, employment levels, prices, and investment requirements while lacking an independent basis for judging which costs are unavoidable, which efficiencies are realistically attainable, or which operational claims reflect genuine constraints. The problem is not necessarily that private enterprises provide false information. It is that the state may lack an independent source of operational knowledge against which such information can be assessed.
This provides one justification for public enterprise that is distinct from conventional arguments based on market failure, natural monopoly, redistribution, or unmet social need. A limited but continuing sphere of publicly owned enterprise can function as part of the knowledge infrastructure of government. By operating enterprises directly, public institutions can preserve practical competence and acquire first-hand knowledge of production, employment, investment, management, and service provision.
Public enterprises can also provide benchmarks. Their costs, productivity, prices, employment practices, investment requirements, and service quality can be compared with those of private enterprises operating under comparable conditions. Such comparisons need not presume the superiority of either form of ownership. Their epistemic value lies precisely in providing more than one institutional point of observation. Public and private enterprises can thereby serve as comparative sources of information about the possibilities and constraints of economic organization.
For this benchmarking function to be credible, however, differences between public and private enterprises must be made explicit. Public enterprises may receive subsidies, accept obligations that private firms do not bear, maintain services that are commercially unattractive, or pursue social objectives in addition to commercial ones. Their accounts must therefore be transparent, their management competent and accountable, and their commercial performance clearly distinguished from publicly mandated obligations. Otherwise, comparison becomes misleading rather than informative.
Public enterprise should not, on this argument, displace private enterprise or become the predominant form of ownership. Nor does the argument imply that direct ownership is the only means by which governments can acquire economic knowledge. Regulatory agencies, independent audits, professional expertise, research institutions, and consultation with economic actors can all contribute to institutional knowledge. The narrower claim is that some forms of operational knowledge arise from participation in economic activity and may be difficult to obtain entirely through external observation and reporting.
The issue is therefore not simply one of ownership. It concerns the epistemic capacity of the state. A government that withdraws completely from the practical operation of economic institutions may gradually lose not only productive capacity but also the knowledge required to evaluate the enterprises it regulates and the policies it adopts. Conversely, maintaining a limited sphere of well-governed public enterprise can preserve both operational competence and an independent basis for economic comparison.
Public enterprise can therefore have an epistemic function in addition to whatever economic or social functions it may perform. Properly governed, it becomes part of the institutional machinery through which a democratic state learns how parts of the economy actually work and retains the practical capacity necessary to govern them intelligently.
Hossein Jorjani 