Punctuated Equilibria in the Private Sector and the Stability of Market Systems

The article examines longitudinal trends in expenditures by over 1,200 private firms, finding evidence of punctuated equilibrium—a pattern of change widely interpreted as evidence of stick-slip dynamics in decision-making processes. Levels of punctuation in the private sector closely resemble those observed in studies on public budgeting, suggesting that the private sector is not on average any less resistant to change than government. Both privateand public-sector decision making is a function of deliberative processes, which the article compares to market systems. Deliberative decision making takes place when a group comes to a consensus about the allocation of resources. Market processes aggregate the actions of many independent decision makers to arrive at an outcome, such as the value of a commodity. The article considers the relative informational efficiency of these two processes and concludes that market systems should be more adaptive to incoming information. Three case studies provide natural experiments to investigate the stability of outputs during periods of deliberative and market control. A key finding is that when outputs are determined by market systems it greatly reduces the magnitude of punctuation.