What is the role of whistleblowers in a democratic market economy?


Answer: Whistleblowers play an important role in a democratic market economy. With highly complex structured contracts, specifically in the financial sector, there’s asymmetric information due to limited access. Shareholders cannot adequately monitor the behavior of financial traders who can take risks, which when materialized shareholders will not be able to repay. There’s also a lack of efficient monitoring on part of the regulators/government agencies due to resource constraints or revolving doors among the staff working at these financial institutions and regulatory agencies. Thus, whistleblowers play a critical role in exposing potential fraud within their organizations.