AN OVERVIEW - Part 1

In general, “the market” is smarter than the smartest of its individual participants.

Robert L. Bartley

Although business enterprises based on profit have become one of the most common economic institutions in modern industrialized nations, an understanding of how they operate internally and how they fit into the larger economy and society is not nearly as common.

Among the many economically productive endeavors at various times and places throughout history, capitalist businesses are just one. Human beings lived for thousands of years without businesses. Tribes hunted and fished together. Families lived on self-sufficient farms, growing their own food, building their own houses, and making their own clothes. Even in modern times, there have been cooperative groups, such as the Israeli kibbutz, where people have voluntarily supplied one another with goods and services, without money changing hands. Back in the days of the Soviet Union, a whole modern, industrial economy had government-owned and government-operated enterprises doing the same kinds of things that businesses do in a capitalist economy, without in fact being businesses in either their incentives or constraints.

Even in countries where profit-seeking businesses have become the norm, there are private non-profit enterprises such as colleges, foundations, hospitals, symphony orchestras and museums, providing various goods and services, in addition to government-run enterprises such as post offices and public libraries. Although some of these enterprises supply goods and services different from those of profit-seeking businesses, others supply similar or overlapping goods and services. Universities publish books and stage sports events. National Geographic magazine is published by a non-profit organization, as are other magazines published by the Smithsonian Institution and a number of independent, non-profit research institutions (“think tanks”) such as the Brookings Institution, the American Enterprise Institute and the Hoover Institution. Some functions of a Department of Motor Vehicles, such as renewing automobile licenses, are also handled by the American Automobile Association, a non-profit organization, which also arranges airline and cruise ship travel, like commercial travel agencies.

In short, the activities engaged in by profit-seeking and non-profit organizations overlap. So do the activities of governmental agencies, whether local, national or international. Moreover, many activities can shift from one of these kinds of organizations to another with the passage of time.

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