AN OVERVIEW - Part 2

Municipal transit, for example, was once provided by private profit-seeking businesses in the United States before many city governments took over trolleys, buses, and subways. Activities have also shifted the other way in more recent times, when such governmental functions as garbage collection and prison management have in some places shifted to private, profit-seeking businesses, and such functions of non-profit colleges and universities as running campus bookstores have been turned over to companies like Borders or Barnes & Noble. Traditional non-profit academic institutions have also been supplemented by the creation of profit-seeking universities such as the University of Phoenix, which not only has more students than any of the private non-profit academic institutions but more students than even the largest of the state universities.

The simultaneous presence of a variety of organizations doing similar or overlapping things provides opportunities for insights into how different ways of organizing economic activities affect the differing incentives and constraints facing decision-makers in these organizations, and how that in turn affects the efficiency of their activities and the way these enterprises affect the larger economy and society. The fact that businesses have largely displaced many other ways of organizing the production of goods and services suggests that the cost advantages, reflected in prices, are considerable. This is not just a conclusion of free market economists. In The Communist Manifesto, Marx and Engels said of capitalist business, “The cheap prices of its commodities are the heavy artillery with which it batters down all Chinese walls.” That by no means spared business from criticism, then or later.

Since saints are no more common among people who own or manage businesses than among people in other institutions and activities, in evaluating business and its critics we must distinguish examples of individual wrongdoing from systemic problems of businesses as such. Criticisms of those in business have ranged far beyond criticisms of particular shortcomings, scandals, or crimes by particular individuals, all of which occur in other kinds of organizations as well.

Negative reactions to business are not confined to socialists or others who have some alternative economic system in mind. Even Adam Smith, the patron saint of laissez-faire capitalism, had only negative characterizations of businessmen in the 900 pages of his classic, The Wealth of Nations.

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