[Interviewer] DH: Let’s move on to the next chapter, “Myths about Markets.” Let’s start with the phrase “dictates of the market.” What’s wrong with that phrase?
TS [Thomas Sowell]: The market is in no position to dictate. You can write a whole book on the misuse of the word “power” as it regards markets. The left likes to say Wal-Mart is a powerful force. There are people who have never set foot in Wal-Mart, who never will set foot in Wal-Mart, and there isn’t a thing Wal-Mart can do about it. Insofar as there are voluntary transactions, there are no dictates. People who use that phrase often want to create a situation whereby they, through the government, can dictate to the market.
DH: Let’s talk next about prices. You write about the concept of reasonable or affordable prices, and, here’s a direct quote, “It is completely unreasonable to expect reasonable prices.” Explain.
TS: Reasonable prices are prices that adjust to our budget. Prices, of course, are determined in part by what it costs to produce things and get them distributed and so on, and so there is no reason whatsoever to expect reasonable prices. There is no reason in the world to expect costs to conform to what you are willing to pay. There is no reason to expect the Hope Diamond to be affordable.
. . . .
DH: I think most people hear the term “non-profit” and think of a group that is selfless, works for the public good and not private gain, and embodies just about everything that is good about human nature. You don’t quite see it that way. You write, “What are called ‘non-profit organizations’ can be better understood when they are seen as institutions which are insulated, to varying degrees, from a need to respond to feedback from those who use their goods and services, or those whose money enabled them to be founded and continue operating.” Can you expand on that?
TS: The difference is that a profit-seeking organization has to please simultaneously the customers and the investors. A non-profit organization doesn’t have to do that with either one—particularly if it is a long-lived organization. Many of the people who have invested in it are already dead. Among those that are still alive it is very hard for them to monitor what is going on inside the organization.
There is overlap in the things that for-profit and non-profit organizations do, like publishing magazines and stuff like that. And so they compete. Over time, if it was true that non-profits didn’t have the problem of generating profits and had better people, the non-profits would be taking away market share from the profit sector. In point of fact, just the opposite happens. For example, it is very common for college bookstores to be taken over by a Barnes & Noble or cafeterias to be taken over by profit-seeking companies. The test of market share is usually won by the profit-seekers.