Wharton School of Business professor Joel Waldfogel, in his new book, tears into the prevailing notion that markets left alone will sort themselves out and can be left to the dynamics of the invisible hand.

In the prevailing view, markets allow everyone to get what they want, regardless of what others want — recalling Blockbuster Video’s “Go Home Happy” slogan — while allocation through government imposes what John Stuart Mill called a “tyranny of the majority” — that you get what you want only if the majority wants it. This stark distinction between markets and government, advanced by Milton Friedman in his book Capitalism and Freedom, has been the rationale behind letting markets decide a wide variety of questions for decades. But according to Waldfogel, the tyranny of the majority is also at work in many markets, benefiting some, harming others, and not always ending up promoting efficiency.

The tyranny of the majority — Waldfogel calls it “the tyranny of the market” — arises whenever two conditions hold. First, production entails substantial fixed costs; and second, preferences differ across groups of consumers. High fixed costs limit the number of products that markets can profitably offer, so that only large groups get appealing products. And when preferences differ across groups, then those not targeted — “preference minorities,” in Waldfogel’s words — are unable to go home happy.