I believe that he is correct about some markets failing even when all ideal circumstances are met; some things simply become obsolete, as with his example with the record store. It certainly could have been an operating inefficiency due to the power structure with the employees, but when was the last time anyone bought music in a record store? It still has a certain romantic appeal, but hello iTunes. The other store was probably able to stay in business because it had a stronger corporate structure. In a local example, Box Office Video went out of business long ago, but we still have a Blockbuster video, even though that store is probably "leaving money on the table"for the sake of remaining seen by the physical public, and not just as an online asset, like we see with Netflix or other similar companies.
As far as food coops, or any others, I think it comes back to supply and demand; if there is enough demand for an organization like that, then it should get enough public support to make it successful. But there also lie problems of not having a higher management, if the employees can't agree on every business aspect, it is bound to unravel eventually.
Frank says that the foundation of capitalism is that people are greedy. I guess that's one way to put it, but if both parties will benefit from he trade they make, as in The Wealth of Nations, then that greed is leading each party to it's optimal outcome.
And, I just must pick a little bit about the example of the blade guard, he is only weighing the costs and benefits of the initial amount of the device and it's maintenance, but what about the business owners insurance premiums? Surely, the safer the workplace, the lower the occurrence of workman's comp claims= lower insurance premiums. Not to mention the manufacturer of the device, someone else is going to add that safety feature for free, or a comparable price, therefore selling many more devices than the other company that's selling a much more dangerous product. There really are no benefits to not having the blade guard. The incentives are much higher to have safer, happier workers.
These reasons are exactly why there are so many laws about labor; how old you must be, how many hours you can work without a break, minimum wage,ect. but there are alternatives for those who do choose to trade safety or other comforts for higher pay, such as some overseas jobs that have become available for civilians in places like Iraq or Kuwait. People are able to make a lot of money, tax free, by willing to risk the safety net of the U.S.. Each individual will weight their own costs and benefits, whether they have a family, significant debt to pay off, or maybe want to take advantage of the travel opportunity. I guess it depends on how "greedy" they are, but we're all going to choose the option we hold in the highest regard.
Okay, I think I'm done, may add more later, but I'm getting tired and I feel ike I'm rambling and getting distracted.