Arnold Kling  

Still More on Non-profits

The Problem with Greece... John Goodman Hits a Home Run...

A commenter suggested, among other readings, Susan Rose-Ackerman:

an organization that binds itself not to distribute its surpluses to owners may be trusted more by customers and donors unable to judge service quality directly...

Second...The nonprofit form provides a weak guarantee to donors that their funds are not being syphoned [sic] off as profits...

Third, nonprofits provide a shell within which people can reify their ideological beliefs without having to be accountable to profit-seeking investors. Ideological entrepreneurs, not focused on amassing wealth, will disproportionately select the nonprofit form.

I am starting to come around to the view that the distinction between profit and non-profit may not be the central issue.

My original question is why a young idealist would insist on working for a non-profit. One answer is that what the young idealist wants to be able to say is "I work on providing food to the poor," rather than, "I work on providing luxury cars to the rich."

Incidentally, if you work in a profit-seeking grocery that takes food stamps, you can say that you work on providing food the poor. But my guess is that most idealists would not think of taking a job working in a grocery in a poor neighborhood, although they would consider volunteering in a soup kitchen.

In a poor neighborhood, which is more valuable--a soup kitchen, or a grocery? My inclination is to let poor people take their money and their food stamps to the outlet of their choice, and let profits determine which one survives. Why does that inclination trouble an idealist?

Naturally, Robin Hanson has an opinion.

I suspect that what is going on here is that non-profit donors and employees both dislike the idea of letting money to go non-profit firms [sic? I assume he means "letting money go to profit firms"], regardless of how much that might benefit aid recipients. They affiliate with non-profits in order to gain an image of "doing good" and substantial affiliations with for-profits in that process taints that image.

Read the whole thing. He brings up the food stamp (voucher) alternative, also.

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COMMENTS (5 to date)
ThomasL writes:

Try substituting "filthy lucre" for "profit" and I think you can cut to one of the main drivers directly.

Choosing a non-"filthy lucre" immediately establishes you as above the base concerns that for-"filthy lucre" firms and their employees are subject to.

It is the discount, Mega-Lo-Mart version of a vow of poverty -- the same halo, but you still get a decent paycheck at the end. What better discount could there be? A true vow of poverty will cost you everything; this one is almost free! And just as good as the name-brand, since naturally each dollar has been thoroughly washed by only the purest motives before it finds it way to your home.

JF Sebastian writes:

This article on Scientology ( made me think of what constitutes a non-profit in most people's eyes:

"The traditional religious bedrock - worship, God, love and compassion, even the very concept of faith - is wholly absent from its precepts. And, unique among modern religions, Scientology charges members for every service, book, and course offered, promising greater and greater spiritual enlightenment with every dollar spent. People don't 'believe' in Scientology; they buy into it... This is a story about a global spiritual enterprise that trades in a product called 'spiritual freedom.' It is, on many levels, a story about the buying and selling of self-betterment: an elusive but essentially American concept that has never been more in demand than it is today. As far back as the mid-nineteenth century, when a New England hypnotist named Phineas Quimby popularized a form of healing he called 'mind cure,' Americans have yearned for a quick fix for their physical, psychological, and spiritual imperfections."

Non-profits can be seen as institutions where the solution cannot be bought with simply sufficient capital (and may actually undermine it). That there is a labor-intensive element that requires a certain pressure that cannot be sustained in a profit-seeking enterprise. Most would say that faith is something that is demonstrated and built through missions and good works rather than earned through purchasing redemption (the camel and the eye-of-the-needle and all of that). Of course the evaluation of this is all in the eye of the beholder. The US government views Scientology and LDS as equal non-profit entities. But I suspect there are many who would view the purchasing of Clear status as a lesser virtue than a Mormon's youth mission to Taiwan. And if the government *did* revoke tax exempt religious status, there's a good chance many churches would fold and an equally good chance the Church of Scientology would continue humming along. The survival of an institution relying heavily on the benevolence of individuals seems to be key to the concept of non-profit in most people's eyes.

Floccina writes:

I work with a couple of small non profits and I have seen an interesting thing in them. That is that the originator of the non-profit wants it to be his baby. That is a they have shown a reluctance to join efforts with other non-profits.

Foobarista writes:

From what I can tell, there is an implicit notion that people who work for nonprofits are somehow "sacrificing" (even if they're salaried employees), and there is a certain type of person who feels that their sacrifice gives them some sort of claim to righteousness.

If you're "in it for the money", you lose your claim to righteousness, even if your profit-making activity serves the common good.

Tom West writes:

I'm not certain what's so hard about this.

In traditional business, the value of a human being to the business is proportional to their demand for your service and the amount of money they have. (Demand from human beings with no money is worthless.)

This is somewhat emotionally counter-intuitive, in that we often believe the demand of human beings who have no money should count for something simply because they're human.

Non-profits allow donors *and* workers to address this incongruity in a way that simply giving money to the poor does not.

Of course, it is true that forcing a customer to ration and allocate their money is a wonderful way to actually determine true demand and thus allocate resources, a mechanism that non-profits don't have.

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