The economics of non-profits

Non-profit entities depends on begging for money. And contrary to popular belief, the market for begging is finite. The market for begging depends primarily on two factors.

1. The supply of empathy we possess towards others
2. The supply of disposable income we have available to spend.

A popular belief is that Americans are not a giving people. On the contrary, the market for begging is generally over-saturated. There are simply too many non-profits begging people for money. A cursory glance around at the number and size of non-profits ought to be enough to dispel the twin myths that Americans are not a giving people and that non-profits are just that, not for profit.

The fact is that like any other business in America, non-profits are really out to make a profit. To grow. To become bigger and more prosperous. And that prosperity is, like all other businesses, measured in dollars. Unfortunately, however, unlike other businesses, most non-profits rarely produce a good or service that is a general benefit to society. A common mistake most people make is thinking that non-profits are not driven by money or as competitive as their for-profit counterparts.

The truth is, however, that they are even more competitive because their market of empathy and, in the current economic climate, the resources of those they prey beg from are very limited.

I believe the best thing for us as a society would be to stop pretending there is a division between for and not for profit institutions and simply incentivize what we wish to see more of (through tax breaks) but still tax everything all the same. At least then we would hopefully end up with fewer organizations begging for our money and, hopefully, fewer people drawing large salaries while still claiming to work at a not-for-profit institution.

As a footnote I want to add that I am not opposed to charity. As a follower of Christ I readily embrace charity. However I am a firm believer that charity is best done on an individual basis. Sure, individuals can pool their resources for greater impact, but this should rightly be called a corporation. And while I recognize that there are genuinely altruistic not-for-profit institutions, what I am writing against here are the organizations which, quite simply, not.

In the coming days I will be writing on one such abuse of the not-for-profit system in America, the church planting movement.

Share/Bookmark

Leave a Reply