A Rant Against Non-Profits
By Arnold Kling
He was much more self-effacing in person than he is in his ideology. He believes in big political programs. He asserted that the reason that the elderly are not poor today is because we have Social Security. I’m sorry, but economic growth is a much more important factor.
One of the other panelists, Maya Wiley, made no pretense of humility. She would gladly spend whatever it takes (of other people’s money, of course) to give everyone broadband Internet access, whether they want it or not. I can imagine a scene where she announces getting government funding for fiber-optic Internet connections to a poor neighborhood, and while she stands beaming in front of a group of poor people, several of them get out their smart phones and ask her, “You’re not going to make me give up my 4G, are you?” (And, yes, poor people are adopting smart phones.)
Basically, Wiley and LaMarche reinforced my view that non-profits are for people who would rather dictate to customers than serve them. Consider this table:
In the profit-seeking sector, there is tension among all three groups. Shareholders and managers would like to sell to consumers at the highest possible price and lowest cost. Consumers want the opposite. Shareholders would like management to be maximally effective and minimally compensated, and management wants the opposite. But, as you know, the forces of competition force an alignment of interests. In particular, consumers have a strong say in what happens, because they can choose how much they are willing to pay for what the business is selling.
In the non-profit sector, donors are comparable to shareholders and agencies are comparable to management. But the beneficiaries have no say in the matter.
The issue for discussion in the panel was whether “metrics” are over-used or under-used in the non-profit sector these days. LaMarche and Wiley were arguing that they are over-used. I might actually agree. “Metrics” might give donors the illusion that they are holding agencies accountable for helping beneficiaries. In fact, though, who knows? Do you believe that school test scores are a sufficient measure of teacher quality, and that students and parents cannot possibly figure out for themselves who the good teachers are?
One of the other panelists, Leslie Lenkowski, embraces a Tocquevillian vision of many diverse small non-profits. I buy into that vision, but I fear that the reality is that government and non-profits have become too heavily intertwined. Many non-profits owe much of their funding to government grants. And other non-profits owe their existence to the desire of donors to push political agendas (LaMarche and Wiley proudly do that).
What’s worse than a non-profit that by its nature ignores the wishes of beneficiaries and instead gives them what the donors and managers think they should want? A non-profit that by its nature uses the coercive mechanisms of government to ignore the wishes of beneficiaries, etc.
Holden Karnofsky has found a charity through which you just give money directly to beneficiaries. Obviously, this seems like a promising concept. However, my prediction is that it will not meet the psychological needs of the typical donor, and it would not surprise me to see traditional charities lobby with the IRS to make sure it does not maintain a tax exemption.
UPDATE: More in GiveDirectly from Alex Tabarrok.