Non-profits can be Monopolists, too
By G. Patrick Lynch
During the past several weeks in self isolation many of us have been watching the Netflix series Tiger King with a mix of shock, horror and fascination. The cast seems unbelievable – a parade of individuals with prison records, drug problems, missing teeth, tattoos, and impressively unconventional personal lives. The main story is about two individuals locked in a duel for victory over the legal status of private zoos and large predatory animal breeding. It is very much a tale of political economy: a non-profit seeking to gain monopoly control over a good and maximize utility rather than wealth.
The protagonist of the show is a flamboyant, erratic, compelling private zoo owner and breeder of tigers who has named himself Joe Exotic. His antagonist is a woman named Carol Baskin. While Joe Exotic runs a private for-profit zoo that sells the opportunity to see large cats and play with cubs, Baskin’s organization purportedly seeks to “rescue” these same animals from exploitation. Her goal is to prevent the private holding and breeding of large cats and other endangered animals by private individuals. She is championing a bill in the Congress called the Big Cat Public Safety Act. The act would only allow certain accredited zoos and other organizations (one can safely presume Baskin’s own organization will be included) to hold and maintain these animals to prevent the public at large from keeping grown lions, tigers and bears in their yards as pets, a practice that is surprisingly currently legal in the US, but regulated.
On the surface this appears to be a noble end – the expense and work of keeping large animals in captivity is prohibitive. The animals are prone to neglect by individuals who buy a young tiger cub and discover after a short time that their pet is a large and potentially ferocious animal. The series describes an incident in Ohio in which a private individual who had dozens of wild animals let them loose in his town, which forced the police to slaughter the animals.
An economist might look at Baskin’s goals somewhat differently. Armen Alchian, the noted UCLA economist and author of several seminal articles on the importance of property rights, wrote about non-profits, and using economic analysis he explored what might be the micro incentives for actors in the non-profit world. His article Competition, Monopoly, and the Pursuit of Money, co-authored with Reuben Kessel, explores what animates the actions of someone in a monopoly situation. While the stereotype we have of regulated monopolists is that of an unmotivated individual, Alchian and Kessel argue that even though monopolists might be limited in the profits they can gain, they might very well be motivated by utility maximization rather than wealth maximization.
This is very much the motivation of Carol Baskin. She is trying to end the private trade in cats; however, this will not put her big cat refuge out of business. Additionally, she is not necessarily trying to gain wealth and become richer from this action, although a quick perusal of her 990’s in recent years shows that her admissions fees and fundraising have put her organization in a very lucrative position. It is strongly suggested that she gained considerable wealth from the mysterious disappearance of her first husband (later ruled a death). But as Alchian and Kessel note, Gary Becker’s ground breaking work on the economics of discrimination showed that people in competitive settings would eschew more profits in exchange for other material benefits over which they don’t have property rights. Becker finds that discrimination exists in competitive markets despite competitive forces because of “tastes.” The opportunity for such “tastes” to be expressed in monopoly settings is even greater. Therefore we can see Baskin’s desire to maintain monopoly control over access to large predatory cats as an expression of who she believes is the proper steward of these creatures. Any viewer of Tiger King would agree that Joe Exotic and his colleagues in the private zoo world push the boundaries of “proper stewardship.”
Of course Baskin doesn’t run a money losing enterprise. She is a master of fundraising and social media. She currently charges $200 per person to enter her refuge (families are charged $200 for the first person and 50 dollars per person after the first). The series explains the prohibitive costs of maintaining such a place, but Baskin has a built-in advantage that her private competitors do not, and it’s one Alchian and Kessel anticipate in their work.
Alchian and Kessel describe one way that a monopolist who doesn’t face market pressures can choose to “take income in a nonpecuniary form” such as choosing one’s work environment or coworkers not necessarily to maximize wealth but rather utility. And Baskin and her “co-workers” exemplify this perfectly.
Baskin employs an army of volunteers to run her organization. Volunteers of course choose to do so not for monetary gain but for the utility they receive. Additionally Baskin provides incentives – she gives her volunteers different colored tee shirts to signify experience and status. Thus her “employees” are striving to signal their commitment to the noble cause of saving wildlife while climbing the ladder of status she has built for them in lieu of payment.
In contrast, Joe Exotic’s employees are often fresh out of prison or struggling with addiction. He receives free, soon to expire, meat from Walmart to purportedly feed the animals, but several of his employees admit they comb through the meat for themselves before turning it over to the animals. While Carol Baskin’s unpaid employees return home to safe middle class lives, Joe Exotic’s workers sleep in dirty trailers and toil long into the night.
Alchian and Kessel somewhat ironically write about wages paid in monopolies; since they do not face competition they must offer a wage that “must be high enough to attract the `right’ kind of employees.” Of course the proper wage for Baskin to attract volunteers looking to make social contacts and meet other like minded individuals is zero, and that’s because these individuals aren’t looking for salaries. They are maximizing utility, not wealth.
Finally, Alchian and Kessel grapple with the incentives of the heads of these enterprises. While they do not themselves have property rights over the organization’s assets, they are much freer to use these assets in a way consistent with their tastes and preferences because they do not face the competitive forces from the market. Baskin is shown throughout the show wearing various cat themed clothing, some of which she says was given to her, but clearly she has a salary and expenses. She pursued an expensive lawsuit against Joe Exotic and this action was obviously funded through the resources of her organization, no doubt as a good justified by the endangered welfare of the animals under his care.
So as you stare in awe at the breathtaking trainwreck of humanity that is Tiger King, don’t forget that as far removed from ourselves as these individuals appear to be, they are still animated by incentives and limited by institutions. The basic principles of economics are still useful for analyzing even the most unusual of humans, even if their utility is maximized by being alone in cages with full grown lions and tigers.