I stumbled across
this article over the weekend that has some relevance to some of our recent posts on charity and altruism. The question is: should charities be run like corporations - high executive salaries, lots of advertising to build market power, maybe even publicly traded stocks? A summary of key points provided by the fine students at Centives.net:
- We have an emotional reaction to charities that use money to pay their employees high salaries rather than help the poor, but that means that the best and brightest don’t go to work for charities, and this ultimately hurts the poor.
- If you’re rational then you should continue to spend money on advertizing as long as the money you get from contributions as a direct result of advertizing is more than the money you spent. Yet we don’t like our charities using their donations to advertize, and as advertizements from other businesses continue, charities won’t be able to steal market share from the private sector – because they can’t advertize.
- Accept failure. Not every business initiative succeeds, and not every charity event will raise as much money as expected. Charities must take risks.
- Give them time. Startups go for years just building their capacity without generating profits. Charities might not generate donations immediately. Give it time, it’s an investment.
- Offer dividends through a stock market to attract more capital.
Some interesting points, although I think some of what is missing in his argument is that there is a fundamental difference between seeking donations and seeking customers. A firm that's looking for customers wants to present itself as successful, with money to spare for high salaries, glitzy ads, etc ... this inspires confidence and makes you think they will be there tomorrow to stand behind their product. While you also want to feel confidence in a charity to do good work and not waste your money, I don't know that you want to be TOO confident in them, or else you will feel they don't need your help. It's a bit like suggesting that the homeless would be more successful panhandling if they wore suits and had a polished sales pitch ...
Source:
The Wall Street Journal
Via:
Centives
Well, what's interesting is to look at this from a world culture perspective. George M. Thomas, one of the original developers of world polity theory (...OK, many are not familiar with this...Google it), argues that one of the main foundations for legitimacy in the world today is volunteeristic authority. It's interesting, but altruism often gives us more authority to demand policy changes globally. So we expect that if a person or institution acts in a non-rational manner, then they have more legitimacy. If a corporation or business acts in their own self-interest and pursues profit we say "Well, that makes sense- they're acting rational". Same with a nation-state pursuing policies that simply benefit its own constituents. But if you want to criticize a not-for-profit NGO, simply say "They are acting in their own self-interest". This is incredibly debilitating for them, per Chris's comments in this blog, and is kind of a fascinating paradox, actually.
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