Wednesday, January 22, 2014

Nonprofit Readings: Boettke and Prychitko

Several years ago at a conference I met Lenore T. Ealy. I remember the conversation was brief but very encouraging. She shared my for nonprofit organizations and their role in transforming lives and tapering the scope of government action. After our meeting she sent me several volumes of Conversations in Philanthropy. In the past I skimmed these volumes noting that the topics interested me; but, there always seemed to be something more pressing that I needed to read. This morning I pulled the books off the shelf and committed to reading at least one article. The article I chose was from Peter Boettke and David Prychitko entitled, "Is an Independent Sector Prone to Failure? Toward an Austrian School Interpretation of Nonprofit and Voluntary Action".

Here is my brief summary of the article:

Nonprofit scholar Lester Salamon argues that the nonprofit sector is not independent from government and instead acts as a collaborator with government ---in fact, they exist as collaborators because nonprofit organizations can never be anything more than a bandaid on social problems due to their limitations. These limitations include coordination failure, unreliable resource streams, and lack of ability to be large-scale providers. Salamon thinks of these limitations as voluntary sector failures.

First, Boettke and Prychitko ask the simple question, "What constitutes a failure?" What they are attacking is that Salaman has no conceptual benchmark to state that the voluntary sector has failures.  Second, Boettke and Prychitko discuss the work of Roger Lohmann who criticizes "failure" arguments on the grounds that imposing the logic of economic calculation on nonprofit organizations automatically makes nonprofit organizations seem like failures (because they lack same substance of for-profit firms). Overall, Lohmann's ideas are acceptable to the authors but they object with Lohmann's prescription for the way forward.

Third, Boettke and Prychitko present their Austrian take on the problem which I would just consider "good economics":  (1) The prices for inputs help to guide nonprofit action; however, (2) There is no help from the price-system to coordinate actions when providing goods, and (3) It is difficult to calculate the "value-added" of the unilateral transfers made by nonprofits. While there cannot be calculation in the strict sense the authors argue that nonprofits still engage in rational decision-making in the sense that they use information to update their beliefs about the relative merits of different courses of action. 

This is not meant to be an in-depth post. There are four commentaries on the Boettke and Prychitko article that I will read later on that will help me form some more in-depth thoughts on the article. For now, I can tell you, this article presented some good leads for readings that I need to be familiar with for my dissertation. It also confirmed that some people are thinking on similar dimensions as I am with the importance of nonprofit organizations in cultivating a self-governing society.

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