November 7, Wednesday, meets at 12pm at Baruch College (There will be lunch at 12:00, with the presentation starting at 12:30 in room 308, 135 E. 22nd St)

George Mitchell, Marxe School of Public and International Affairs, Baruch College

Thad Calabrese, Robert F. Wagner Graduate School of Public Service, New York University

Outcome-Oriented Philanthropy and the Problem of Institutional Design

Abstract: In the United States, the 501(c)3 public charity is the dominant institutional form for philanthropic activity. However, the emergence of new innovations in philanthropic forms and instruments suggest certain limitations to the traditional form of the public charity, specifically as a vehicle for outcome-oriented philanthropy. In line with recent calls to reexamine the fundamental precepts and conventional wisdoms of nonprofit studies, this article critically analyzes the institutional form of the public charity and the ‘standard theory’ that describes it. This analysis demonstrates that the form of the public charity, including the current legal and cultural architectures in which it is embedded, are implicitly designed to maximize resource provider satisfaction and that this objective is necessarily incompatible with the maximization of program outcomes. In this ‘iron circle’ model, donors and nonprofits provide mutual benefits to one another, disregarding beneficiary welfare, and no reliable selection mechanism exists in the sector that could possibly promote allocative efficiency. Further analysis attributes this scenario to the role of information costs and the ‘specter of disappointment.’ Although reform is extremely unlikely, policy implications suggest specific means of developing an information ecosystem significantly more conducive to outcome-oriented philanthropy and the solving of the social problems evidently delegated to the nonprofit sector.

Download the paper for discussion here