THERE’S NOTHING ESPECIALLY WORTHY ABOUT A “NONPROFIT:”

People assume that because non-profits do not seek profits, their intentions are good. And good intentions are sufficient to make them morally superior to profit-seeking enterprises. The intention heuristic ignores the possibility that the outcomes of profit-seeking businesses can be—and often are—more socially beneficial than the outcomes of nonprofits. We should evaluate enterprises based on outcomes, not on intentions.

Then there is the issue of accountability. A profit-seeking business is ultimately accountable to customers, who are in the best position to gauge the value of what the business provides. If customers do not pay more than the cost of what the firm provides, the firm loses money and goes out of business. In contrast, a nonprofit only has to keep its donors happy. If the services it provides are not worth the cost, it can continue to operate by maintaining good relationships between the executives of the nonprofit and the providers of funding.

Also, it’s not in fact the case that the intentions are always good.

I had a conversation about regulating nonprofits with The Giving Review recently. Here’s part two of that conversation.