The Role of Nonprofit Organizations in Compensating for Market Failure

The Role of Nonprofit Organizations in Compensating for Market Failure ABSTRACT: This paper reviews three social scientific accounts of the civic sector's role in society: the government failure, contract failure, and voluntary failure theories. All three explain the role of nonprofit organizations as compensating for the market's failure to provide certain collective goods. This approach involves a radical misinterpretation of the underlying principles of civic sector organizations. An account is needed that explains their economy in terms of their normative concerns, rather than explaining normative concerns in terms of their economy. I lay a foundation for such an account by examining (1) the self-understanding among civic sector organizations that they should be "mission-driven," and (2) the implications of this self-understanding for the sector as a "social economy." Whereas "mission-drivenness" calls attention to service-provision, resource-sharing, and open communication as the normative core of civic sector organizations, the notion of a "social economy" suggests a recirculation of money into channels where standard economic logic no longer holds. The key to the civic sector's role lies not in responses to market failure, but in the short-circuiting of a money-driven capitalist economy. Three trends will shape the future of education around the world: the revolution in information technologies, the crisis of the welfare state, and the globalization of a consumer capitalist economy. In the face of such powerful developments on a massive scale, philosophy's efforts toward "educating humanity" (1) can seem both presumptuous and quixotic: presumptuous, because much of philosophy has given up global theorizing of sort ... ...n producers and consumers, or among consumers. (10) Jon Van Tils Mapping the Third Sector: Voluntarism in a Changing Social Economy (Washington, D.C.: Foundation Center, 1988) hints at this, but a communitarian emphasis on building habits of the heart keeps Van Til from pursuing the normative implications of voluntarism for the communication that should characterize such organizations and their relations to the public. (11) Civic sector organizations are under tremendous pressure to bend their communicative capacities for the sake of sales, advertising, marketing, and public relations strategies whose primary objective is the promotion and preservation of the organization itself. While such strategies are necessary, openness suffers when communication subserves these strategies rather than these strategies themselves submitting to tests for open communication.