Cuts Both Ways

Last time, I was fretting about the counter-majoritarian nature of philanthropy, coming to the conclusion that maybe it’s not such a bad thing. There are such things as democratic failures, and it can be good to have a corrective element in the ecosystem – albeit not in a dominant position.

The latest kerfuffle in the nonprofit space is about the for-profit company GOOD buying the non-profit social network Jumo. People have fretted about it, said “get used to it,” said, “actually, there’s something more interesting going on over here.” There are valid points made in this discussion about getting beyond the superficial discussion of tax status.

But the real issue is remembering why there’s a “nonprofit” sector in the first place (however you want to label it). And that’s because there are some things for which there are no “natural” markets. Robert Kuttner pointed this out years ago, that the “markets” for health care and labor are fundamentally different from markets for other kinds of commodities because the former are about human beings and the latter are generally about physical objects. Human beings have a unique moral status, so it simply doesn’t work to treat them like any other widget, no matter what the textbooks say. Those markets will always be different and always inherently political.

It follows that there are areas of human endeavor where market dynamics will not function in the same way. Think of it like the upside-down mountains in Avatar whose magnetic field throws off conventional instruments. Our basic assumptions about how markets function – rational actors optimizing utility defined in terms of immediate material gain, etc – are called into question. Our tools – our business plans – don’t work in the same way; input A, instead of generating output A, leads to output Q. Behavioral economics helps here, but there’s something more needed.

I’ve written about the imp of the perverse, that dark impulse that leads people to do things against their own self-interest. And about how our theories of human behavior are just so boring.

The problem is, there are just some areas of human endeavor where money isn’t the point. The profit motive isn’t enough to motivate action. Something more has to get people to do it. And that something else is like a flame; it can grow, it can spread, but it can also go out. It may endure as embers, waiting to be rekindled, but its going out spreads a chill, dims light, causes the huddled crowd to disperse.

The [insert a better word for nonprofit] sector is where that flame is kindled. My mentor Jeff Weintraub points out that what gets called “civil society” or the third sector actually has two components: civil society, the realm of private business for private gain, and political society, the realm of collective action for collective gain that is not as all-encompassing at the state. Political society is where advocacy happens, where organizing happens, where (shudder) political parties exist. We conflate civil society and political society – however we label them – at our peril.

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