I’ve been listening to a lot of lectures over the last week on FEE while at work (the work has been mindless the last few days and it’s been nice to have something to think about).
During the Q & A on a lecture about Entrepreneurship ( http://fee.org/videos/entrepreneurship/ ) by Ivan Pongracic, a question was asked about Non-Profits and if they could be efficiently appropriating resources since they are not driven by profits and losses which signal if they are doing something right or wrong.
Would donations and ability to do charitable activities (donations - costs of current charitable actions = ability to do more charitable actions i.e. profit), be considered the same signalling process that profits and losses provide to traditional entreprenerial ventures?
I wouldn’t say the same, but similar. There can be competiton among non-profits for donor monies, however, an entrepreneur achieving a zero return might be inclined to employ his capital elsewhere, a non-profit organization might be perfectly happy carrying on at zero return indefinitely.
Aren’t profits a consequence of the economy not being in “equilibrium”? If so, would a Non-Profit operating with no additional donations above the cost to provide current charitable actions be in equilibrium? So, the market would see the non-profits use of resources as the best use of the resources they are using.
The state that occurs when the knowledge and expectations, and consequently plans, of the individual actors in the economy are compatible and coordinated with one another and the external “datum” that exists so that the plans of the individual actors may be carried out simultaneously.
I think the relevant point for Non Profit organizations is essentially that for those operating them, they’re considered a final, or “consumption” good. They’re not really in equilibrium in any sense other than that the plans of a given individual may be in equilibrium (which is always true). For the economic system to be in equilibrium what it would be mean is that it would be impossible to bid resources away from the Non Profit and use them as an input elsewhere (or vice versa) and make a (pure) profit.
This is true of equilibrium and of what I was intending on a very small scale (but not to say that it would truly be “equilibrium”, only that it would be the same process toward equilibrium that profits would provide, or lack thereof). I guess I was wrong to use the term when I wasn’t intending a full economy equilibrium.
The process to reach equilibrium is driven by the profits entrepreneurs receive for their utilization of resources. If a non-profit is not outbid for resources and the donors do not see any other place to spend or donate their money, hasn’t this effectively reached the same goal that profit seeking reaches?
Josh, I didn’t really get the way your phrased your last post, so I’ll respond to the original post.
As I see it, it works like this. The donors are giving the charity money in return for a consumers good (the feeling of goodness as a result of donating to a charity). The money that the charity gives away to whoever is analogous to the buying of inputs in other areas. (So, whereas the coffee will buy coffee beans, a machine and labour to give the consumer coffee, the charity will “buy” the services of the various charities in order to give the donor the service of “feeling good”).
Now, if the charity changes the way it donates and stops giving money to AIDS foundations and instead gives money to cancer research and the latter is valued more highly than the former by society. This will mean that more people will give money to the charity, resulting in more money available to the charity to donate to wherever (pure profit).
One must distinguish between non-profits arising in a free market, and non-profit by coercive means (government). ##################
In the free market non-profit, the donor should be seen as the consumer, while the beneficiary (such the students in the FEE lecture) are simply part of the service/product.. The consumers (donors) still values that service provided by the non-profit as any other consumer good. According to his own subjective value, one decides to if to donate and how much. The fact that different donors contribute different amounts should be viewed as just another characteristic of the product. The revenue from donations must still cover all costs, profits or losses are still present. “Profits” may not be viewed as profits only to the extent that the organizers of the non-profit organization are obliged to always put them back into the organization.
Recently some Advanced Austrian Economics seminars were uploaded too. I saw Free Banking from Larry White so far, it was great, totally blows up the money warehousing theory in the first half hour.
AEN: You have been critical of White’s book on free banking.
MNR: The White book says the Scottish banking system was more successful than the English system. But he doesn’t say one word about prices, inflation, or business cycles. His only statistic is that were fewer bank failures in Scotland than Britain. But what’s so great about not having failures? An industry that doesn’t have failures might be doing poorly. What if we applied this test to the Soviet Union, where no industries fail?
When you say one banking system is more successful than another, it seems the test should be less inflation and fewer business cycles. Yet this is never mentioned.
There is some discussion at the end. If you want more there are lectures Cost of Inflation and Monetary Equilibrium Theory by Horwitz entirely on tha topic.
He does nothing but attack a straw man. He doesn’t dare to address the refutations by de Soto, Hans Hoppe, Block, ,Rothbard, etc… He also seems to get good critical and challenging questions about fraud and the business cycle towards the end, and to my impression, he doesn’t address the questions at all, Especially about the business cycle.
That’s because you haven’t taken any of the specific criticism of the free bankers seriously. You have to at least be familiar with his critics before proclaiming objectivity.
White addresses none of the inconsistent problems that arise with his theory which have been exposed numerous times by the people I’ve mentioned.