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Toward a Theory ofthe IfJluntary Non-Profit Sector in a Three-Sector Economy* Burton A.Weisbrod This paper is an exploratory effort to examine the role of a voluntary, "philanthropic" sector in an economy with public and private (for-profit) sectors and with collective-consumption and private-consumption goods. More generally, it seeks an answer to the questions what factors determine which goods will be provided governmentally, which privately in for-profit markets, and which in voluntary markets. The approach is primarily positive, attempting particularly to predict the circumstances under which the voluntary sector will develop, grow and decline. A model will be fashioned in which certain behavioral and organizational constraints limit public-sector and for-profit sector activities and stimulate the voluntary sector; and in which the existence of collectiveconsumption goods is not sufficient to ensure governmental production or provision. The existence of such voluntary organizations will thus be explained with a minimum of institutional assumptions. In effect, we set forth the logic behind a hypothesis that there are non~overnmental, voluntary organizations providing collective goods. Some normative judgments will be reached regarding efficient public policy toward certain types of voluntary organizations.·This research has received a variety of support: from the Institute for Research on Poverty, pursuant to the Economic Opportunity Act of 1964; from the University of Wisconsin Graduate School; and from Guggenheim Foundation and Ford Foundation fellowships. In connection with various parts of the research I have been very fortunate to be assisted by Jennifer Gerner, A. James Lee, Donna Beutel, and Marc Bendick, Jr. Eugene Smolensky, Mark Menchik, and Donald Nichols provided helpful comments on an earlier draft of this paper. 171 172 • ALTRUISM, MORALITY, AND ECONOMIC THEORY The analysis presented here is essentially static. There is some consideration, however, of the effects on the distribution of economic activity among the three sectors-government, for-profit, and voluntary-that result from changes in population characteristics and in the level and inequality of income. The interest that is now developing in organizations variously referred to as voluntary, non-profit, collective, charitable, non-market or philanthropic is overdue, for there is no doubt that a wide array of economic activity is undertaken outside the private profit-seeking sector and outside the public sector. Contemporary economics includes a long-established theory of the private (profit) sector, the rationale for its existence and the mode of its equilibrium behavior; more recently a theory of the public (government) sector has evolved, emphasizing the existence of "public," "collective-consumption" goods for which the private sector is an unsatisfactory production vehicle that is likely to produce sub-optimal quantities.! Yet the reality of goods and services that are provided neither governmentally, in the sense of being financed through taxation, nor privately, in the sense of being financed through user charges and operated for "profit," confronts us with a gap in our theories. But my goal is less ambitious than to explain the existence, let alone the behavior, of all of the many kinds of organizations that are found outside the private-profit and the public sectors. Rather I wish to identify one class of such activities-the provision (financing) of public-type, collective-consumption goods by non-governmental enterprises. Thus, this paper will examine some interrelations between the public sector, the private sector, and the voluntary sector, focusing on the provision of collective-consumption goods outside the government . We begin with an analysis of governmental behavior. The existence of certain constraints on governments will be seen to create what might be termed government market failure, analogous to the conditions causing private market failures. Development of a voluntary sector will then be posited as an adjustment to the restricted capabilities of these other two sectors. THE ELEMENTS OF A SIMPLE MODEL OF OUTPUT DETERMINATION IN THE GOVERNMENT SECTOR To begin with let us assume a society in which -People behave rationally in pursuit of their individual objectives of utility maximization; I For a useful survey of the varied conceptions of "public" goods, see Peter O. Steiner, "Public Expendirure Budgeting" (Washington, D.C.: The Brookings Institution, 1969). Toward a Theory of the Voluntary Non-Profit Sector. 173 -A given state of technology and set of production possibilities exists, and these permit production of some collective-consumption and some privateconsumption goods; -Each person's utility is a function of both his private goods and the collective-consumption goods that are available to him; -Utility functions are not the same for all people. One question with...

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Additional Information

ISBN
9781610446792
Related ISBN
9780871546593
MARC Record
OCLC
908573169
Pages
242
Launched on MUSE
2016-01-01
Language
English
Open Access
No
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