Thursday, April 18, 2013

Interesting New Book: With Charity for All

The full title is: With Charity for All: Why Charities Are Failing and a Better Way to Give. It is by Ken Stern. Click here to read the WSJ review by MEGHAN CLYNE. Excerpts:
"D.A.R.E. (Drug Abuse Resistance Education) didn't work. Long-term studies have shown overwhelmingly that the program produced no meaningful reduction in drug use and in some cases actually made kids more likely to use drugs. Yet the nonprofit survives, having consumed an estimated $10 billion to $15 billion in donor and taxpayer funds over the past decade."

"From one-person startups to powerhouses like the Red Cross, charities have plenty of good intentions, slick fundraisers and promotional "happy sheets," but they often fail to solve the social problems they are intended to address. As an example, Mr. Stern highlights fashionable water charities that drill wells in Third World countries with much fanfare but are then unable to maintain them."

"The charitable sector is also plagued by corruption and fraud. Even when nonprofits obey the letter of the law, many defy the spirit of their tax-exempt status, differing in no meaningful respect from for-profit enterprises. Among the more laughable examples are the nation's college-football bowl games, which defend their charitable status by pointing out that they donate some of their proceeds to other nonprofits."

"The IRS approves more than 99.5% of all charitable applications, creating more than 50,000 new charities each year. Once a nonprofit is started, the IRS and state regulators exert negligible oversight; even charities exposed as scams can be nearly impossible to shut down."

"According to one survey, 65% of donors don't research the effectiveness of the organizations to which they contribute; the remaining 35% tend to make only a cursory effort."
I wonder what Adam Smith would say. Although he said people were motivated by self-interest and that is how things got done in the market place, he also thought people could be motivated by sympathy. See this earlier post: Adam Smith vs. Bart Simpson.

Another article that is relevant and interesting is Have We Evolved to Be Nasty or Nice? by MATT RIDLEY of the WSJ. It suggests that whether we are selfish or cooperative depends on the circumstances. If we are nice, then we would never see charities being corrupt. But if we were nasty, we would never donate money to charities. So the truth may be complicated.

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