Tyler Cowen lists “the economics of the non-profit sector” as an under-explored area in economics. Having worked primarily in the non-profit sector (with a brief stopover in the intriguing for-profit-but-not-profitable sector inhabited by The Atlantic) I also think this is an interesting topic. I sort of wonder why economic researchers aren’t more interested in it, since they overwhelmingly work in this sector as well, so it’s hardly plausible that they forget it exists. According to “The Nonprofit Sector in Brief 2007: Facts and Figures from the Nonprofit Almanac 2007″, “the nonprofitsector accounts for 5.2 percent of gross domestic product (GDP) and 8.3percent of wages and salaries paid in the United States.”
You can also learn here the perhaps-surprising fact that sales revenue dwarfs donations as a source of nonprofit financing:
Figure 2shows that fees for services and sales of goods account for a huge percentage (71 percent) of the revenues for reporting public charities. These include patient revenues for hospitals (including Medicare and Medicaid reimbursements) and tuition at colleges and universities. They also include items such as the revenue from theater tickets, rental fees for providers of low-income housing, and—much less significant for most organizations—sales of goods such as merchandise sold at thrift or museum shops.
Which is just to say that the economics of the non-profit sector isn’t the same as saying the economics of giving money away. American nonprofits are primarily in the business of charging customers money in exchange for medical or educational services.
My sense is that in the near future a larger-and-larger portion of news media is going to be produced by non-profits, and we may need to start adding advertising revenue to the list of major sources of non-profit funding. After all, a great newspaper whose advertisers covered 85% of the costs of gathering news would be (a) totally non-viable as a business proposition, (b) a great bargain as a charitable endeavor, and (c) still primarily in the business of selling readers to advertisers rather than attracting donors.
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