For Profit, For Charity.

Tyler Cowen points out a paper by Eric Posner on allowing for-profit firms to receive the full tax benefits of not-for-profit firms insofar as they engage in charitable activities. I would just like to point out two passages from the paper:

The argument is based on the assumption that some commercial and charitable operations are likely to benefit from economies of scope--they can be provided more cheaply by the same firm that[sic] by separate firms.

I think Prof. Posner may understate the case; while it is true that for-profit firms have economies of scope because they are directly involved in a related operation (in their example Starbucks and the plight of coffee farmers), there is also an additional marginal benefit to the consumer: no longer needing to hunt out charities, independently confirm their reliability and so on. If the consumer has reason to trust the company and believes the company to being do well in the market, those same facts may signal that the firm has a reliable charity operation as well, independent of economies of scope, by virtue of having talented and hardworking employees. Successful market competition may also be a good signal for charitable competence--though not necessarily for altruism. If that's the case, an index of market value and charitable donation might be a good indicator of which corporate charity operations are the best, presuming the company is directly involved with the charity.


...many people argue that firms like Starbucks do not engage in "real" charity; their apparently charitable activity is simply a marketing gimmick. ... What matters is not the firms' motive, but the effect on their behavior.

I'm not sure this is the case, necessarily. Certainly many people might not care what the motive is for doing socially beneficial work, others might care greatly: some might donate to charity in the belief that they are helping someone be an altruist, charity-as-marketing is therefore anathema to their motive for donation. It's not obviously necessary that people donate in order to achieve an end like saving wildlife or helping the poor. They may also donate to support social experiments meant to encourage others to, for example, reject capitalism and live in organic farming communes. To them, non-altruistic sponsorship would run counter their objectives.

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