Social problems solved or your money cheerfully refunded

In a piece in last Friday’s Wall Street Journal, Professor Arthur C. Brooks of Syracuse proposed that charities give donors "money-back guarantees," saying that would encourage greater generosity.  While he doesn’t enlarge on this suggestion, it appears from context that he doesn’t mean "Poverty cured or your money back!"  That’s something, I suppose.  But what he does seem to mean–that charities should spend money only the way donors tell them to, or the donors’ money back–is almost equally misguided.

If I give you a sweater and you decide to use it for your dog’s bed, I can be irritated and vow never again to expend my generosity on such a jerk.  But I can’t really reclaim the sweater itself–it was a gift, an object formerly mine but now yours.  Likewise, if I give you money to record books for the blind and you spend it to provide blind people with scanning computers so they can read the books themselves, I can think you’re a fool (because, say, you’ll be serving fewer people, albeit more completely) but I can’t fairly accuse you of having made off with my money and expect redress from the courts.

Professor Brooks says that money-back guarantees have been a commonplace among retail firms for decades; but here’s where his analogy fails him.  Donors to charities aren’t buying a product–so many units of art, so many units of environmental protection.  They’re buying stock in an enterprise.  And just as you’re not entitled to receive a refund on your investment if Ford makes an Edsel, you’re not entitled to a refund if the object of your largesse goes about its business in a way that disappoints you.  The management gurus who are always prating about how nonprofits should be more businesslike would surely agree with that. 

Certainly charities should be clear about what they expect to do with contributions–but I would argue that this means being clear in saying they’ll run their business the best way they–that’s they, not you!–know how.  They’ll do that anyway, because money is fungible: if "your" money goes directly to client service, that just means some other money from client service will be shifted over to general operating support. 

And what’s wrong with that?  Really, may the worst thing that happens be that the Red Cross spends your Hurricane Katrina money helping people from other hurricanes, or your 9/11 money making sure the nation’s blood supply is secure.

This "diversion" of charitable gifts is the subject of much tongue-clucking in the mainstream press.  Certainly the Red Cross should have been upfront with its 9/11 donors about how their money was going to be spent, and in fundraising for Katrina it was careful to say, "for the victims of the hurricane and other disasters," "other disasters" being what the Red Cross does every day. But aside from the issue of transparency, what exactly is so terrible about making sure there’s an infrastructure in place for the next disaster? Because that’s what charities’ general coffers are for: keeping their lights on all the time so when we need them they’re ready.

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One Response to “Social problems solved or your money cheerfully refunded”

  1. Anita Bernstein Says:

    Yeah, I guess Brooks goes too far. But isn’t his suggestion (which I know of only from your summary, the WSJ being most stingy to freeriders like me) not that different from directed gifts? Money may be fungible, but some donors like to focus on its nonfungible aspects and dream of power over a piece of the enterprise they are supporting. If Brooks was talking about how to generate new donations that otherwise wouldn’t be forthcoming, which I guess is the reason nonprofits grit their teeth and accept limited-purpose gifts, then he’s writing about a larger challenge you’ve talked about before: Charities have to convince donors to relinquish–maybe in the name of generosity–their desire to control the object of their bounty.

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