Too many charities - Not enough charity...

There are too many charities and if we are not careful, the new web-based philanthropic services and tools will worsen the situation. What is needed is responsible ways of aggregating information, simplifying comparisons, achieving credible and outcome-based rankings.


I am not by any shot the first to think about these questions. One recent post on this is from Albert Ruesca, who argues that we probably don't have too many charities. Basically, his main argument is that they are surviving in the market, which suggests there's a sufficiently valuable reason for their existence. Against this, there's Rosetta Thurman, who is arguing that the number of charities is excessive and driven by the ego of founders: They believe starting a non-profit is easy and that their ideas are so much better than those of others that they require their own organization.

As an economist, my take on this is that there are forces operating from the two "sides of the markets," that is to say from the organizations and from the funders. 

• From the side of the organizations:
• Benefits to scale: Surely there must be some reasons why larger-scale organizations can operate more effectively in this field just like in most others? A larger organization can build on past experience, transfer people with skills between projects, aim for large-scale projects when appropriate, have a smaller share of overhead if it avoids bureaucratization, raise funds through a well-established brand, etc.
• Interests of workers/volunteers: People working in this sector are probably more strongly motivated towards specific issues. Especially I would think this is true for volunteers. Thus, it might be easier for smaller, more focused organizations to attract people.
  
• From the side of funders, the big question is "why are they funding non-profits?" Are individuals funding what they believe to be the most pressing and serious issues handled in the most effective and responsible manner, or are they contributing to specific issues they have a personal stake in for some reason? Are companies funding indiscriminately (picking from some list of "good enough" charities) in order to give off an aura of social responsibility? And what is behind public spending on non-profits? Which criteria are important?

In theory, these different incentives and forces are balanced by a well-informed market - but as Sean Stannard-Stockton has been discussing in a couple of very interesting posts recently (see for instance the post on the value of information-sharing and his response to the responses), information that enables comparisons on who does what and how well is perhaps the biggest gap in the non-profit field today. It could be that the large number of non-profits reflected an underlying difference in what funders want to fund - but it seems unlikely. It seems more likely (to me) that the lack of widely available judgment or outcome-based indicators of effectiveness is the issue.

I've written on this before: If you look at several of the new on-line charity sites, they are trying to gather information, create lists of charities sorted or tagged by what they are working to eliminate, where they are operating, what their share of overhead costs is, etc. But what we need is something that narrows down the discussion, helps us focus, gives us an overview and a sense of proportion and priorities.

In the comments I've read on the net there seem to be (roughly speaking) three main camps:

• Those who see the situation as fine: The more people and organizations we have doing good work the better it is. They are (almost) all well-intentioned and responsible run charities, and if they are able to get funding and excited people then this is great and a force for good.
• Those who believe in quantitative measures - finding outcome-based indicators that say something about efficiency or impact
• Those who believe in judgment - whether individual judgment or some form of structured discussion leading to a consensus or "expert norm"

Personally, I believe the last two are complementary - finding good quantitative measures and ways of using them responsibly requires the kind of informed, judgment based evaluation and discussion covered by the third camp.

Personally, I also believe this is the most pressing issue to be solved in order for web-based charity to really take off - and I would love to see some creative and deep thinking about how to get it done.

• A WIKI covering proposed measures, their pros and cons - with a forum for discussion structured in a way that promotes seriousness?
• A real-life conference involving academics, NGOs, bloggers and politicians?
• Discussion on-line with proposals and counterproposals from various individuals and groups?

Or is this the kind of thing the "big shots" such as the Gates Foundation should be covering?

I don't feel I have any good answers here - but I feel that this is something worth thinking about a lot.