Philanthropy, NPO, Public Sector and Social Benefit

Abstract

In an aging and matured society, services such as regular medical examinations, care for elderly and handicapped people, child care, or supporting artistic activities become more important, since people are more concerned with quality of life and preferences are diversified. Such services or goods are called merit goods or quasi-public goods, which are between private goods and pure public goods. Consumption of these goods is desirable in a social point of view. Such goods may be supplied by private firms, public sectors like local governments, or nonprofit organizations (NPO). For consumers, it does not matter that what kind of organization supplies these goods. Only price and quality may matter for consumers. In this paper, we discuss the problem that what kind of organization can supply more efficiently or desirably merit goods by using simple economic models. It is shown that the more consumers prefer quality of the private good, the more social benefit of the merit good is supplied by the firm as philanthropy. It suggests that philanthropy by profit seeking firms becomes more important and efficient as the society becomes more affluent. And for the NPO, if volunteers can be used at lower factor price, it can supply merit goods more efficiently than public sectors. Therefore, it depends on a character of goods and some kind of maturity of the society which organization is more appropriate. This paper may provide some point of view for analyzing problems such as tax exemption for NPO and corporate philanthropy, or regulations on entry in various fields.