By Zoltan J. Acs
Peter J. Boettke and David L. Prychitko provide a valuable contribution to the debate on the relationship between the compulsory power of the state, the capitalist search for private monetary profit, and the spontaneous ordering of associations—the nonprofit sector. While there is general agreement across the political spectrum that the nonprofit sector plays an important role in American society, the exact nature of that role is in dispute.
Lester Salamon (1999) suggests that the nonprofit sector is not an independent sector but is an effective partner of the state and represents a viable “third party governance.” Boettke and Prychitko (emphasis added) argue “that the sort of ‘third party government’ advocated by Salamon would distort the incentives for nonprofit innovation, and weaken the ability of philanthropists and social entrepreneurs to fill in the gaps that might be left by for-profit firms before government bureaucracies expand to fill the supposed vacuum.” Before this Austrian interpretation of the nonprofit sector advocated by Boettke and Prychitko can be properly evaluated, we need to be a little clearer on the relationship between the nonprofit sector and economic development in general and the role of philanthropy in particular.
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