The intention heuristic is what generates the veneration of non-profits. One can readily suppose that the intentions of a non-profit are better than those of a for-profit institution. Accordingly, it seems morally superior to work at a non-profit.As an example, here in San Diego, we have a non-profit company called Family Health Centers, that I happen to be very familiar with. They provide health care for the underserved (i.e., the poor) and their headline mission statement is "[c]aring, affordable, quality healthcare for anyone in need." An excellent mission, and they do indeed, at minimum, make significant inroads towards their mission statement. What's not to like?
In the past, the Veterans Administration has been highly lauded as the pinnacle of socialized medicine in America and an example of what's possible. As Glenn Reynolds (of Instapundit fame) points out:
Writing in the Washington Post during the debate over Obamacare, Ezra Klein suggested that we should expand VA coverage to non-veterans, because the government just does health care better than the private sector: "Medicare is single-payer, but VA is actually socialized medicine, where the government owns the hospitals and employs the doctors. ... If you ordered America's different health systems (from) worst-functioning to best, it would look like this: individual insurance market, employer-based insurance market, Medicare, Veterans Health Administration."
A couple of years later, in 2011, Klein hailed the VA health system as an example of "when socialism works in America": "The thing about the Veteran's (Affairs') health-care system? It's socialized. Not single-payer. Not heavily centralized. Socialized. As in, it employs the doctors and nurses. Owns the hospitals. . . . If I could choose my health-care reform, I don't think I'd go as far towards government control as the VA does. But the program is one of the most remarkable success stories in American public policy, and it needs to be grappled with."All government organizations are inherently non-profit, so the Veterans Administration is therefore, according to Mr. Klein, a shining example of what can be achieved by non-profits.
But what does non-profit mean? Does anybody make money? Or is it all volunteer?
Back to Family Health Centers (mentioned above). Their CEO, Fran Butler-Cohen, made more than $550,000 in 2012 (I believe her current compensation package exceeds $600,000). So it's certainly not all volunteer and $600,000 is pretty good compensation for someone running a fairly small operation ($80 million per year). Especially when much of that $80 million comes from taxpayers (medicaid, medical and other federal health funding) and grants. So we have to remember that non-profit simply means that the organization itself doesn't make a profit. All of the employees at the non-profit company can make ludicrous amounts of money and, if they do, it's very profitable for them as individuals.
The shine on the Veterans Administration has lost a bit of its luster as of late due to a series of scandals. Back to Reynold's article:
Now that the VA has erupted in scandals involving phony wait lists, and people dying because of treatment delays, an audit reveals a "systemic lack of integrity" in the system. According to the auditors, "Information indicates that in some cases, pressures were placed on schedulers to utilize inappropriate practices in order to make waiting times appear more favorable."
In other words, they cooked the books. And what's more, they did it to ensure bigger "performance bonuses." The performance may have been fake, but the bonuses were real.
People sometimes think that government or "nonprofit" operations will be run more honestly than for-profit businesses because the businesses operate on the basis of "greed." But, in fact, greed is a human characteristic that is present in any organization made up of humans. [...]
The absence of a bottom line doesn't reduce greed and self-dealing — it removes a constraint on greed and self-dealing. And when that happens, ordinary people pay the price. Keep that in mind, when people suggest that free-market systems are somehow morally inferior to socialism.Yes, the problem with non-profits and government organizations is that they're made up of people and they have all the defects, foibles and imperfections of all other humans, with greed being one of the prime examples of those imperfections. So what if people died? They got their bonuses!
From Cosmopolitan, here's another description of the Veterans Administration:
Our disabled veterans are being betrayed by the incompetency, bureaucracy, and callousness of the Veterans’ Administration, the agency set up … years ago to ensure the finest medical care for them.What's interesting about the excerpt above is that it's from the March, 1945 issue of Cosmopolitan, so apparently these problems have been going on for quite a while.
The economist Don Boudreaux captions the expectation that government organizations should be expected to be any better than any other organizations: "Then a Miracle Occurs:"
This famous Sidney Harris cartoon (below) captures what is wrong – what is deeply unscientific – about far-too-much modern economics. The miracle assumed by the unscientific ‘scientific’ modern economist is that government will act (1) apolitically, (2) without any of the human imperfections, myopia, and psychological quirks that (are assumed to) give rise to the market imperfections that allegedly justify government intervention, and (3) with more information and wisdom than is discovered and used in markets.For the purposed of this post, I consider non-profit and government to be very similar if not synonymous and we're specifically focusing on the "human imperfection" of greed. Once you eliminate Kling's "intention heuristic" and Boudreaux's "miracle," there's no reason to expect non-profits or governments to be better organizations than for-profit organizations. In fact, as Reynolds points out, the bottom-line of a for-profit may actually constrain things like greed:
The absence of a bottom line doesn't reduce greed and self-dealing — it removes a constraint on greed and self-dealing. And when that happens, ordinary people pay the price. Keep that in mind, when people suggest that free-market systems are somehow morally inferior to socialism.It's not that markets and for-profit companies are perfect, or even good. It's just that it's naive to expect other organizations to avoid things like greed and be any better.
By the way, Washington D.C. is easily the greediest place in the country and probably the world. It has nearly 2.5 times the GDP per capita ($146,000) as the next richest state (Delaware at $61,000) and more than 3 times the GDP per capita as the rest of the country. Not a lot of for-profit companies in D.C., but a heck of a lot of people making a heck of a lot of money. Sort of like the Hunger Games, but not quite as extreme. Yet.
When counties embrace true socialism, they essentially turn the entire country into one giant non-profit organization. Especially in a diverse populous such as that which exists in the U.S., I think that will be an utter disaster.