Competition in the Non-Profit "Green" Sector or the Industrial Organization of Non-Profits

 Mark Tercek’s recently posted an interesting column where he makes the case for why major cash investments in the “blue chip” environmental interest groups is a wise use of Jeff Bezos’ funds.

A quote from Tercek;

“When Jeff Bezos originally committed $10 billion to a new climate-focused philanthropic fund, environmental journalists and podcasts immediately began to discuss and debate where the money should go. (See here, here, and here).

While lots of interesting and cool ideas were proposed—investments in education, new far-out technologies, ambitious R&D programs, efforts to build stronger, bigger, and more diverse political coalitions—none of these smart and well-intended commentators (so far as I could find) suggested that the money go to funding the big NGOs so they could build on their success and do more of their important work. 

But that’s just what Bezos did.  Bravo, I say.  

Unsung Heroes 

NGOs are the “essential workers” of the environmental movement.”

END of QUOTE

Mr. Tercek’s piece raises the question about how non-profits (such as The Nature Conservancy) compete against each other for $, attention and influence.

In the for profit world, I understand how firms compete. Starbucks offered higher quality coffee, at a higher price and managed to make billions creating a new experience for customers.

What is the analogue in the non-profit world?  How does Jeff Bezos and other very rich people judge the productivity of non-profits?  As highlighted by the work of Chad Syverson, it is very difficult to measure the productivity of different firms in the for profit sector — how is productivity measured in the non-profit sector? If potential investors cannot judge this, how do they know what to invest in? If they form a portfolio by diversifying their investments, how do they judge if their donations “had impact”?

This raises the question of how non-profit environmental groups “have impact”.  What pieces of legislation would not have been implemented with the NGO”s efforts?  What causal effect does the green legislation actually have?

In for profit markets, Starbucks does not value extra coffee profits earned by Peet’s. In the NGO space, if one green NGO doesn’t have much impact but if a rival NGO does and the environment is positively impacted — does the losing NGO still feel good that the dirty status quo does not persist?  Is the output produced by green NGOs a type of public goods game?

Mr. Tercek argues that it is a good thing if the “big get bigger” in the NGO space.  During our new democratic age, this is an unpopular view. Many who are using the Internet to advise Mr. Bezos are nudging him to donate to unproven green NGO startups. Mr. Bezos has chosen to ignore this advice.  Mr. Tercek applauds this as he argues that the major green organizations have a proven track record and just need more money to finance their operations.

Society appears to be uncomfortable with an industrial organization featuring just a few very large, very well functioning firms (either in the private sector or in this case in the non-profit sector).   

An obvious economics question that arises here concerns the “efficiency versus equity” tradeoff for the environmental non-profit sector.  In this specific case, what does this classic Econ 101 diagram look like?