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  Chapter 1
The Nonprofit Marketplace
The Missing Hand of Adam Smith


The Missing Hand of Adam Smith

Summary

Charities deliver services to beneficiaries who often pay little or nothing. This contrasts with commercial customers who have to pay full value. To fund the difference, charities seek donations. However, donors do not always give based on the value that the charity delivers to the beneficiaries. Rather, they donate based on generosity, connections and the appeal of the fundraising campaign.

To bridge this structural disconnect between revenue and expenses, can the “invisible hand” of Adam Smith be replaced by the visible hand of the donor and the iron fist of governance and regulation?


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