September, 2003

Is an Independent Nonprofit Sector Prone to Failure?

  • David Prychitko

    Professor of Economics, Northern Michigan University
  • Peter J. Boettke

    Director, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
Key materials
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Salamon argues that the U.S. has a long, established history of efficient institutional linkages between the nonprofit sector, which he calls the "voluntary sector," and the state. Rather than a substitute, Salamon sees nonprofits in an effective "partnership" with the state, a viable form of "third party" governance. He argues that the independent sector is in fact not so independent. On its own it is prone to failure. Salamon’s work attempts to show not only how the nonprofit sector can support and improve the modern welfare state, but more importantly, how the welfare state supports and effectuates the nonprofit sector. This working paper by Boettke and Prychitko offers a critical assessment of the coherence of Salamon’s paradigm from a largely Austrian economic perspective (that is, one in the tradition of Ludwig von Mises and F.A. Hayek.)