“But most people don’t see it the way I see it. They see the intentions of non-profits as inherently better than the intentions of profit-seeking businesses. The intention heuristic is harder to overcome than you might think.”
It’s easy to be progressive if you are ignorant of economics.
And fail to understand - or deliberately ignore - that incentives matter.
The above are almost always true.
Lack of understanding that incentives matter is imo at the root of almost every single bad leftist political idea there is.
But there is an additional point re: intentions.
For personal interactions and evaluations, intentions matter enormously. This is just common sense.
For public policy, intentions matter somewhere between very little and not at all.
This is based on logic (including public choice theory) and data and history, even when it clashes with individual common sense.
The exact analogy here is authoritarian socialism (Communism) vs. free enterprise rule of law democracy (capitalism).
Authoritarian socialism can and in fact usually does work at the family unit level.
But it does not work on a societal level.
Indeed, history shows “communism” rarely works even at the commune/kibbutz level.
Whatever the intentions of all involved.
IMO the likely innate, pro-Darwinian idea that for personal interactions intentions matter is why so many - especially leftists - think it matters at a societal or state level.
What's interesting to me is that my Christian theology and belief in Original Sin suggests that good intentions don't lead to good consequences because we've always got some "bad" intentions in anything we do...
Ther is a Right version of this fallacy, too: Leftists who are willing and even eager to use state power to achieve their favorite economic outcome -- taxing the rich, minimum wages, command and control for externalities abatement. -- is really just cloaking a power grab.
"criminal enterprises are the most blatant exceptions" - "the missions of profit-seeking enterprises are noble"
This charge against criminal enterprises does not appear to me a given. The assumption that legal and ethical are synonymous has been unpopular for quite a while.
A softball would be smuggling Bibles into Communist countries.
Yes, B&B a a very good read, but appears that you do not give much emphasis to the "domino effect" many if not all in power were concerned with regard to if Vietnam fell to the Communists.
Too many do not seem to understand that if profit seeking institutions, biz and commerce at large did not exist or was dramatically less, that there would be no money for the non profit sector.
So, yes at least equal worth if not more to get a job where profits are made that allow for non profits to exist.
Just a great article. I had the same realization about the nature of evil in college, in reading about the Third Reich. They really believed they were doing something good and correct, even if it was difficult. That shocked me. But it also made me suspicious of what you’re here calling the “intention heuristic”, i.e., that the merit of someone’s actions can be judged by their intentions rather than the outcomes of those actions.
I think there is another good explanation for why the intention heuristic is as strong as it is. For example, when I worked in the healthcare field, I saw how the third-party reimbursement system worked. It wasn't pretty. I would try to explain to outsiders how the system artificially drove up both demand and prices, at taxpayer expense. My explanation contradicted the priors of those I would talk to. Talking with them, I noticed that their views were often shaped by the collective PR of governments, media, pundits and industry players. In other words, by the players with the most power and money on the line. It seemed to me that this PR messaging purposefully emphasized intentions, as it was a simpler and more persuasive message. The only way to overcome this type of messaging is with facts, but these facts are often complicated and are disputed. Most people don't have the bandwidth (or the desire) to hear details about the healthcare system, the banking business, or whatever, and they also may not have the patience to separate the facts from fiction. That is unless the issues impact them directly
Re: "profit-seeking organizations are accountable to the customers that they aim to serve; non-profits are accountable to donors."
Private, not-for-profit educational institutions and private, not-for-profit hospitals rely main on market revenues (tuition & fees; insurance payments & co-pays). In these sectors, institutions (e.g., Harvard U.) that rely mainly on revenues from endowments and current-use donor gifts are the exception rather than the rule.
One framing may be that good intentions are necessary but insufficient. I wouldn't want a society guided by bad intentions, or systems so perfect that no one needs to be good, paraphrasing TS Eliot. Another axis may be "weak" vs "strong" good intentions. Weak meaning a vague wish, strong implying follow-through in achieving intended outcomes and aligning means and ends, embracing experimentation and competition.
We are a species highly given to self-deception. We are not transparent to ourselves. Consider the recent revelations from the Twitter files showing the massive effort of government law enforcement, intelligence, and other agencies working with non-profit "NGOs" and for-profit entities to suppress desperately needed open discussion and debate on critically important policy issues, all under the purported good intention of avoiding supposedly harmful effects from "misinformation." Were many of the individual actors so misguided as to think they had good intentions? Or is it more likely that they had convinced themselves that they did but were in reality seeking other advantage? In fact, what they characterized as misinformation was often true but politically or otherwise inconvenient.
We cover up ill intention with spurious good intention. The easiest person to fool is oneself.
"But I would argue that one does not need religion to understand that the human spirit contains both good and evil, and the relationship between intentions and consequences can be complicated."
I think we need religion to govern our behavior, and I write this as someone who has been mostly an atheist his entire life. I think humans need the idea of consequences for bad behavior that extend beyond the span of a human life, and rewards for good behavior that do so, too.
While religion has its negatives, when I look at the sum of history it seems hard for me to see anything but a net positive. That said, some societies seem to do quite well with little or no religion.
Some societies probably refer to today, correct? Will that be the case 2 or 3 more generations going forward? I don't know, and will not live long enough to know.
“But I would argue that one does not need religion to understand that the human spirit contains both good and evil, and the relationship between intentions and consequences can be complicated.”
Perhaps not. But I would argue that it is hard to internalize this lesson without a truly immersive experience with the relevant concepts and religion has done the best job of delivering such a thing at scale.
To highlight just one angle to this, substantive religion effectively teaches people of vastly different IQ. Low IQ people can understand the struggle with good and evil embedded in stories and act on that knowledge by applying simple constructive principles like repentance. High IQ people can engage with religion at greater intellectual depth, but are bound by socially observable constraints that limit their scope for rationalization.
The fundamental issue with the argument is that nobody is without a religion. A system of beliefs about ultimate causes, ultimate ends, meaning and purpose is a religion. Good and evil are inherently religious beliefs, though they don't exist in every religion.
I see your point, but we must also reckon with harms committed in the name of religion; for example, the Wars of Religion in Europe during the 16th, 17th, and 18th centuries.
In my judgment, counterfactual speculation in historical inquiry should focus on what plausibly might have been different.
For example, if I understand correctly, economic historians have engaged in productive speculation about what might have been, had the Navigation Acts not been enacted. By contrast, an Europe without religion in the 16th century is altogether implausible.
A more fruitful line of inquiry might be to compare the behaviors (the propensities to good and evil) of two subsets of low IQ people in a modern, semi-secular society: low IQ persons who practice religion, and low IQ atheists. (It would be tricky to disentangle confounding variables.). I imagine that research has been done in this vein — Tyler Cowen likes to say that "there is a literature" about any and every topic.
There has been some; both of the experimental and quasi-experimental variety. Would be a worthwhile project to summarize that literature at some point...
I once saw an analysis of warfare and its causes/justifications throughout all history. So for instance the Thirty Years War is considered a religious war (in reality a mixed war, the French fought for the protestants out of realpolitik, and the worst atrocities were committed by non-religious mercenary groups).
Meanwhile, something like the Punic Wars was considered mostly secular power politics.
There didn't seem to be any indication that religion was a particular cause of war. Nor were religious wars necessarily worse. Many wars in Pagan times were total wars between people, with genocide/enslavement of the other population the goal. Many wars in the Christian era were limited wars, mainly squabbles between nobles who sometimes killed civilians but that wasn't the goal.
One could easily call the French Revolution a "religious war". Th religion being liberalism. Try to convince me that the Cult of Reason wasn't a religion.
I follow the argument all the way up to the last section, where I'm not sure the conventional perception of non-profit vs profit is an example of the intention heuristic – is it not based on a instinctive recognition that the incentive structures are different in each case? We trust non-profits to stay truer to their good intentions because the profit motive is dialled down (though, as you say, other bad incentives exist – pleasing donors more than end users etc). But we treat the avowed good intentions of for-profits with scepticism because we know outcomes are dictated by incentives more than intentions. So Larry Fink and the US Business Roundtable may mouth noble platitudes about the 'social purpose' of business, but none of it translates into outcomes, and it may indeed enable worse outcomes – seeding a form of 'noble cause corruption' where companies become convinced they are pursuing noble goals and therefore can justify any means towards that end. That way a thousand Theranoses lie. Would be fascinated to hear your views on the corporate 'purpose' movement in general.
I guess I'd answer with a question – why do non-profits exist? If there is no likely conflict between doing good and making a profit, why does society choose to dial down the profit motive when it comes to community and humanitarian organisations?
Non-profits exist as entities as a result of tax policy, but, again, I think the idea that to do good requires profits be eschewed is the intention heuristic in action.
I would restate the question though – why does tax law treat them as a separate case?
My wider point is that 'intention' isn't the key difference when it comes to for-profits and non-profits. For example, Facebook's stated intention is "to give people the power to build community and bring the world closer together". My scepticism is not exactly about the sincerity of that intention – many in Facebook may actually believe it on some level. Instead, my scepticism comes from a realistic acknowledgement of the incentives that are necessarily driving them: market forces, shareholder value, internal targets and bonuses, external competition. And I think most of the public instinctively get that. If Facebook became a non-profit, we would all consider it a morally significant and consequential change.
None of this is an argument against for-profits in general, which I think can and do deliver a lot of good in the world (employing people, paying taxes, delivering useful goods & services). But the pursuit of wider social good has to happen within that overall framework, and usually exists in tension with it. The idea of 'doing well by doing good' has been very popular of late, but I'd argue it's seductive snake oil. As adman Bill Bernbach once said, 'A principle isn't a principle until it costs you something'.
Nick, Facebook could become a non-profit without changing anything it does other than simply not distributing any profits to the owners via dividends or capital appreciation, but by giving away the profits to third parties as charity. Any for-profit corporation could do this. I think, again, you are falling for the intention heuristic- i.e. believing that becoming or being a non-profit is a meaningful change in social do-gooding. I write this because of the long history of charities that aren't really all that charitable but, rather are organized solely for the benefit of the people that run them and work for them.
You're not seriously arguing that Facebook converting to a non-profit would change nothing about its incentive structures?
You keep saying I'm falling for the intention heuristic without offering any theory as to why. My whole argument is that incentives trump intentions whenever humans are gathered into complex systems like businesses and markets. To argue otherwise is to put 'intention' above all else.
Yancey, try again. Non-profits in US existed long before there was any tax incentive. One might even argue they are likely to play a bigger role in the absence of government involvement.
Stu, there has always been a tax incentive for organizations that are strictly non-profit, be it income tax forgiveness, property tax abatements, etc. These have existed for centuries now.
“But most people don’t see it the way I see it. They see the intentions of non-profits as inherently better than the intentions of profit-seeking businesses. The intention heuristic is harder to overcome than you might think.”
It’s easy to be progressive if you are ignorant of economics.
And fail to understand - or deliberately ignore - that incentives matter.
The above are almost always true.
Lack of understanding that incentives matter is imo at the root of almost every single bad leftist political idea there is.
But there is an additional point re: intentions.
For personal interactions and evaluations, intentions matter enormously. This is just common sense.
For public policy, intentions matter somewhere between very little and not at all.
This is based on logic (including public choice theory) and data and history, even when it clashes with individual common sense.
The exact analogy here is authoritarian socialism (Communism) vs. free enterprise rule of law democracy (capitalism).
Authoritarian socialism can and in fact usually does work at the family unit level.
But it does not work on a societal level.
Indeed, history shows “communism” rarely works even at the commune/kibbutz level.
Whatever the intentions of all involved.
IMO the likely innate, pro-Darwinian idea that for personal interactions intentions matter is why so many - especially leftists - think it matters at a societal or state level.
short version
people give value for value
What's interesting to me is that my Christian theology and belief in Original Sin suggests that good intentions don't lead to good consequences because we've always got some "bad" intentions in anything we do...
Ther is a Right version of this fallacy, too: Leftists who are willing and even eager to use state power to achieve their favorite economic outcome -- taxing the rich, minimum wages, command and control for externalities abatement. -- is really just cloaking a power grab.
"criminal enterprises are the most blatant exceptions" - "the missions of profit-seeking enterprises are noble"
This charge against criminal enterprises does not appear to me a given. The assumption that legal and ethical are synonymous has been unpopular for quite a while.
A softball would be smuggling Bibles into Communist countries.
It has often been a refuge for scoundrels.
Yes, B&B a a very good read, but appears that you do not give much emphasis to the "domino effect" many if not all in power were concerned with regard to if Vietnam fell to the Communists.
Too many do not seem to understand that if profit seeking institutions, biz and commerce at large did not exist or was dramatically less, that there would be no money for the non profit sector.
So, yes at least equal worth if not more to get a job where profits are made that allow for non profits to exist.
Just a great article. I had the same realization about the nature of evil in college, in reading about the Third Reich. They really believed they were doing something good and correct, even if it was difficult. That shocked me. But it also made me suspicious of what you’re here calling the “intention heuristic”, i.e., that the merit of someone’s actions can be judged by their intentions rather than the outcomes of those actions.
They wanted to make the world into a German garden. The rest of us were weeds.
I think there is another good explanation for why the intention heuristic is as strong as it is. For example, when I worked in the healthcare field, I saw how the third-party reimbursement system worked. It wasn't pretty. I would try to explain to outsiders how the system artificially drove up both demand and prices, at taxpayer expense. My explanation contradicted the priors of those I would talk to. Talking with them, I noticed that their views were often shaped by the collective PR of governments, media, pundits and industry players. In other words, by the players with the most power and money on the line. It seemed to me that this PR messaging purposefully emphasized intentions, as it was a simpler and more persuasive message. The only way to overcome this type of messaging is with facts, but these facts are often complicated and are disputed. Most people don't have the bandwidth (or the desire) to hear details about the healthcare system, the banking business, or whatever, and they also may not have the patience to separate the facts from fiction. That is unless the issues impact them directly
Re: "profit-seeking organizations are accountable to the customers that they aim to serve; non-profits are accountable to donors."
Private, not-for-profit educational institutions and private, not-for-profit hospitals rely main on market revenues (tuition & fees; insurance payments & co-pays). In these sectors, institutions (e.g., Harvard U.) that rely mainly on revenues from endowments and current-use donor gifts are the exception rather than the rule.
https://nccs.urban.org/publication/nonprofit-sector-brief-2019#the-nonprofit-sector-in-brief-2019
Yes, and when non-profits become intertwined with government agencies, they become rent-seekers just like any for-profit business.
One framing may be that good intentions are necessary but insufficient. I wouldn't want a society guided by bad intentions, or systems so perfect that no one needs to be good, paraphrasing TS Eliot. Another axis may be "weak" vs "strong" good intentions. Weak meaning a vague wish, strong implying follow-through in achieving intended outcomes and aligning means and ends, embracing experimentation and competition.
Religion and econ 101 help. :)
We are a species highly given to self-deception. We are not transparent to ourselves. Consider the recent revelations from the Twitter files showing the massive effort of government law enforcement, intelligence, and other agencies working with non-profit "NGOs" and for-profit entities to suppress desperately needed open discussion and debate on critically important policy issues, all under the purported good intention of avoiding supposedly harmful effects from "misinformation." Were many of the individual actors so misguided as to think they had good intentions? Or is it more likely that they had convinced themselves that they did but were in reality seeking other advantage? In fact, what they characterized as misinformation was often true but politically or otherwise inconvenient.
We cover up ill intention with spurious good intention. The easiest person to fool is oneself.
"But I would argue that one does not need religion to understand that the human spirit contains both good and evil, and the relationship between intentions and consequences can be complicated."
I think we need religion to govern our behavior, and I write this as someone who has been mostly an atheist his entire life. I think humans need the idea of consequences for bad behavior that extend beyond the span of a human life, and rewards for good behavior that do so, too.
While religion has its negatives, when I look at the sum of history it seems hard for me to see anything but a net positive. That said, some societies seem to do quite well with little or no religion.
Some societies probably refer to today, correct? Will that be the case 2 or 3 more generations going forward? I don't know, and will not live long enough to know.
“But I would argue that one does not need religion to understand that the human spirit contains both good and evil, and the relationship between intentions and consequences can be complicated.”
Perhaps not. But I would argue that it is hard to internalize this lesson without a truly immersive experience with the relevant concepts and religion has done the best job of delivering such a thing at scale.
To highlight just one angle to this, substantive religion effectively teaches people of vastly different IQ. Low IQ people can understand the struggle with good and evil embedded in stories and act on that knowledge by applying simple constructive principles like repentance. High IQ people can engage with religion at greater intellectual depth, but are bound by socially observable constraints that limit their scope for rationalization.
The fundamental issue with the argument is that nobody is without a religion. A system of beliefs about ultimate causes, ultimate ends, meaning and purpose is a religion. Good and evil are inherently religious beliefs, though they don't exist in every religion.
I see your point, but we must also reckon with harms committed in the name of religion; for example, the Wars of Religion in Europe during the 16th, 17th, and 18th centuries.
Point well taken. I personally suspect the counterfactual Europe without religion would also be warlike, but I could be wrong.
In my judgment, counterfactual speculation in historical inquiry should focus on what plausibly might have been different.
For example, if I understand correctly, economic historians have engaged in productive speculation about what might have been, had the Navigation Acts not been enacted. By contrast, an Europe without religion in the 16th century is altogether implausible.
A more fruitful line of inquiry might be to compare the behaviors (the propensities to good and evil) of two subsets of low IQ people in a modern, semi-secular society: low IQ persons who practice religion, and low IQ atheists. (It would be tricky to disentangle confounding variables.). I imagine that research has been done in this vein — Tyler Cowen likes to say that "there is a literature" about any and every topic.
There has been some; both of the experimental and quasi-experimental variety. Would be a worthwhile project to summarize that literature at some point...
I once saw an analysis of warfare and its causes/justifications throughout all history. So for instance the Thirty Years War is considered a religious war (in reality a mixed war, the French fought for the protestants out of realpolitik, and the worst atrocities were committed by non-religious mercenary groups).
Meanwhile, something like the Punic Wars was considered mostly secular power politics.
There didn't seem to be any indication that religion was a particular cause of war. Nor were religious wars necessarily worse. Many wars in Pagan times were total wars between people, with genocide/enslavement of the other population the goal. Many wars in the Christian era were limited wars, mainly squabbles between nobles who sometimes killed civilians but that wasn't the goal.
One could easily call the French Revolution a "religious war". Th religion being liberalism. Try to convince me that the Cult of Reason wasn't a religion.
I follow the argument all the way up to the last section, where I'm not sure the conventional perception of non-profit vs profit is an example of the intention heuristic – is it not based on a instinctive recognition that the incentive structures are different in each case? We trust non-profits to stay truer to their good intentions because the profit motive is dialled down (though, as you say, other bad incentives exist – pleasing donors more than end users etc). But we treat the avowed good intentions of for-profits with scepticism because we know outcomes are dictated by incentives more than intentions. So Larry Fink and the US Business Roundtable may mouth noble platitudes about the 'social purpose' of business, but none of it translates into outcomes, and it may indeed enable worse outcomes – seeding a form of 'noble cause corruption' where companies become convinced they are pursuing noble goals and therefore can justify any means towards that end. That way a thousand Theranoses lie. Would be fascinated to hear your views on the corporate 'purpose' movement in general.
"We trust non-profits to stay truer to their good intentions because the profit motive is dialled down"
I think this tendency is the intention heuristic in action, Nick. Why believe that the profit motive must be dialed down to continue to do good?
I guess I'd answer with a question – why do non-profits exist? If there is no likely conflict between doing good and making a profit, why does society choose to dial down the profit motive when it comes to community and humanitarian organisations?
Non-profits exist as entities as a result of tax policy, but, again, I think the idea that to do good requires profits be eschewed is the intention heuristic in action.
I would restate the question though – why does tax law treat them as a separate case?
My wider point is that 'intention' isn't the key difference when it comes to for-profits and non-profits. For example, Facebook's stated intention is "to give people the power to build community and bring the world closer together". My scepticism is not exactly about the sincerity of that intention – many in Facebook may actually believe it on some level. Instead, my scepticism comes from a realistic acknowledgement of the incentives that are necessarily driving them: market forces, shareholder value, internal targets and bonuses, external competition. And I think most of the public instinctively get that. If Facebook became a non-profit, we would all consider it a morally significant and consequential change.
None of this is an argument against for-profits in general, which I think can and do deliver a lot of good in the world (employing people, paying taxes, delivering useful goods & services). But the pursuit of wider social good has to happen within that overall framework, and usually exists in tension with it. The idea of 'doing well by doing good' has been very popular of late, but I'd argue it's seductive snake oil. As adman Bill Bernbach once said, 'A principle isn't a principle until it costs you something'.
Nick, Facebook could become a non-profit without changing anything it does other than simply not distributing any profits to the owners via dividends or capital appreciation, but by giving away the profits to third parties as charity. Any for-profit corporation could do this. I think, again, you are falling for the intention heuristic- i.e. believing that becoming or being a non-profit is a meaningful change in social do-gooding. I write this because of the long history of charities that aren't really all that charitable but, rather are organized solely for the benefit of the people that run them and work for them.
You're not seriously arguing that Facebook converting to a non-profit would change nothing about its incentive structures?
You keep saying I'm falling for the intention heuristic without offering any theory as to why. My whole argument is that incentives trump intentions whenever humans are gathered into complex systems like businesses and markets. To argue otherwise is to put 'intention' above all else.
Yancey, try again. Non-profits in US existed long before there was any tax incentive. One might even argue they are likely to play a bigger role in the absence of government involvement.
Stu, there has always been a tax incentive for organizations that are strictly non-profit, be it income tax forgiveness, property tax abatements, etc. These have existed for centuries now.
There has always been a tax incentive, at least for the religious non-profits. Secular non-profits proliferated after the incentives were broadened.