FAQ
Why can’t charities already get support for this type of analysis?
Wouldn’t it be better if charities had to pay something for the service?
How can we be sure the charities will use the results?
Does Pro Bono Economics hope to develop a market in paid economic consulting to charities?
Would the results of a Pro Bono Economics project be available only to the individual charity?
Can you really add value in such short assignments as envisaged by Pro Bono Economics?
Who will monitor the quality of the work of Pro Bono Economics?
How can I get involved?
Why can’t charities already get support for this type of analysis?
Few charities either employ or consistently make use of economists. We believe this is a market failure or, to all intents and purposes, a missing market. We believe there are essentially two reasons for this: cost externalities; and information failures on both side.
Reason 1: Cost externalities
Most charities cannot afford to pay for in-house or outsourced economists. The market price of economists is set within the private and public sectors, at levels above the “going rate” within the charitable sector. Partly as a result, there is also a lack of career opportunities for economists within charities and there is no consultancy dedicating advisory services to charities. This cost argument seems to be one of the key reasons why other professions, whose wage is set within the private sector, operate pro bono programmes – lawyers, management consultants etc.
If cost was the only issue, one could argue that greater funding of the charitable sector was a solution. But there can be further positive benefits to to the services provided by economists: the value of a piece of economic analysis to an individual charity depends on the needs of that organisation, but its value may be much greater if other charities could use the same analysis themselves – for example, in the area of data collection or measurement of results. In this situation, the total value of a piece of research exceeds what the individual charity would be willing to pay – an externality. And even if the charity had more resources, it would still not be in its interests to buy as much economic analysis as the public interest would want. As a result the quality of the work might be lower and undermine the development of a proper market in economic analysis.
Reason 2: Information failures
On the demand side, many charities do not understand or appreciate the value of economic analysis to their business and so do not seek it. On the supply side, most economists do not realise that their skill-sets would be valuable in addressing questions such as measuring the impact of charities’ work. With neither demand nor supply well articulated, the reuslt is a largely missing market. There are some examples of economists helping charities on a pro bono basis with problems of measurement and articulation of ‘return’, but these are the exception rather than the rule.
Within the third sector, there is a growing recognition of the problems caused by a lack of measurement and evidence. The Office for Civil Society in the Cabinet Office has noted this and, together with the Economic and Social Research Council, funded a new Third Sector Research Centre at Birmingham and Southampton Universities.
The work of Pro Bono Economics is intended to complement this and other initiatives. It helps to address the market failures which have resulted in this missing market by:
- brokering economists into the charitable sector on a pro bono basis – thereby addressing the cost problem;
- acting as a matching agency, as a more general source of information about the use of economics in the charitable sector, between charities and economists – thereby addressing the information problem.
In this way, PBE aims to kick-start a market in economic services to charities.
Wouldn’t it be better if charities had to pay something for the service?
The above arguments explain why having charities pay the true market price for economist services may be neither feasible not desirable. Nonetheless, it could be argued that setting a zero price for these services is distorting and could lead to excess demand and poor incentives on the part of charities. This might make them unwilling to pay for the service in the future if a market in economic services to charities was realised. It could also then place an excessive burden on the suppliers, including the public sector.
Working against such an outcome are several factors:
- This is at zero cost service for charities. At the outset they will need to submit an application, setting out the purposes and uses of the consultancy; for the duration of the project they will be required to commit resources to supporting the project; and after completion they will be required to evaluate and specify the uses of the research, both to themselves and to the wider charitable sector. Pro Bono Economics will provide the infrastructure within which this will operate, in effect monitoring the use and application of the resources provided. This means that the cost to the charity, while below market prices, will not be trivial.
- The returns to the providers of services to the charitable sector will not be zero. Within the Government Economic Service or private sector pools of economists, we would hope a project on the application of economics within the charitable sector would be a valuable addition to the professional development of staff. It would give exposure to a wider set of issues in a different environment and with the potential to have a direct bearing on the setting of policy in an organisation. Our own professional experience, as economists within the public and private sector, certainly suggests that having such opportunities would have been desirable, with returns to both individuals and parent institutions.
- There are the broader public returns that we anticipate will result from the application of economists’ skills to charitable projects. Through wider dissemination of results and research, a public good is being provided.
How can we be sure the charities will use the results?
Pro Bono Economics will only have an impact if charities engage with and use the services it helps broker. Assessing this will be an important part of the application procedure. PBE will accept only those charities where the charity is able to engage and shows a clear desire to apply the results to its work. In addition there will be an ex-post monitoring process (described below) which provides further safeguards around quality assurance and the use of results. So PBE’s infrastructure and processes will be designed to minimise the risk of results being either underused or misused by charities. Lessons from such monitoring will be reflected in amendments to the application and assessment procedure.
Does Pro Bono Economics hope to develop a market in paid economic consulting to charities?
Pro Bono Economics aims to help charities measure their performance better and demonstrate the results of their work. Though it is not the primary goal of PBE to help develop a market in economic consulting to charities, if the organisation’s work helps to reduce the information barriers to a more developed market, this will be a valuable side-benefit. Whether the market can develop sufficiently to overcome both the information and the cost frictions is more questionable. So even if PBE were only a bridge to a functioning market, our guess is that it could be a fairly lengthy one.
An economist might reason that the availability of free economic advice could undermine the development of a viable market and that PBE should plan to scale down its operations as its work demonstrates the need for this type of work. Let us hope so. But it is worth noting though that in other professions – such as law – paid advice for charities exists alongside pro bono support. At a minimum, the high cost of economic advice will limit the development of the market and provide a continuing rationale for pro bono support.
One deliberate intention of PBE is to equip charities with the tools to do more themselves. Engaging with the projects and the economists will leave a lasting legacy of understanding more about economics. Publishing the results of individual projects and sharing these with other charities will reinforce this. So this training function could grow in importance even if/as the explicit provision of outsourced economics advice falls.
Would the results of a Pro Bono Economics project be available only to the individual charity?
Pro Bono Economics wants to help individual charities through its work. So the results of an individual project would be shared first with the management and trustees of the charity concerned. Having met the costs of having the research carried – application, delivery etc – it is only right that the charity has ownership of the results; indeed, it is important for incentives that it does so.
Equally, many other charities might benefit from projects carried out under PBE auspices; there will, especially early on, be considerable “learning by doing” in a fledgling market and significant increasing returns to scale in the provision of economic research directed at charities. PBE would like to maximise the value of this informational public good through making it widely available. There would be a presumption that research carried out under PBE auspices would be made available to everyone – for example, through the PBE website – unless there were overriding sensitivity concerns on the part of the charity. Even then, it is hoped that some form of the results or methodology could be disseminated. Such a requirement will be explicitly flagged to the charity at application stage.
Who will monitor the quality of the work of Pro Bono Economics?
A number of checks and balances will be used to ensure Pro Bono Economics is supporting good work. First, we will be careful to ensure that economists and charities are paired in a way that is sensitive to both sides.
PBE will help create a network of economists who can then support the work as it proceeds. Each project will be peer reviewed in draft form by an independent economist before it is completed. We will also gather feedback from the charity and the economists involved after each project. This feedback and review mechanism will ensure that PBE is able to track the quality of its work and impact, as well as make any necessary changes to its operations.
If you are an individual or company interested in providing economic support to charities, click on the “Interested in volunteering?” link at the top of each page of this website and send us an email.
If you are a charity interested in getting some help, send an email to info@probonoeconomics.com describing your work and the area where you would like help. We will then register your interest on our database for when we open the applications process. This will happen in the near future once the first pilot projects are well underway and we are confident the idea works. This website will then be updated to outline details of the application process, the decision makers and timings. We will also get in touch with all charities who have previously registered notifying them about this.
