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5IE451 – Economic Analysis of the Non-Profit Sector

The course is identical (with the exception of language of teaching) with the course 5IE401 – Ekonomická analýza neziskového sektoru.

Course information: The course analyzes social phenomena traditionally considered to be outside of the scope of economics, such as altruism or social capital. We look at them from an economic perspective and consider their importance for operation of markets, politics and „civic society“. Upon successful completion of the course students will be able to understand principles of the so-called non-profit sector (ranging from a family to mafia) and will be able to critically analyze economic policy in this area. Thanks to the seminars students will also become familiar with relevant literature in the field of economics, but also sociology and politology (in English), among other with works of several Nobel Prize winners (G. S. Becker, V. Smith, E. Ostrom, J. Buchanan, K. Arrow).

6 ECTS credits

When and where: see ISIS


  • written test based on lectures and texts from seminars (see below) (60 % weight)
  • active participation in seminars + reacting to read articles (20 % weight)
  • essay on selected topic (must be consulted in advance) (20 % weight)

Required reading: There is no general textbook covering the whole course, so we will work with selected papers (usually accessible through Jstor) – one paper for each lecture and one for each seminar. It is highly recommended that you read both of the texts before lecture/seminar, otherwise you might get lost. Please bring a hard copy of the paper assigned to the seminar with you, together with your notes, so we can discuss them at the seminars. I suggest „creative reading“ – look for main ideas of the paper, try to apply them in different situations, find parallels from your own experience, search the Internet for unknown terms or concepts etc. The seminars are partly in your own direction – they will be interesting if you make them to be interesting.

Course outline:
1) Introduction, methodological minimum
Lecture: James M. Buchanan: What Should Economists do?, Southern Economic Journal, Januar 1964, 30(3):213-222
Seminar: There is no reading for this week

2) Altruism and self-interest – altruism in religion and biology; economic view: „pure altruism“ and possibility of its economic analysis, differentiation between self-interest and egoism, “Das Adam Smith Problem”
Lecture: Pavel Chalupníček: Altruism and Social Entrepreneurship (pdf) – esp. Parts 1 and 2
Seminar: Vernon L. Smith: Two Faces of Adam Smith, Southern Economic Journal, July 1998, 64(1):2-19

3) Altruism vs. reciprocity – consumption vs. investment, nature and forms of capital
Lecture: Pavel Chalupníček: The CAPITAL in Social Capital: An Austrian Perspective, The American Journal of Economics and Sociology, 2010 (pdf)
Seminar: Gary S. Becker:Theory of Social Interaction, The Journal of Political Economy, 1974, 82(6):1063-1093

4) Social capital – economics meets sociology, application of capital theory on interpersonal relations, benefits and problems of such analysis
Lecture: James Coleman: Social Capital in the Creation of Human Capital, The American Journal of Sociology, 1988, 94:S95-S120
Seminar: Lisa Bernstein: Opting out of the Legal System: Extralegal Contractual Relations in the Diamond Industry, The Journal of Legal Studies, 1992, 21(1):115-157

5) Importance and critique of the non-profit sector – relations between non-profits, economy and politics, empirical studies focusing on the importance of the non-profit sector and civic society; critique of the non-profit sector – corporate giving, „ngo-ism“, mafia
Lecture: TBA
Seminar: Raimondo Catanzaro: Enforcers, Entrepreneurs, and Survivors: How the Mafia Has Adapted to Change, 1985, The British Journal of Sociology, 36(1):34-57

6) Non-profit sector and the state – partnership, or a threat? – history of coexistence, crowding-out effect, „social capital cycle theory“, empirical evidence
Lecture: Anthony M. Carilli & Christopher J. Coyne & Peter T. Leeson: Government Intervention and the Structure of Social Capital, Review of Austrian Economics, 2008, 21:209–218
Seminar: Elinor Ostrom and Roy Gardner: Coping with Asymmetries in the Commons: Self-Governing Irrigation Systems Can Work, The Journal of Economic Perspectives, 1993, 7(4):93-112

7) Transformation of the non-profit sector – non-profit sector and civic society in totalitarian and post-totalitarian society
Lecture: Beate Volker and Henk Flap: Getting Ahead in the GDR: Social Capital and Status Attainment under Communism, Acta Sociologica, 1999, 42(1):17-34 (will be distributed via e-mail upon request)
Seminar: James L. Gibson: Social Networks, Civil Society, and the Prospects for Consolidating Russia’s Democratic Transition, American Journal of Political Science, 2001, 45(1):51-68

8 ) Theory of the entrepreneur – neoclassical theory of the firm, Schumpeter, Kirzner – comparing main approaches of economic theory to the phenomenon of entrepreneurs and entrepreneurship – contact points and friction areas
Lecture: Israel M. Kirzner: Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach, Journal of Economic Literature, Vol. 35, No. 1 (Mar., 1997), pp. 60-85
Seminar: Peter J. Boettke, Christopher J. Coyne: Entrepreneurship and Development: Cause or Consequence?, Mercatus Center Working Paper

9) Social entrepreneurship – solution for the non-profit sector? – application of entrepreneurship in “social” area, kinds of non-profit/non-market organizations, relation between non-profit and profit sector
Lecture: J. Gregory Dees: The Meaning of „Social Entrepreneurship“
Seminar: Edward L. Glaeser and Andrei Shleifer: Not-For-Profit Entrepreneurs, NBER Working Paper No. 6810, November 1998

10) Case study I – Altruism vs. trade in the case of human organs
Lecture: Kenneth J. Arrow: Gifts and Exchanges, Philosophy and Public Affairs, 1972, 1(4):343-362
Seminar: Richard A. Epstein,The Human and Economic Dimensions of Altruism: The Case of Organ Transplantation, John M. Olin Law & Economics Working Paper No. 385, University of Chicago, January 2008

11) Case study II – Private health insurance – British „Friendly Societies“ in the 19th century
Lecture: Marcel Fafchamps: Solidarity Networks in Preindustrial Societies: Rational Peasants with a Moral Economy, Economic Development and Cultural Change. 1992, 41(1)147-175 (will be distributed via e-mail upon request)
Seminar: Pavel Chalupníček, Lukáš Dvořák: Health Insurance Before the Welfare State: The Destruction of Self-Help by State Intervention, The Independent Review, 2009, 13(3):367–387

12) Case study III – Development aid – salvation, or a curse? Analysis of microfinance mechanism
Lecture: William Easterly: Can Foreign Aid Buy Growth?, The Journal of Economic Perspectives, 2003, 17(3):23-48
Seminar: S. Navas et al.: Microcredit and the Poorest of the Poor: Theory and Evidence from Bolivia, World Development Vol. 28, No. 2, pp. 333-346, 2000