Unhealthy Charities: Hazardous to Your Health and Wealth.

• Author: Lee, Dwight R.

Most economists are by their nature contrarians. Let any proposition become widely accepted and some economist will begin attacking it with the heavy fire power of economic analysis. Contrariness does not always make economists popular, but it does make them useful. Comfortable beliefs are tempting, but often misguided because they ignore harsh realities that good economists were put on Earth to constantly and, if need be, obnoxiously remind people of. Few economists are better contrarians than James Bennett and Thomas DiLorenzo, and their latest book, Unhealthy Charities, is a great example of how useful the critical application of economic analysis to widely held views can be.

Some of the most trusted organizations in America today are health charities, in particular the Big Three: the American Lung Association, the American Cancer Society, and the American Heart Association. Because they are so trusted, the Big Three health charities can raise large sums of money and have considerable latitude in how that money is used. There is a widespread belief that most of the money contributed to the Big Three is being used to fund medical research and to help disease victims who, because of their income or circumstances, are most in need of help. Bennett and DiLorenzo put this belief in the crosshairs of their analytical artillery and unleash a devastating barrage of theory and fact against it.

Bennett and DiLorenzo examine the three major health charities the way good economists examine any organization. Of primary importance is to consider how people who have not yet fully mastered the art of ignoring their self-interest can be expected to respond to the relevant incentives. And if the analysis suggests that people will behave differently than indicated by their pronouncements, it is the pronouncements that are questioned unless supported by a hard look at the evidence.

Competition for consumer dollars serves as an effective means of channeling self-interested behavior into public-interest outcomes in most private settings. Such competition is not completely without force in the case of charities, and one implication of a self-interest model is that those who operate a charity will not appreciate competition from rival charities even when that competition promotes the charitable objective. Indeed Bennett and DiLorenzo have a fascinating chapter (Chapter 8) on attempts by the Big Three health charities to use their political power to eliminate...