Application paper:
Most of our textbook and PowerPoint applications focus on minimizing cost to help businesses maximize profit (revenue minus cost). You are to adapt one of those applications to show how a non-profit business (like a charity) can minimize cost. The application paper has a maximum of 3 pages.
Overview and alignment:
The topics covered in Managerial Economics help students make the most of the time and effort put into benevolence.
You must write and print out a 3-page paper using a topic in Managerial Economics that either suggests how to make a specific charity more effective, or explains how a specific charity was changed to be more effective.
I encourage you to think of original applications, but I may suggest some paper topics as class progresses. Here are two suggestions:
Cash Gifts and cost Minimization:
You learned in Managerial Economics that, assuming all that matters is the happiness from the objects of your benevolence (say, the happiness of poor families with children at Christmas) and assuming the objects of your benevolence are rational (that is, they use their resources in ways that are best for them), then you should of- ten donate cash to any benevolent foundation, rather than gifts or your labor. For ex- ample, cash can be given directly to poor families with children to buy their own toys (or something they may need even more) or can rent capital for the foundation to work with donated labor.
So pick a charity and either document how they used the managerial economic conclusion of the superiority of cash over donated gifts or labor to improve efficiency, or document how some non-quantitative or non-economic elements of their operation or of their donors caused them to violate managerial economic assumptions and so follow different conclusions.
For example, suppose a student picked Toys for Tots. (You may not pick that same charity; pick something else.) That charity accepts donated toys and donated labor to distribute those toys to poor families with children at Christmas. That is obviously not the cheapest way to get toys to those children. It is cheaper to have donors give cash, which can be collected and toys can be purchased in bulk at a discount, and then distributed. One can document that over time Toys for Tots started encouraging cash donations and so made itself more effective at distributing Toys to Tots.
To explore non-quantitative or non-economic elements of donors, you should read the article
giving.pdf
which cites evidence that many donors donate labor over cash because it makes do-
Purpose of Charities:
Under the assumptions of Managerial Economics (all that matters is the happiness from the objects of your benevolence and the objects of your benevolence are ration- al), the stated purpose of some charities make little sense. For example, consider again Toys for Tots. If the objects of benevolence are rational, Toys for Tots is not as effective as Cash for families with Tots. But again under rationality, having Tots (children) is a choice adults make and so making that choice does not make those adults needy. So, Cash for families with Tots is not as appropriate as Cash for needy families — which means Toys for Tots should be replaced by a program that dupli- cates government welfare programs that give cash to needy families. One response to that reasoning is to change the stated purpose of the charity.
An alternative response is that the stated purpose of the charity is different from the actual purpose of the charity. For example, maybe the actual purpose of the Toys for Tots charity is to help donors feel better about themselves as they give toys to chil- dren rather than cash to needy families.
So pick a charity (other than Toys for Tots) and argue how either they should change the stated purpose of the charity or argue that the actual purpose of the charity is different than the stated purpose.
