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Encouraging Charitable Efficiencies More Charitable Than Discouraging Nonprofits - Take One

In a recent article entitled Charities Rise, Costing U.S. Billions in Tax Breaks, Stephanie Strom of the New York Times raises concerns about an out of control nonprofit sector that is flooding the IRS with frivolous new applications to establish new public charities that will deprive the federal budget of billions of dollars. She demonstrates her point by citing new groups such as Save Your Ass Long Ear Rescue, working to save donkeys from cruelty; new chapters of the Sisters of Perpetual Indulgence, a group of cross-dressing nuns raising money for AIDS treatment; and the Red Nose Institute, a group of trained clowns trying to bring relief to US troops abroad by distributing clown noses.

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Sunk Costs and Social Innovation

I've been thinking a lot lately about the concept of "sunk costs." In economics and business decision-making, sunk costs are unrecoverable past expenditures that, under normal circumstances, should not be taken into account when determining whether to continue or abandon a project, effort, or initiative because costs that are already "sunk" cannot be recovered. Inevitably, thinking about sunk costs reminds me of my "Saab stories"...

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