2. Various achievements and some failures in the Italian non-profit world.
As arranged with F. Cafaggi and E. Courir, I am going to deal with a topic that certainly allows me to praise enthusiastically the achievements of Law and Economics, even in the Italian law system. The economic approach followed in the United States of America, where the main representative is Mr. H. Hansmann, was immediately spread by the young Italian scholars, in the young non-profit Italian world. Over the past twelve years the late and much mourned Disiano Preite, Andrea Fusaro, myself and more recently Andrea Zoppini have given to Italian readers the most credible explanations of the improvements achieved in the non-profit sector in the United States. In particular, the one-sided fiscal explanation of the growth of the non-profit world is now criticized. At the same time, the argument recognizing the phenomenon of "market failure" as the main justification for such growth, is firmly supported.
As is well-known the massive presence of non-profit associations in different areas (such as: culture, scientific research, health, education and so on), as well as usage of the non-profit institution as a juridical instrument, are well explained in Henry Hansmann's writings: if there are areas preferred by the non-profit associations, this is because the usual workings of contractual mechanisms are going to fail. People trust non-profit organizations mainly because of a deep-rooted impression, shared by the majority of consumers: a non-profit will not abuse the privileges accorded to it by the fiscal statutes. Such a statement is certainly true in those cases where, at least according to the economists (the main contributions on this point come from Estelle JAMES and Susan ROSE-ACKERMANN) the phenomenon of "informative asymmetry" occurs between the corporation, on the one hand, and the consumers and supporters of their services, on the other. I refer to those welfare services where minors and/or the elderly are not able to check the quality of the services bought, or to art and theatre centres, where again it is very difficult to check the actual usage of the private economic support, in order to achieve a better quality product.
Non-profit organizations have a fiduciary duty towards consumers as a whole. Such a fiduciary duty is due to the main characteristic of non-profit organizations, that is the non distribution constraint, and it cannot be otherwise understood according to market rules. Those who make use of products and/or services offered by a non-profit organization choose such products or services because the non-profit producer is much more able than a business corporation to guarantee that the product or service offered maximizes the public interest, since there is no private interest involved in the distribution of net income. Quoting Hansmann: "...the advantage of a non-profit producer is that the discipline of the market is supplemented by the additional protection given the consumer by another, broader contract the organization's legal commitment to devote its entire earnings to the production of service". In other words: non-profit organizations grow and operate successfully in those cases where the market seems to fail.
This interpretation of the growth of non-profit sector has found strong approval among Italian professors: which is why Mr. Hansmann has been invited many times by Italian Universities as a visiting scholar.
In fact, the diffusion of the non-profit sector in Italy is due to Mr. Hansmann's positive reputation. (He also owes much of his private life to the research on the non-profit sector, as otherwise he probably would not have met his wife). Although his two essays (respectively published in the Yale Law Review and in the Pennsylvania Law Journal) were not translated into Italian, they immediately caught the attention of the Italian lawyers.
I would like to remind you of another theory that combines market and government failure. From this perspective, the inefficiencies of the public sector are mainly due to a public administration which is unable to adequately meet the demands for goods or services, because a bureaucratic organization is inefficient and expensive in offering quality services .
Recently, the most representative supporter of the above--mentioned thesis, Mr. Burton Weisbrod, was in Milan to deliver the opening speech at the Cariplo conference entirely devoted to the subject of ''non-profit organizations".
The traditional interpretation of the non-profit world, given by Mr. Oleck, has not had the same success as the two illustrated above. But we should not forget the interesting point-of-view offered by those scholars who consider the non-profit world as a coherent element of the government system, as a conglomeration of relationships organized around the state power. In the United States, the main spokesman for this thesis is Mr. SALAMON . The fiscal privileges enjoyed by non-profit organizations would, according to this point-of-view - mean different things in different countries. In the U.S.A., for example, fiscal privileges strengthen the existing pluralism and the commitment to achieving a better distribution of economic reserves; in Germany, they represent a trend towards a new corporatism, while in Latin-American countries they hide the deterioration of a system based on lobbies.
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As I said before, the economic approach to the understanding of the non-profit phenomena occurred in Italy in a time when the non-profit world was expanding and leaving behind those periods when either it was completely absent or had very different characteristics. I believe it will be useful to go quickly over the past periods.
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