ABSTRACT
Economists commonly divide the economy into two sectors: public and private. Revenues for many non-profit institutions come from voluntary contributions rather than from coerced taxes or exchanges of money for goods and services. The list of organizations that are given tax preferences under the federal tax laws is diverse enough that it is reasonable to question how they work for the public good. The chapter considers the public benefits that are produced, and that could be produced, by non-profit foundations. It suggests that there is a role for such organizations, but that their niche is shrinking because an expanding public sector is undertaking activities at the end of the twentieth century that would have been the province of foundations at the beginning of the century. The characteristic of a public good, jointness in consumption, means that once the public good is produced additional users can consume it without reducing the consumption of others.
