ABSTRACT
This chapter focuses on Australia’s third sector's economic contribution and reviews the interesting body of economic theory that has developed to account for, and understand the behaviour of, nonprofit organisations and their philanthropic supporters. The American economist Burton Weisbrod notes that many nonprofits provide goods similar to those provided by governments. He proposes that this is because such goods are funded by taxation and that governments have to balance the provision of such goods with the level of taxation required to finance them in such a way that satisfies the 'median voter'. Weisbrod's theory has been criticised for addressing only the question of why nonprofits provide certain goods rather than government. Critics note that in many industries nonprofits provide services that are similar to those provided by for-profit firms. A great deal of economic research and modelling work has been done on donations of time and money, particularly the latter.
