Markets Doing Good Lecture Notes

A collection of flashcards summarizing the key concepts from the lecture notes on markets and social issues.

What is the main idea of the course titled 'Doing Good' at Northwestern Kellogg?

It explores how various sectors address social issues, the reasons for market failures, and how to evaluate charitable efforts.

What is a 'savings failure'?

It refers to the phenomenon where individuals do not save money even when there are significant financial incentives, such as high interest rates.

What is the metaphor used to explain the savings failure?

Saving is described as 'earning 50% free money,' and not saving is akin to leaving cash on the table.

What connects education to health and jobs in market systems?

A failure in the education market affects investments in health and job outcomes.

What are demand-side issues affecting investment in education?

They include misconceptions about low returns, difficulty borrowing money, and seeing personal costs instead of societal benefits.

Why do nonprofits intervene in markets?

Nonprofits innovate and share solutions when government fails to address social issues.

What is the government's role in fixing market failures?

The government provides subsidies, enforces taxes, protects consumers, and ensures competition.

What is the 2x2 framework for comparing investments?

It plots financial versus social returns, distinguishing between traditional investments, impact investments, philanthropy, and ineffective options.

What is a key retention trick regarding the roles of different sectors?

Imagine nonprofits as inventors, for-profits as business heroes, and the government as the rule-maker.

What are the main types of market failures listed in the document?

Information asymmetries, transaction costs, tragedy of the commons, public goods, externalities, competition issues, and behavioral issues.

What is a potential solution for cash versus in-kind aid?

Cash is preferred if affordability is the only issue; in-kind aid is used if information or access problems exist.

Why is understanding market failures important for charitable initiatives?

Identifying specific market failures helps design effective interventions that address root causes.

What is the difference between altruism and warm glow in charitable giving?

Altruism is donating to help others unconditionally; warm glow refers to the satisfaction of feeling good from giving.

What obstacle do motivated donors face when giving to charities?

Lack of clear information about charity quality and the influence of behavioral biases.

What is the significance of the Theory of Change?

It outlines how specific actions lead to measurable impacts in both nonprofits and for-profits.