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Nonprofit organizations, institutional economics, and systems thinking


  • Valentinov, Vladislav
  • Hielscher, Stefan
  • Pies, Ingo


The present paper applies the logic of John Kenneth Gailbraith's institutional economics analysis of corporate power to inquiring into the societal role of the nonprofit sector. Building on Galbraith's insight that corporations cause subtle but pervasive societal imbalances, the paper locates the role of nonprofit organizations in compensating for these imbalances, thus showing corporations and nonprofit organizations to be mutually complementary rather than antagonistic actors. This argument is supported by Niklas Luhmann's vision of the precarious relationship between the complexity and sustainability of social systems as well as by Kenneth Boulding's analysis of the farmer and labor movement. Luhmann's and Boulding's perspectives show profit-seeking corporations to be social systems developing high technological complexity at the cost of sacrificing their societal sustainability, while the improvement of the latter constitutes the rationale of many nonprofit organizations. The same systems-theoretic logic suggests, however, that nonprofit organizations may tend to underestimate the technological complexity of implementing their mission-related activities, thereby undermining their own effectiveness.

Suggested Citation

  • Valentinov, Vladislav & Hielscher, Stefan & Pies, Ingo, 2015. "Nonprofit organizations, institutional economics, and systems thinking," Economic Systems, Elsevier, vol. 39(3), pages 491-501.
  • Handle: RePEc:eee:ecosys:v:39:y:2015:i:3:p:491-501
    DOI: 10.1016/j.ecosys.2014.12.002

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    References listed on IDEAS

    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Geoffrey Hodgson & Thorbjørn Knudsen, 2004. "The firm as an interactor: firms as vehicles for habits and routines," Journal of Evolutionary Economics, Springer, vol. 14(3), pages 281-307, July.
    3. Valentinov, Vladislav, 2014. "K. William Kapp's theory of social costs: A Luhmannian interpretation," Ecological Economics, Elsevier, vol. 97(C), pages 28-33.
    4. Jacques Defourny & Marthe Nyssens, 2010. "Conceptions of Social Enterprise and Social Entrepreneurship in Europe and the United States: Convergences and Divergences," Journal of Social Entrepreneurship, Taylor & Francis Journals, vol. 1(1), pages 32-53, March.
    5. Fidrmuc, Jan & Tichit, Ariane, 2013. "How I learned to stop worrying and love the crisis," Economic Systems, Elsevier, vol. 37(4), pages 542-554.
    6. Wolfram Elsner, 2012. "The Theory of Institutional Change Revisited: The Institutional Dichotomy, Its Dynamic, and Its Policy Implications in a More Formal Analysis," Journal of Economic Issues, Taylor & Francis Journals, vol. 46(1), pages 1-44.
    7. Valentinov, Vladislav & Iliopoulos, Constantine, 2012. "Property Rights Problems in Agricultural Cooperatives: A Heterodox Institutionalist Perspective," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 61(3).
    8. Vladislav Valentinov, 2012. "Toward a holistic nonprofit economics: insights from institutionalism and systems theory," Journal of Bioeconomics, Springer, vol. 14(1), pages 77-89, April.
    9. Valentinov, Vladislav, 2015. "From equilibrium to autopoiesis: A Luhmannian reading of Veblenian evolutionary economics," Economic Systems, Elsevier, vol. 39(1), pages 143-155.
    10. Herbert A. Simon, 1996. "The Sciences of the Artificial, 3rd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691914, January.
    11. Vladislav Valentinov, 2013. "Veblen and Instrumental Value: A Systems Theory Perspective," Journal of Economic Issues, Taylor & Francis Journals, vol. 47(3), pages 673-688.
    12. Putterman, Louis, 2013. "Institutions, social capability, and economic growth," Economic Systems, Elsevier, vol. 37(3), pages 345-353.
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    Cited by:

    1. repec:zbw:espost:163551 is not listed on IDEAS
    2. repec:bla:srbeha:v:34:y:2017:i:2:p:195-207 is not listed on IDEAS
    3. Vladislav Valentinov & Lioudmila Chatalova, 2016. "Institutional Economics, Social Dilemmas, and the Complexity-Sustainability Trade-off (A response to Hielscher and Pies)," Systems Research and Behavioral Science, Wiley Blackwell, vol. 33(3), pages 488-491, May.
    4. Vladislav Valentinov, 2017. "The Rawlsian Critique of Utilitarianism: A Luhmannian Interpretation," Journal of Business Ethics, Springer, vol. 142(1), pages 25-35, April.
    5. Steven E. Wallis & Vladislav Valentinov, 2017. "A Limit to Our Thinking and Some Unanticipated Moral Consequences: A Science of Conceptual Systems Perspective with Some Potential Solutions," Systemic Practice and Action Research, Springer, vol. 30(2), pages 103-116, April.
    6. repec:zbw:espost:170724 is not listed on IDEAS
    7. Alexander, David & Blum, Véronique, 2016. "Ecological economics: A Luhmannian analysis of integrated reporting," Ecological Economics, Elsevier, vol. 129(C), pages 241-251.
    8. Valentinov, Vladislav & Vaceková, Gabriela, 2015. "Sustainability of Rural Nonprofit Organizations: Czech Republic and Beyond," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 9890-9906.
    9. repec:zbw:espost:170726 is not listed on IDEAS
    10. Stefan Hielscher & Ingo Pies, 2016. "Emergent Social Dilemmas in Modern Society: An Institutional Economics Perspective (A comment on Valentinov and Chatalova)," Systems Research and Behavioral Science, Wiley Blackwell, vol. 33(3), pages 483-487, May.


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