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    Adam Smith tax maxims - profit and non profit entities

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    It has been said that private business people do not do enough for the societies they live in. After graduation, some students choose to go into the public, non-profit sector instead of the private business sector because they want to help others. However, business people claim that they actually do more to help others than non-profit groups do because they provide jobs for people rather than just giving them charity, which often precludes them from searching for work. Furthermore, they believe that businesses create all the wealth that nonprofit groups then distribute.

    Can you find some middle ground in this debate that would show that both business people and those who work for non-profit organizations contribute to society and need to work together more closely to help people? Can you use the concepts of Adam Smith to help illustrate your position?

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    Solution Preview

    The discussion of the differences between for-profit business and not-for-profit business are, in my view, narrower than some people might say. If you consider the objectives of each type of organization, the similarities are that they:

    1. have a purpose to support their existence
    2. redistribute wealth in terms of their goals
    3. support the economy by providing jobs for employees

    In the most general terms, both types of organizations transform inputs to outputs. The term 'business' is normally equated with making a profit which is then theoretically distributed to the stakeholders, whereas the goal of a non-profit organization is to distribute all the inputs to stakeholders so as not to have a profit. "In economics, business is the social science of managing people to organize and maintain collective productivity toward accomplishing particular creative and productive goals, usually to generate revenue." http://en.wikipedia.org/wiki/Business By changing one ...

    Solution Summary

    The 625 word solution describes Adam Smith's four tax maxims and how they realte to our problem. The solution suggests that the differences between for profit and not for profit entities may be narrower than we think. It includes an explanation which compares one to the other.