On Monday, November 5 (yeah, I know, I’m way behind), I attended a lecture on social impact investing with Sharon Oster, one of my econ teachers from last quarter and something of a celebrity on campus. Unfortunately, I had to miss the beginning for an Internship Fund meeting, but here’s what I learned from the portion I did see.
From what I gathered, during the part I missed Professor Oster talked about how there are many aspects of what nonprofit organizations do that cannot be measured, but that doesn’t mean they aren’t valuable or shouldn’t be taken seriously. That dovetails pretty nicely with my point in the first two Thoughts on Philanthropy posts, although I’m beginning to think that this issue is not as specific to the arts as I might have thought. For example, Oster drew a distinction during her talk between measuring the cost savings to the government thanks to a program that finds employment for disadvantaged youths (which can be done using economic models), versus measuring the impact on overall societal happiness that comes from a being able to walk down the street in formerly dodgy neighborhoods (which is much harder).
However, you might be surprised at the extent to which some things can be represented in terms of traditional models. Going back to the previous example of the employment program, you can forecast not only the increased future earning power of the individuals participating, but also a reduction in welfare payments, an increase in the tax base, and potentially savings to the health care system. The key is to get as much data as possible, and as detailed data as possible, when constructing your models. Then, you find ways to convert the benefits you find into monetary terms. If you’ve done everything right, you can then use quantitative methods to compare projects to each other, just like they do it in the finance world.
Getting back to the arts, I think there is a lot here to think about, particularly with respect to measuring the economic footprint of grassroots arts communities (a special interest of mine). The hard part is isolating the effect of the arts from other factors, since so much of their impact on a community is really indirect. Fortunately, Professor Oster teaches a full course on the strategic management of nonprofit organizations, so hopefully I’ll have a much better understanding of these issues by this time next year.