The Price of Virtue
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The Price of Virtue

The Economic Value of the Charitable Sector

Vivien Foster, Susana Mourato, David Pearce and Ece Özdemiroglu

The authors of this pioneering book attempt to address this problem by utilizing survey techniques, originally developed in environmental economics, to place an economic value on the benefits provided by the voluntary sector in the UK.
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Chapter 1: Conceptual Foundations

Vivien Foster, Susana Mourato, David Pearce and Ece Özdemiroglu


1.1 PURPOSE OF THE BOOK The charitable sector uses inputs such as land, capital and paid and unpaid labour to produce outputs such as care of the elderly, shelter for the homeless, environmental amenity and so on. In this respect the sector is just like any other productive activity in that it transforms resources into something that society values. However, unlike many other productive sectors, the goods and services produced by charities are not openly traded on the market. When goods and services are bought and sold on the market, the price at which they are traded provides a real indication of the value consumers place on the corresponding outputs. In the case of charities, services are usually provided at zero, or highly subsidized, cost to specific beneficiary groups who typically lack the means to secure the services in any other way. The price therefore does not provide any indication of the value which beneficiaries place on the service provided, making it difficult to put a monetary figure on the output of the charitable sector. The absence of any measure for the value of the services provided by charities is problematic for a number of reasons. First, as already noted above, if output could be measured, it would enable an economic calculation of the value added of charitable organizations, thereby providing a more accurate economic measure of their size. This would permit them to be integrated into the national accounts on an equal and consistent basis...

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