Of the many myths about the United States, few rival the longevity of the supposed independence of the voluntary or charitable realm: the idea that nonprofit organizations stand apart from both the state and market. That story dates to Tocqueville’s accounts of associational life of the early republic and his assessment of self-organized civic action as a key ingredient in the democratic experiment. It has been sustained in more recent decades with the advent of terms like “third sector” or “independent sector.”
While not completely unfounded, the myth of an independent third sector obscures how deeply intertwined nonprofits are with the state and market. True, nonprofits can and do provide an important check on government authority, deliver goods and services in the absence of public provision, and operate with a different set of economic principles. At the same time, they receive more revenue from the U.S. government than they do from private donors, and while not profit-distributing, nonprofits are nevertheless revenue-seeking and participate in the market economy, albeit with certain tax-advantages.