A non-profit organisation’s goods and services may be worth the minimal or nonexistent costs to the recipients without being worth its production costs. An enterprise constrained by profits and losses cannot continue to use resources that have more value in alternative uses elsewhere in the economy. However, a non-profit organisation can, since it need not recover the costs of the resources it uses from the recipients of the goods and services provided.

The desires of the current users or investors lack leverage on a non-profit institution, allowing the individuals in charge to substitute their own goals for the institution’s goals or those of its founders.

In short, incentives and market pressures do not function correctly in non-profit organisations.