A couple of the commenters on a previous post object to our idea of “rewarding failure” and prefer to focus on “putting the bad charities out of business.”

In theory, I’d like to see a world where all charities are evaluated meaningfully, and only the effective ones survive. But the world we’re in is just too far from that. The overwhelming majority of charities simply perform no meaningful evaluation one way or the other – their effects are a big question mark.

It’s not in our power to sway enough donors – at once – to starve the charities that don’t measure impact. (And even if it were, there are simply too many of these for starving them all to be desirable.) But it is in our power to reward the few that do measure impact, thus encouraging more of it and creating more organizations that can eventually outcompete the unproven ones.

Of course failure isn’t valuable by itself, and shouldn’t be rewarded. But showing that a program doesn’t work is expensive and valuable in and of itself, and should be rewarded. As Paul Brest says, “the real problem is that, unless they are doing direct services, most nonprofits don’t know whether they are succeeding or failing.”

Evaluation is valuable whether or not it turns out to have positive results. Yet currently, only positive results are rewarded – honest evaluation is riskier than it should be. This is the problem that the “failure grant” idea is aimed at.