The theory of the nonprofit institutional form introduced by Henry Hansmann more than 40 years ago proposed that informational problems, specifically information asymmetry, explains the essential defining feature of the nonprofit organization – the so-called nondistribution constraint. While the conventional argument holds that an asymmetry of information arises due to intrinsic, hard-to-measure attributes of nonprofit outputs, this chapter argues instead that informational problems arise because private purchasers fail to sufficiently value the positive externalities of information. In short, information is a social good, rather than a private good, and neither purchasers (donors) nor producers (nonprofits) have sufficiently strong incentives to systematically incur the costs and risks associated with generating information. The undervaluing of information by private parties results in a symmetry of ignorance that may lead to “benefit failure” in the form of foregone social impact. This type of failure is induced by transaction, allocative, and production inefficiencies resulting from the symmetry of ignorance.

The chapter's premise is that understanding how something works requires studying it when it’s broken. The book is about labor contracts, i.e., formal or informal agreements between employers and employees. Sometimes employers breach these contracts by failing to pay their workers. Some workers (e.g., undocumented immigrants) are particularly vulnerable to “wage theft”. The timing of the parties' exchange of work and pay, and how it relates to wage theft, is discussed. Regulatory remedies to the wage-theft problem are studied, and it is shown that such regulations can lower workers’ average pay level by reducing the risk premium that compensates workers for wage-theft risk. Other remedies are given that involve no government intervention. Employers’ passive cuts to workers' real (as opposed to nominal) pay, via the erosive role of inflation, are discussed. Wage theft is offered as an example of a compensating differential (because it is an undesirable job attribute) before that topic is introduced. Themes from the wage-theft discussion recur throughout the book (e.g., in Chapter 10, on executive compensation, there is discussion of firms reneging on CEOs’ expected bonus payments).

The chapter's premise is that understanding how something works requires studying it when it’s broken. The book is about labor contracts, i.e., formal or informal agreements between employers and employees. Sometimes employers breach these contracts by failing to pay their workers. Some workers (e.g., undocumented immigrants) are particularly vulnerable to “wage theft”. The timing of the parties' exchange of work and pay, and how it relates to wage theft, is discussed. Regulatory remedies to the wage-theft problem are studied, and it is shown that such regulations can lower workers’ average pay level by reducing the risk premium that compensates workers for wage-theft risk. Other remedies are given that involve no government intervention. Employers’ passive cuts to workers' real (as opposed to nominal) pay, via the erosive role of inflation, are discussed. Wage theft is offered as an example of a compensating differential (because it is an undesirable job attribute) before that topic is introduced. Themes from the wage-theft discussion recur throughout the book (e.g., in Chapter 10, on executive compensation, there is discussion of firms reneging on CEOs’ expected bonus payments).