Tyler Cowen's article “Investing in Good Deeds Without Checking the Prospectus” (New York Times, June 15) raised excellent points about about the seemingly irrational or uninformed behavior of donors to charities. Cowen cited research indicating that "donors often tolerate high administrative costs, fail to monitor charities and do not insist on measurable results — the opposite of how they act when they invest in the stock market."

Without trying to justify donors’ behavior, there may be some good explanations. Over half of all charitable gifts go to religious organizations and schools – typically, the donors’ own congregations and their or their children's schools – and most other gifts go to organizations with whom donors have had some experience or contact. In most cases, donors likely feel they have enough information about the organizations to make a decision. We might find most people who buy stock have a similar level of knowledge about the companies in which they invest. Finally, even the most financially sophisticated donors apparently make large gifts without trying to quantify the effectiveness of the charities they support – as reported in “Why Measure?,” in the Stanford Social Innovation Review in Summer 2004, a study of major donors of over $50,000 found that information about performance measures did not influence their decisions to give, and in fact, they were skeptical about the feasibility of getting reliability information on outcomes.

Assessing the value of a charitable organization’s work is difficult because it involves so many intangibles. The for-profit world is supported by a multi-billion dollar industry dedicated to providing information to investors, a universe of outside analysts dedicated to calculating value, and yet there is no shortage of bad investment decisions and wasted resources. The nonprofit world has no equivalent analysis infrastructure, unfortunately, and the burden of proving value falls on each nonprofit organization itself, where the need to measure performance must compete with other pressing needs for a share of inadequate resources.

One final key point: In contrast to grant making by individuals, institutional funders such as private foundations, corporations and government agencies, typically require much more information and paperwork from grantees than the size of their grant should require.