Here’s a charity you might not be aware of: a math teacher in a Rochester, NY, public school is accepting donations to enable the class to conduct “experiments in calculus” as part of the math curriculum. The campaign goal is $247 and charitable donations have covered 46% of that amount so far. Only about $125 to go!

How do I know about this charity? Through the marketplace for charitable donations at DonorsChoose.org, a website that specializes in connecting donors with opportunities for charitable donations.

Columbia University held a “Hacking Philanthropy” mini-conference this past September (2007) and published the transcript of the discussions that took place there. “Hacking” is a term of respect: it refers to an effective, innovative and efficient solution to a challenging problem. “Hacking philanthropy” represents a new movement in which web technology is doing for the world of charitable donations what it has already done for many for-profit businesses: it is providing a marketplace where donors and charities communicate directly with each other.

Commentary on the conference pointed out how radical a departure a marketplace is from the more traditional large-charity-based pattern of giving. The degree of departure is illustrated by the fact that the top 25 charities (in terms of total annual donations received) in the Philanthropy 400 are the same today as they were 40 years ago with the exception of only two new entries (Habitat for Humanity and AmeriCares are the only ones to have entered the top 25 since 1965). Compare this stability to the top 25 for-profit companies in 1965 and today in the Forbes 100 list, where a third of today’s top 25 didn’t exist 40 years ago.

The Philanthropy 400 received $62.7 billion in donations in 2006, up 13% from the year before. This represents more than one-fourth of the total donations made that year. The Chronicle of Philanthropy charges a fee for the full listing of the top 400 but publishes highlights from the list. The top spot on the list for 2006 is the United Way with $4 billion in donations; the Salvation Army, AmeriCares, the American Red Cross, and the American Cancer Society round out the top five.

Why philanthropic markets are emerging now as an alternative to the big charities was debated at the Columbia conference. One theory is that, much as the 1937 article on the theory of the firm pointed to the importance of transaction costs in determining the need for an intermediary in for-profit economies, the same principle applies in philanthropy: as transactions (and connectivity) costs plunge due to decreased computing and communication costs, a marketplace connecting donors and recipients can replace firms (charities) that used to provide that service for a fee.

A donation of $25 to a large charity may not feel like much, but it represents 10% of the total campaign for a Rochester, NY, calculus class charity – that appeals to some donors. A philanthropic (virtual) marketplace makes that donation a real option for many givers. Emerging markets like DonorsChoose.org may become the new organizing principle for philanthropy much as free markets have shaped for-profit economic activity. Charles Best of DonorsChoose.org explains why he thinks the marketplace is a more effective philanthropic mechanism:

We push production to the front-end user in a way that makes them feel like they are partners with us. So that starts with frontline classroom teachers being the ones to come up with the micro solutions that will most help their students. And we actually see that these teachers come up with ideas that are far more innovative and creative than any top-down program would be. And we turn to those teachers to help screen and authenticate proposals submitted by teachers in other regions. We turn to the students who benefited to describe the impact of the project rather than having a staff person go in and record things….

One venture capitalist is already sold on this market.

There are two terrific antidotes for preventing a leader from morphing into an untouchable icon. Antidote one is schlubbing. Iconic leaders need to walk their dogs, take out their garbage, and wait in line once in awhile. The idea is not to breathe only the rarefied air because that kind of isolation skews perspective and lets the untouchable arrogance grow. A student shared a story with me about an interaction her friends had with the late Ken Lay and his wife, Linda. Just after all the news about the Enron fraud broke, Mr. Lay was on the cover of Time magazine as the very symbol of corporate greed. During the week that cover appeared, my students’ friends were on a flight with the Lays. The flight was awkward as the passengers realized who was with them there in first class. The passengers all avoided eye contact and conversation with the Lays. However, after the plane had landed, my student’s friends turned to Mrs. Lay and said, “This must be a very difficult time for you.” Mrs. Lay responded, “You have no idea. Just arranging this trip was awful. We had to fly COMMERCIAL!” A wee bit of perspective and the view from the retail level had long been lost on them.

The second antidote is a combination of self-deprecation and humor. When Herb Kelleher eased up on his role at Southwest Airlines, there were actually two officers, general counsel Jim Parker and executive vice president, Colleen Barrett, who took over Herb’s duties. Parker and Barrett acknowledged that it did indeed take two people to replace Herb, with Parker commenting, “"Well, Colleen's going to handle the smoking, and I'm going to handle the drinking." That two officers felt comfortable enough to use humor involving the founder of their company speaks volumes about Mr. Kelleher’s willingness to listen. Human, approachable, and, well, a schlub. Regal treatment means little or no dissent. Little or no dissent means the icon continues to push the envelope in the gradual descent into ethical and legal missteps.

In a recent Knowledge@W. P. Carey article, the findings of Hoskisson and Kim align with my priors. It would seem sheer folly to believe that major multinationals would locate in a region simply to reap the short run tax benefits. R&D investments by businesses pay off in an array of ways but the size of the ROI depends on the quality of the people available to conduct the analysis. And R&D, no doubt, is more dependent on proximity to quality technical workers than are regular manufacturing positions or even high tech manufacturing positions. The lesson for policymakers should be clear. Maintain a business climate conducive to attracting and retaining people with technical skills, and if you don’t, no amount of R&D tax incentives will substitute.

The article reminds me of a related thread. Many businesses may find advantages in locating R&D and related manufacturing facilities in close proximity. Pressures for reducing the cost of manufacturing invariably increase the pressure to locate in less developed countries. But there remain challenges of finding technical talent in the same location where manufacturing labor costs are low. When confronted with this challenge, Motorola responded by maintaining R&D facilities in Arizona and manufacturing in nearby Sonora Mexico. US border States are uniquely positioned to leverage this location advantage and should be devoting more energy to using this advantage in economic development initiatives.

It’s tough being an optimist for the next few quarters when it comes to forecasting the U.S. economy. But let me give it a shot.

U.S. GDP growth 1st Q 2007 was .6% -- not a pretty number. Naturally everyone pointed to the housing sector. Yet a significant part of the slowdown was the result of unexpected inventory adjustments and slower consumer spending. However, the revised 2nd Q growth rate was a booming 4.0%. Consequently growth over the first half of 2007 turned out to be an annualized 2.3%.

The most recent Blue Chip consensus forecast in September for overall growth in 2007 is 2.0%. In other words, these 50 top forecasters in consensus are anticipating growth over the second half of 2007 to be an unremarkable 1.7%. I disagree for a variety of reasons.

Before I go into why, keep two points in mind. First, since the sharp downturn in the U.S. economy in 1982, for the past 25 years the U.S. has experienced only two minor recessions (1991 and 2001). Real GDP growth averaged 3.3% from 1982 to 2002, and a number of economists today (including Ben Bernanke) refer to the post-1982 era as the Great Moderation. The U.S. economy is remarkably more stable than at any time in its history and rebounds more quickly from shocks.

Second, since 1987 the world economy has not experienced a recession. Think about that! Over this 20-year period worldwide real GDP growth has averaged a strong 3.7%. This bodes well for the U.S. economy since free trade is sweeping the world.

Coming back to the present, over the past year the housing problems have subtracted 1.0% from U.S. growth, whereas previously housing was adding 1.0%. This explains why growth today is closer to 2.0% than 4.0%. So where has been the strength of the U.S. economy?

Let’s start with the consumer. Nearly 70% of GDP is consumer spending. After a five-year run up, it finally slowed down in the 4th quarter of last year and the first quarter of this year. Then it rebounded in the 2nd quarter. Those predicting slow growth or recession believe that consumer spending will be tepid the next several quarters for a number of reasons: houses can no longer be used as ATM machines to withdraw cash for a host of purchases, rising energy costs will eat into discretionary income, and labor markets are about to go into the tank. Maybe.

Another factor contributing to the U.S. growth has been the sharp increase in exports due to the weakened dollar. Estimates are that net export growth has contributed 1.4% to real GDP growth over the past year.

A third area of strength has been corporate earnings. They grew at double-digit levels from 2003 through 2006 and contributed to the commercial building boom the past three years and to the strong employment numbers. Remarkably, in August the Bureau of Labor Statistics originally reported a loss of 4000 non-agricultural jobs, then revised it upward to over 80,000 new jobs!.

Finally, remember that the Federal Reserve has stepped forward with a big rate cut in September and will likely cut the federal funds rate again when it meets October 30-31. It recognizes that raising rates at this time in order to fight inflation will have negative consequences right now.

So, is it a time to worry? Again, maybe. The housing numbers just seem to get worse every week. Corporate profits are projected by the Blue Chip crowd to increase only 3.4% this year. American consumers are hesitant. Jobless claims are on the rise and the stock market has just gone through a terrible week.

But take heart. Never underestimate the American consumer, especially baby boomers. We love to spend and will continue to do so until we drop. Yes, the overall employment numbers are down, but jobs are still being created and this serves as the backbone of consumer spending. Even with the decline in housing prices, household net wealth is near record highs.

Also, the world economy remains strong, and with the weak dollar, U.S. export growth will continue to flourish. Prices of U.S. imports are edging up, helping to shrink the trade deficit.

The Fed will continue to cut rates as a credit-led recession seems a reasonable possibility. Leading American banks are establishing a fund to trade mortgage backed securities, thereby giving greater transparency to this market and reducing the chances for a credit freeze throughout the economy. And I expect all kinds of government action to protect a host of people from losing their homes due to the fall out of the sub-prime mess.

All things considered, I would not be surprised if growth in the 3rd quarter comes in at 3.0% and much the same in the 4th quarter. If so, overall growth this year will be in the 2.5% range rather than 2.0%. After the stock market crash of 1987, the recession of 1991, the Asian contagion – Russian bond default -- Long Term Capital Management collapse of 1997-98, the dot-com crash of 2000, the recession of 2001 with 9-11 thrown in, many forecasters predicted major recessions yet they never materialized. It is not a time to be Pollyanna. But it is also not a time to worry yourself to death over an impending plunge in the U.S.