Think tanks are a vital part of the democratic process as well as of our political system and our social landscape. They conduct research and analysis on public policy issues and their work can have a major impact on government decisions and the shaping of public policy.
But how do think tanks make money?
There are six main revenue streams that think tanks tap into: government contracts, public funds/grants, private donations, endowments, consulting services and publications.
In this article, we will explore each of these revenue streams in detail.
How Do Think Tanks Make Money?
Think tanks need money for their operations, just like any other organization, and they tap into one or more of the following sources of revenue:
- Government Contracts
- Public funds / Grants
- Private donations
- Endowments
- Consulting services
- Memberships / Publications
1. Government Contracts
Government Contracts are the most common source of revenue for think tanks. This is because think tanks are able to offer their expertise and analysis to help government agencies make informed decisions.
One of the reasons government agencies outsource to think tanks is because they are usually more nimble and can provide more independent insights and recommendations than can government employees.
Also, many think tanks will employ former government officials and staff members who have first-hand knowledge of how the government works, which can be invaluable to decision-makers.
According to the American Conservative, the top 50 think tanks in the United States received $1 Billion from the US government and defense contractors.
2. Public funds / Grants
Sometimes, think tanks also have access to public funds or grants. A government agency will often award a grant to a think tank to conduct research on a specific issue.
In such a case, the think tank is usually required to provide the government agency with a report on their findings which can also be made available in the public domain.
The advantage of a grant (as opposed to a contract) is that it allows the think tank to maintain its independence, as opposed to working directly for the government.
3. Private donations
In addition to contracts and grants, think tanks also rely on private donations from individuals, foundations, and corporations.
This is a significant source of revenue for think tanks, as it allows them to maintain their independence from government agencies and other institutions.
However, for many think tanks, this independence has come under question in recent years as they have become increasingly reliant on donations from a small number of wealthy donors who tend to have political agendas of their own.
To make matters more complicated, there has been a renewed attention on the funding of think tanks by foreign governments, which has led to allegations of influence peddling.
In an attempt to gain trust through transparency, many think tanks now publicly list their donors. For example, in the UK the IPPR – The Institute for Public Policy Research lists its donors on its website.
4. Endowments
Another source of revenue for think tanks comes from endowments. An endowment is a sum of money that is given to an institution with the understanding that it will be used for a specific purpose.
Often, donors will give money to a think tank with the expectation that their donation will be used to fund research on a particular issue.
The advantage of this arrangement is that it allows the think tank to conduct its work without having to rely on government funding or private donations.
It is also a more recurring source of revenue, as the money is given with the expectation that it will be used over a period of time.
5. Consulting services
Companies and other organizations will sometimes hire think tanks to provide consulting services. This can take many forms, but often it involves the think tank conducting research and providing recommendations on a particular issue.
This is a significant source of revenue for think tanks, as it allows them to utilize their expertise to solve problems for companies and organizations.
It also provides an opportunity for the think tank to build relationships with potential donors and partners.
6. Memberships / Publications
Many think tanks also generate revenue through memberships and publications. Individuals or organizations can become members of a think tank, which usually entitles them to access certain benefits, such as discounted rates for events or access to exclusive research.
Think tanks will also often publish reports and papers, which are usually available for purchase by the general public.
In some cases, think tanks will also offer online subscriptions to their research, which allows members to access all of their publications.
Summary
In this article we tackled the question – How do Think Tanks make money? – and reviewed 6 of the most common sources of revenue that think tanks tap into.
The most common of these are private donations and endowments. Corporations and rich individuals will sometimes set up their own think tanks or finance existing think tanks, often with the goal of influencing public policy.
Think tanks also bid for government contracts or grants. This allows them to offer their services and expertise directly to governments who use this input to make informed public policy decisions.
Think tanks also supplement their income by offering consulting services. After all, most think tanks have plenty of experts in different fields whose advice is often sought out by companies and other organizations.
And finally, think tanks sell publications to the general public or make them available to fee-paying members.
