---
title: The Missing Feedback Loop
number: 1
summary: When donors pay for services used by others, they may struggle to judge quality. Feedback and evaluation can help close that information gap.
evidence: documented
node: feedback
upstream: coordination
flip: Results travel back to givers as clearly as prices travel through a market, and the people served can send a signal that moves money.
sources:
  - title: The Role of Nonprofit Enterprise
    publisher: Henry B. Hansmann, Yale Law Journal 89(5)
    year: 1980
    url: https://yalelawjournal.org/article/the-role-of-nonprofit-enterprise
  - title: Feedback Labs
    publisher: Feedback Labs
    url: https://feedbacklabs.org/
    note: A network working to make listening to the people served the norm in aid and philanthropy.
---

## What it looks like

Consider a donor paying for a clinic they do not use. The people served may know about its accessibility and quality, while the donor relies on reports. If their experience and the measured outcomes do not reach funding decisions, a feedback loop is missing. This example illustrates a mechanism; it does not measure how often it occurs.

## Why it happens

In many purchases, the buyer can use and assess the service. In donor-funded services, the payer and the person served can be different people. The legal scholar Henry Hansmann named the general version of this “contract failure”: the people paying can’t easily see what they are paying for. Charitology’s hypothesis is that this gap can make visible signals, such as stories or cost ratios, more influential than harder-to-observe results.

Charitology treats this as a central mechanism in its Diagnosis. The claim that it causes the other conditions remains a hypothesis.

## No one is to blame

The question is how reporting, listening and funding rules work together. It is about the design of those rules, not anyone’s character.

## What we don’t know yet

How much money would move if results reached donors as clearly as prices reach shoppers? And what mechanism could let the people served send a signal that moves money? Those are [Open Problem 5, Closing the Feedback Loop](/open-problems/closing-the-feedback-loop/), and [Open Problem 4, the Counterfactual Problem](/open-problems/the-counterfactual-problem/).