This is the time of the year we find our mailboxes full of pleas from charities and nonprofit organizations asking us to give to their causes. And many of us open our checkbooks or use our credit cards to send money to strangers whom we trust to spend it as promised.
If you think about it, the whole thing appears to be counterintuitive. First, we part with our money; then we do something that helps strangers; and finally, we show trust to people about whom we know next to nothing. How does this happen? It happens because altruism and cooperation (and the trust that goes with it) are part of our nature and what makes us successful as a species. Feeling good by doing good is a condition embedded in our nature. There is plenty of related evidence to support it. A good example is an experiment in which the participants were given various amounts of money and were told to keep it or share it with others. No other factor mattered more for contentment than the act of sharing the money with others. The interesting thing about natural altruism is that it doesn’t have to be reciprocal. That’s why we are willing to help strangers when most likely there is no chance of reciprocity.
So, we give in various ways. We volunteer to build houses for Habitat for Humanity (as former president Jimmy Carter did) or to mentor underprivileged youths for Big Brother and Big Sister, or work in soup kitchens or food banks or other community projects. Or we choose the easy way out and give money. I looked it up and found that by the percentage of the population that gives to philanthropy, Indonesia is at the top with over 80% of its people doing some giving. But as percentage of the GDP no country comes close to the rate of giving by Americans.
Some ethicists argue that for giving to be truly moral it ought to be purely altruistic and expect nothing in return. This call for high-minded righteousness is though unnecessary. At least for evolution and natural selection, all that matters is that altruism and cooperation work for a species even with some impurity of selflessness, like gaining social status. After all, even religions reserve a place in heaven (not a small incentive) for the Good Samaritans among us.
This is the kind of giving that happens at its most basic and human level. But then we also have the mega-giving from corporations, foundations and wealthy people. And here things get more complicated and deserve a debate. Although on a first level all giving benefits somebody or some cause, it matters how it is done. It matters from an ethical point of view and from a public policy perspective.
First, from a public policy standpoint, giving can be entangled with public policy toward solving social needs and how government chooses to support private giving. Here is an example of a public policy choice. A British organization for homeless people found that for each pound spent on alleviating homelessness there was a total social return on investment of 4.37 pounds. But then couldn’t we reap this benefit through public spending? That is, when we observe a lot of giving, especially through organized philanthropy, this could be evidence a state does not do its part to fund some worthy causes. This may explain why international data show a negative correlation between public spending and giving. States like Finland, France and Norway with higher percentage of GDP dedicated to public spending rank lower in giving by citizens.
We also have the question of whether government should subsidize philanthropy, usually done through tax breaks. Interestingly, the robber-barons of the Gilded Age gave most of their wealth away before tax deductibility of donations was introduced in 1917. Today, tax breaks for giving are part of the tools set for tax avoidance. So, Robert Reich, a professor and author on labor and inequality raises the question “why should governments subsidize philanthropy by the rich?” One could claim that all giving is good and thus deserves public support. But social priorities may diverge from those big donors choose to support. Thus, if we want to promote education, should tax subsidies be used for gifts to Ivy League universities or for funding community colleges? Or if we want to promote culture, should tax dollars be used for splendid renovations of opera houses instead of supporting arts classes and cultural experiences in underprivilege areas? High public profile philanthropy is also a means to earn reputation and status and thus stand apart. Should public funds (that is, tax subsidies) abate this pursuit? None of these questions aims at giving itself; they rather question as to what the proper role of government ought to be.
The ethics of giving concerns the legitimacy of the means that make it possible. Anand Giridharadas, a critic of philanthropy that derives from corporate wealth, argues that it is in essence an ex-post rectification (albeit insufficient) of social problems caused by subpar wages, degradation of the environment, and the off-shoring of business operations. Sometimes the funds used for giving may be derived from within the corporation. That’s the case of CEOs who use corporate funds for high profile philanthropy that primarily burnishes their own reputation. This type of moral hazard problem, that is, doing philanthropy with someone else’s money, was after all behind Milton Friedman’s admonition that the CEO’s (or the firm’s) job is to maximize profits and then let its owners spend it according to their wishes. And then we have the case of Sam Bankman-Fried who wanted to do good with his clients’ money.
The young owner of the bankrupt cryptocurrency exchange FTX has presented himself as an idealistic apostle of effective altruism. I read that effective altruism is a movement spread by some philosophy professors which is premised on the use of reason and data to address long-term problems that will benefit many more people in the future than the just eight billion now alive. To that end, effective altruism advises Its adherents to pursue lucrative careers that generate lots of wealth in order to fund these long-term causes. In the Bankman-Fried case though, the dedication to this mission led to means that proved terribly damaging to his present clients.
So, when we look at the net value of giving to society, we better look at it as part of the whole picture. I would think that this evaluation should take into consideration the social return of giving as well as the tax revenues lost plus any negative externalities (side effects) caused in the accumulation of the resources that fund the giving.
All in all, giving, as a natural expression of altruism, is part of the good side of our nature. Nonetheless, as with so many other aspects of human behavior, it can raise questions, and sometimes its pursuit can cause more harm than good. But for now, let’s give to the causes that inspire us and make us feel good. Happy Holidays!
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