Oct 27, 2006

Generosity Depends on Perspective

by Laura Starita

Financial Times columnist Tim Harford asked some good questions last week in an Op-Ed he wrote for Slate. In it, he argues that the 1.85 percent of GDP that was given away in 2005 as private sector charitable contributions is selfishly low – this in spite of the fact that Americans were the most generous private givers in the world. Furthermore, Harford argues, Americans don’t give so they can do good; they only give to feel good.

There is a lot of validity to Harford’s analysis. It is true that most donors do not maximize the contribution they can comfortably make based on their income and assets. But take a look at private sector contributions to developing countries, as compared to what the government gives them: according to the Hudson Institute’s Index of Global Philanthropy, private sector contributions accounted for 72 percent of the total foreign assistance to developing nations. Looked at another way, the United Nations suggests that rich nations allocate .7 percent of GDP to assist developing nations; according to the OECD in 2004 the United States gave less than .2 percent of GDP. Certainly we could all do better, but considering private individuals gave three times as much as the government, there is little point in condemning the (comparatively) generous.

Elsewhere in the article, Harford suggests that private giving is not altruistic, but usually grounded in personal motivations. He cites as examples the success of raffles or other fund-raising activities in which the giver gets something concrete in return for his contribution. Yet this seems to say less about Americans’ inherent selfishness and more about the nature of traditional giving. Most charitable contributions seem to fall into the budget black hole of the recipient organization, with no clear feedback to the giver on what the money was used for and what impact it made. The success of raffles or retail ventures thus seems grounded in the psychological value of seeing a concrete result from the donation, even if it is an irrelevant one.

Harford is right to question the amount and nature of philanthropic giving – these are things that should be questioned. But his analysis suggests donors shouldn’t give at all, which is the wrong conclusion.

Slate: The Economic Case Against Charity

Hudson Institute: Index of Global Philanthropy