Sunday, August 15, 2004
A more philanthropic world?
A bunch of us had a back-and-forth about philanthropy in response to an earlier post made by Vinay. In that context, I figured this special carried by the Economist on increasing philanthropic activities around the world (and especially in the United States, where it has crossed 2% of GDP) might be of interest to several of you.
Measuring philanthropy is difficult, but two things are clear. Private giving is small in all rich countries, relative to state spending. And American generosity outstrips that of most other countries, especially in money terms, and particularly if gifts to religious bodies are included. Excluding donations to religious congregations (an important point where America is concerned), giving varied in developed countries in the second half of the 1990s from around 1% of GDP in the United States (and 1.3% in Israel, where much generosity comes from abroad) to less than 0.1% in Italy, where cash donations account for the same proportion of GDP as they do in India.
Of course, money is not everything.Around 60% of private giving takes the form of volunteering, the value of which he measures by ascribing to it the average wage of a community worker. Volunteering turns out to be particularly high in the Netherlands, Sweden and other Scandinavian countries, as well as in a few developing countries.
Why do people give money and time? On the face of it, the idea of working to earn money, only to give it away is an odd one. Economists, typically baffled by selflessness, have tended to hunt for hidden self-interest in apparent altruism. One recent study† found the reverse: people gave more willingly if they could cloak their altruism in apparent self-interest. When asked to give to a highly worthy cause (to help emotionally disturbed children), the donation rate trebled if donors were offered a product in exchange for their gift. But when asked to give to a mildly worthy cause (helping a team to buy sports equipment), the offer of a present made no difference.
The piece also goes into some detail on how tax structures affect giving.
Taxes affect giving in two ways. High taxes reduce people's incomes and wealth, leaving them with less money to give away. But generous tax exemptions allow people to give more with less loss of income. They cut the price of giving. Some recent studies, though, suggest that government may give up a great deal in tax revenue to stimulate fairly small amounts of giving. And the relationship between giving and taxation can have perverse effects. For example, America's charities have lobbied hard against scrapping estates tax: they fear people will cut legacies to charities out of their wills if there is no longer any tax advantage in making them.
Tax incentives probably do not cause people to give in the first place, but they may well encourage them to give more generously. They may also have a bigger impact on the wealthy, who are particularly tax-sensitive, than on ordinary mortals. The charities that attract the wealthy, such as universities and opera houses, have more to gain from tax incentives than those the poor favour, such as churches.
Measuring philanthropy is difficult, but two things are clear. Private giving is small in all rich countries, relative to state spending. And American generosity outstrips that of most other countries, especially in money terms, and particularly if gifts to religious bodies are included. Excluding donations to religious congregations (an important point where America is concerned), giving varied in developed countries in the second half of the 1990s from around 1% of GDP in the United States (and 1.3% in Israel, where much generosity comes from abroad) to less than 0.1% in Italy, where cash donations account for the same proportion of GDP as they do in India.
Of course, money is not everything.Around 60% of private giving takes the form of volunteering, the value of which he measures by ascribing to it the average wage of a community worker. Volunteering turns out to be particularly high in the Netherlands, Sweden and other Scandinavian countries, as well as in a few developing countries.
Why do people give money and time? On the face of it, the idea of working to earn money, only to give it away is an odd one. Economists, typically baffled by selflessness, have tended to hunt for hidden self-interest in apparent altruism. One recent study† found the reverse: people gave more willingly if they could cloak their altruism in apparent self-interest. When asked to give to a highly worthy cause (to help emotionally disturbed children), the donation rate trebled if donors were offered a product in exchange for their gift. But when asked to give to a mildly worthy cause (helping a team to buy sports equipment), the offer of a present made no difference.
The piece also goes into some detail on how tax structures affect giving.
Taxes affect giving in two ways. High taxes reduce people's incomes and wealth, leaving them with less money to give away. But generous tax exemptions allow people to give more with less loss of income. They cut the price of giving. Some recent studies, though, suggest that government may give up a great deal in tax revenue to stimulate fairly small amounts of giving. And the relationship between giving and taxation can have perverse effects. For example, America's charities have lobbied hard against scrapping estates tax: they fear people will cut legacies to charities out of their wills if there is no longer any tax advantage in making them.
Tax incentives probably do not cause people to give in the first place, but they may well encourage them to give more generously. They may also have a bigger impact on the wealthy, who are particularly tax-sensitive, than on ordinary mortals. The charities that attract the wealthy, such as universities and opera houses, have more to gain from tax incentives than those the poor favour, such as churches.
