June 4, 1998 | Read Time: 2 minutes
Did Scrooge have it right? Is giving to charity an irrational act?
Forbes contributing editor Dan Seligman advances that incendiary notion in the magazine’s June 1 issue, arguing that “an emerging case” exists against charitable giving.
Rational people maximize their investment returns, Mr. Seligman writes. Why then do they give money away to non-profit groups?
Mr. Seligman’s answer is that it’s not altruism but egotism that motivates many givers. “People gain satisfaction from charitable giving,” he asserts. “It makes them feel good, and they tend to consume more of this feeling as their income rises.”
Yet, he argues, if the feel-good test is the one that people apply to their giving decisions, then charity is “profoundly irrational” for penny-pinching souls who feel better when giving less.
Among those in that category, Mr. Seligman suggests, is Vice President Gore, who gave only $353 to charity last year — about half the average for all U.S. donors.
Mr. Seligman cites the work of University of Rochester economist Steven Landsburg in exploring yet another dimension of his “irrationality” argument. Mr. Landsburg has noted that Americans tend to parcel out their beneficence among a variety of causes rather than concentrating their gifts on a single one.
“The efficient giver would not spread his charitable budget over many different causes,” Mr. Seligman writes. “But that assumes the donor’s main concern is the stated object of his beneficence. If the main concern is, instead, the donor’s own feeling of well-being, then it does make sense to diversify.”
Mr. Seligman also asks why people should give voluntarily to programs that aid the poor when they already contribute involuntarily through the taxes they pay. And he questions whether charitable giving does more for humanity than do profit-seeking investments.
That last question may be “the most subversive of all,” Mr. Seligman admits.
Unlike for-profit companies that have to compete in the marketplace, “non-profits . . . are free to spend billions on dopey programs to raise self-esteem or subsidize bad plays,” he asserts. “Yes, yes, the private sector sells cigarettes, and the non-profits include clearly meritorious public libraries.
“Still, it is difficult to explain why you should expect a higher happiness payoff on money served up to charities than on money put into the stock market.”
Mr. Seligman’s conclusion? “Maybe Al Gore is onto something. Even if he can’t admit it.”
