Why Do People Really Give to Charity?

In February I wrote a post positing that people give to charity as a way to satisfy their deeply held need to find meaning in life. The post is now the #2 result in Google for the phrase “why do people give to charity”. The #1 result is a publication of The Federal Reserve Bank of St Louis titled The Economics of Charitable Giving: What Gives? The paper discusses theories of giving labeled “Perfect Altruism”, “The Warm Glow”, and “Prestige”. The paper concludes:
Although some people may be altruistic when giving, economics tells us that the dominant motivation is the internal satisfaction that individuals derive from the act of giving itself. Individuals derive utility from giving much in the same way they obtain satisfaction from buying a new car or eating at a restaurant; especially when the number of donors is large, the social context of other people’s giving is overshadowed by the satisfaction of one’s own giving when considering how much to give.

The Merriam-Webster dictionary defines altruism as, “unselfish regard for or devotion to the welfare of others” or “behavior by an animal that is not beneficial to or may be harmful to itself but that benefits others of its species”. But I believe that only an incredibly narrow view of life assumes that helping others is somehow separate from helping ourselves. Humans are communal animals. Without “others” we find life intolerable. If a person sacrifices themselves for another, it is not simple “unselfish”, it is because they would be completely miserable if they chose to look the other way. Any parent knows that the happiness and health of their children is more important than their own needs. This isn’t “unselfish”, it is just a fact of life. It is hardwired into our DNA.

The narrative of philanthropy is dominated by the concept that people who give do so to get something for themselves. I cannot tell you how many references I’ve seen to people saying that Warren Buffett’s gift to the Gates Foundation was a way for him to exploit a loophole to avoid taxes. But I think that narrative is false. Humans are interconnected with each other whether they like it of not. The fact that helping others also helps us does not diminish the act of giving, it is the brilliant fact of life that makes community work.

21 Comments

  1. Jennifer Angelo says:

    I agree that when people give they do get something out of it themselves. And I have two questions to pose: 1.Do the get more (the feeling they are after) when they give more? OR 2. Do they get more (of that good feeling) depending on the percent they gave (meaning if they gave a greater percent of their gross income, to they get more of the feeling they are after than someone who gave less.) Just a thought.

  2. That’s a good question Jennifer. I would suggest they get more when they believe that the gift made a difference. “Impact” is a fancy word for “making a difference”. The fact that “doing the most good” results in “feeling the best”, is a perfect example of how altruism is not the opposite of selfishness. Doing good feels good. And that’s a good thing.

  3. Jewels says:

    This is amazing! I agree with you Sean in that doing good feels good and also that whenever you give something of yourself you want to know that it made a difference and that’s what it’s all about. Thanks for a great post!

  4. I used to give what I ‘could’ to a music ed organization that served my child. I felt I owed them for how they impacted her life. I felt my small donation was worth much less than the many hours I volunteered–although I didn’t feel like the organization was very appreciative of either. I did it to help the other children. When I went to work there, I gave from the same sense of obligation–and decided to leave when the director demanded my annual donation NOW.
    This lead me to form my own music ed organization. I cashed in and donated all of my savings to get us started. Before we started teaching, I had moments of doubt. But once we started teaching and now that I see the faces of the children almost daily, I know my money has impacted my community beyond my dreams. The feeling of worth that gives me is beyond price. I will continue to give every possible cent. And all intimately involved in this are also giving everything they can–if not money, then time, instruments, brain power. It’s almost addictive.
    I wonder if people like Bill Gates and Warren Buffet get that same feeling with their huge donations. Are they connected enough to the people impacted by their donations? For me, the overwhelming spur to give all was knowing that my money was going to make something happen that otherwise would not.

  5. Regarding Jenifer’s question, I have found that the perception of being close to the people you are helping is key to deriving satisfaction. For example, if you give millions to a huge global NGO, and you perceive that maybe you are helping people in the end but maybe you are just buying fuel for the NGO’s corporate jets, that is not good. On the other hand, if you give $50 per month to sponsor a single child, and perhaps you are able to correspond or even meet that child and her family… well then that is very satisfying.

    See this story for an example of how powerful this can be: http://lenovoblogs.com/heartofbusiness/?p=107

    Another thought… If I understand taxes correctly (and there is no reason to think that I do), it would be insane for somebody to give to charity to avoid taxes. The tax advantage of giving a billion dollars is roughly $350 million. I’m pretty sure Mr. Buffett would consider giving a billion to avoid 350 million in taxes to be a bad investment. There must be something else at work (or a tax law with which I am not familiar, as Mr. Buffett and I are in different brackets).

  6. Bill, the amount of taxes avoided can be quite large, but NEVER in excess of the amount of the gift. Great point.

    I wonder though if there is a way to reconcile the type of gift that gives you the most satisfaction and the gift that does the most good. $50 to a big international NGO might do more good than $50 to sponsor a child.

    Imagine if you only ate food that gave you the most immediate satisfaction, but didn’t pay attention to what food was best for you?

  7. For the record, I do only eat the foods that give me immediate satisfaction. :)

    I think donor efficiency is important, whether you’re giving $50 or $50 million, you want it to make a difference. If you have lots to give, the greatest satisfaction might come out of big investments in large NGO’s that might catalyze big societal transformation. But if you have $50 to give, it just feels like it all goes to overhead.

    Of course we also need the million $50 donors to give to the large NGO’s in order for them catalyze societal transformation too, so I don’t want to discourage that. But if we are talking about why people give and how they derive satisfaction, well, it’s more satisfying to me to know that one person is better off because of my $50. I’m not suggesting that’s the BEST use of my $50, just the most satisfying.

  8. I totally agree Bill. I guess what I’m saying is that it would be nice to create mechanisms by which the grants that made the most impact “felt” the best, even if your money went to overhead (which is a critically important budget item for a high performing nonprofit).

  9. You should do a posting on the importance of giving to support an NGO’s overhead. (Forgive me if you already have). I’m intimately involved with a nonprofit, the board of which is terrified of coming off as inefficient, so hasn’t hired anybody full time, hasn’t invested in marketing, etc. As a result it hasn’t been very effective (yet).

  10. I’ve written extensively on this issue. I agree with your point completely. I also wrote a column for the Financial Times about it that you’ll find here.

  11. teddyhcraig says:

    Warren Buffett’s gift to the Gates Foundation was a way for him to exploit a loophole to avoid taxes? What?

    You would think that if he merely wanted to avoid paying taxes, he would have found a way to do that without giving up the money, as I do not think he is a stupid person and I am sure he could have found a way if he wanted to.

    No, I do not believe that was the reason he gave the money.

  12. Jeremy Gregg says:

    As several previous comments establish, Buffet’s gift was obviously about more than tax loopholes: charitable deductions never offset the “loss” of funds given over to philanthropy. Even if the donor still technically controls them by putting them into a foundation, one would be hard-pressed to say that the tax benefits outweigh the economic costs of the donation.

    Buffet has talked extensively about the reason why he chose the Gates Foundation as the recipient of his wealth, but I think that we still know surprisingly little about what motivated the “charitable intent” that gave rise to the gift. Sean, do you have any links to Buffet’s comments on this?

    Jeremy Gregg, Editor
    The Raiser’s Razor
    http://theraiser.blogspot.com

  13. Jeremy, I can’t seem to find any appropriate articles like the ones you’re requesting. I can say that what I remember from reading about his gift at the time he made it was that 1) he said that he always intended to give it away (which given his very modest lifestyle is completely believable), 2) that his wife was a major influence on his interest in philanthropy, 3) he has always spoken out strongly against wealth inequality (ie. against high CEO compensation-he only makes $100,000, in favor of the estate tax, in favor of many politically liberal economic policies). So I would think that he is not motived by a specific cause, but by the idea that he “would die disgraced” (to use the words of Carnegie) if he didn’t give the money away.

  14. young staffer says:

    Fortune had a pretty extensive interview with Warren Buffet after he made his gift about the why and how of the decisions. You can read it here: http://money.cnn.com/magazines/fortune/fortune_archive/2006/07/10/8380864/index.htm.

    In terms of the debate about the role of tax incentives in giving, there exists a body of technical, econometric literature that tries to answer the question of precisely how much those tax incentives matter. You can read a pretty good summary of this work here: http://www.urban.org/publications/310256.html). In my opinion, there is fairly convincing evidence that tax deductions and incentives matter in terms of how big a gift (not in whether there is a gift or not) and to wealthier people (keep in mind that a whole group of people don’t owe income tax or don’t itemize and so don’t receive any tax benefit). The evidence beyond that is debatable.

    One last thought – and this is more to Sean’s initial point – when the quoted auhtors say, “economics tells us that the dominant motivation is the internal satisfaction that individuals derive,” they are making a claim they can’t support. Economics doesn’t “tell us” that or prove it at all.

    As an academic discipline, economics is a theory of how the world works that is BASED on the ASSUMPTION that people are selfish and that, when they are free to choose, they will always choose to allocate their scare resources (both time and money) in a way that maximizes their personal utility/happiness. It’s a view of the world that is predicated on the belief that the dominant motivation in all actions is internal satisfaction. The “warm glow” and “prestige” arguments are theories that evolve when you apply the assumption that humans are selfish by nature to charitable behavior. Economics cannot tell us or prove that these are “the dominant motivation” – it offers us no tools for getting inside a person’s head or heart.

    Personally, I think economic assumptions about human nature are largely accurate but also imperfect. Altruism is a puzzle economists can only solve by making it about the individual again, and I think that simplifies the reality of giving in a less than honest way. I think Sean’s description is a bit closer to the reality. But an economist who adheres to the discipline’s assumptions about human nature has little room for Sean’s understanding of giving.

  15. Great insight young staffer, sorry your comment got caught in the spam filter. I have a degree in economics, but hadn’t thought about the way the other article uses economics as proof of their point when it is the assumption that economics makes that they are in fact using as their proof. Well done!

  16. Basil Nkomo says:

    Very interesting subject… I know as human beings we can never take enough. But as humans can we ever give enough in our lifetimes? We are constantly taking/receiving, with regards to natural resources… water, land, vegetation, animals… basically the world in general… I personally give because, I know and understand how it feels and what it’s like not to ‘have’. I’m not generalizing; to me its all the same from giving my friend a brand new sports car, or donating money for a new water system in a poor community in Africa; its all the same. I know my friend, & how we talked bout owning sports cars when we where young… I know what not having water feels like from a holiday in Greece where I had to buy drinking water, so I let my imagination feel in what it’s like not to have water at all. (I don’t expect everyone to agree/understand my reason(s) and views on giving… Simply because you are not me you where not raised my mother & father in their house where my charity began)… However I agree with some of the posted comments with regards to the economical break down of giving… I don’t give to get internal satisfaction, happiness or to find meaning in life… Mostly its because I can… I’m not denying that I get a sense of satisfaction (internal or external) from giving. But if I’m feeling depressed, broke to my last pound and unsatisfied with my current state/being/life… I will not ‘give’ to get a sense or rush of internal/external satisfaction… the consequences will lead me back to square one, or even further back… Giving has ‘consequences’ … Most people need to appreciate that most of these consequences are good; However a few are bad. In a nut-shell… I don’t count as giving if it’s not with my heart and i try to avoid that as much as i can. Giving to me, is giving without expectation… of thank you, award, membership etc.

  17. Kevin Mojica says:

    Then there’s no such thing as “unselfishness”?

  18. Kevin,
    I think that humans are naturally “unselfish” in many respects. My point isn’t to suggest that we aren’t, but that the nature of “selfishness”, “unselfishness” is complex.

  19. Caerol says:

    Being charitable or generous, I, too, believe runs in our blood. And giving is a way of obtaining happiness that is different than just buying material things.

    Knowing that we help somebody gives us a sense of worth, purpose, and accomplishment. And it doesn’t have to be that big; we don’t have to become like Warren to give–Freerice allows us to give rice just by playing and learning at the same time.

    There are lots of ways to give but the question is do we have the time and a generous heart.

  20. jack says:

    So many people forget, “because God tells us to” when listing reasons for giving, sharing, helping. Not for salvation’s sake – we can’t do anything to earn that. But once one IS saved, God asks that we live our lives like Christ did – helping others. Is that now so offensive that we needed to remove it from our schools?

  21. Bill says:

    Rich peopleblabbing blah blah. Go tó a lócal
    Food bank And see The stressed familys
    Faces.will we make it ?how do i kow this?im
    A food bank user !3 autistic children And my
    Wife has grand mal seizures . Cant work beacuse
    10 dollars an hour is nőt Worth risking everything
    I care about! How só u think!i work she cooks
    Breakfast has a sezure burns The House down
    Everyone dies in The fire.And im looking for
    A bullit.sounds rough but reality sets in And
    The 10 dollár an hour just is nőt Worth it
    We get by im a healthy 40 year old i think.
    Dreams of owning my home are gone .só we are stuck ön
    Welfare. Só go tó úr lócal food bank see The stressed fa
    Familys faces .And Tell urself .straight tó The heart
    Of poverty .this is where The reál everyday struggle is !
    Nőt át The benz dealership .NeXT time u see a line up
    Imagine u át a food bAnk with your Family .rough senario
    Try doing it !Warren buffit bill Gates are tru heros .for a greater
    Good .if they could talk Steve Jobs intő donating iTunes tó world
    Wildlife federation .that would be world changing for sure .