While my post on Friday about the “stickiness” of Kiva.org was generally well received, some people felt that any attempt to make an opportunity attractive is a sort of slick salesmanship. Personally, I think that good presentation does not belittle authentic, high impact work. Instead, I think authentic, high impact work deserves to be presented well.
But interestingly, reader Tony Wang questioned my post from a different angle. Tony actually wondered if it would really be a good thing if an additional $150 billion a year was given to charity! At first glance, it seems like a given that more money to charity is a good thing. But Tony is a really smart guy and his comment challenges us to think.
While I’ve been blogging off and on at Blueprint about this question of “What Capital When?”, one thing that’s struck me is how little we know about the Big Picture. There is a lot of talk about the benefits of giving and the benefits of social investing, and some discussion of when to use specific instruments at a micro level, but no one has stepped up to the plate to articulate how much grantmaking is ideal at the macro level.
Perhaps it’s a bit academic of me, but I find this really problematic for my inner economist. If we’re going to talk about increasing charitable giving, we have to recognize the decrease in available financial capital in the traditional markets that corresponds with an increase in charitable giving. When you ask “What if giving went to 4%?” I wonder whether that’s actually an improvement and what sort of empirical evidence we could find for advocating giving as a higher percentage of GDP (or at the very least, some sort of theory). And without the kind of nuanced analysis that would lead us to some sort of ideal percentage, it seems one could argue any arbitrary number – why not 10%? 20%? 100%?
By taking increased giving to a logical extreme (would it be good if people gave 100% of income to charity? Clearly not.) Tony demonstrates that we can’t assume that an increase in giving is a good thing. However, I disagree that additional giving requires a decrease in capital available to traditional markets. Most giving is treated as part of people spending habits, not investing habits. We can see in the data that giving fluctuations with GDP and income, not the level of financial markets. So it seems to me that increased giving results in less capital available for consumption, not investment. However, as impact investing and other blended value approaches to investing take hold, Tony’s point resonates even more.
The percent of income that should go to charity is generally viewed as a moral question. But Tony points out that it is also an economic optimization problem.
From a moral perspective, more giving is generally always seen as a good thing. For instance, Bolder Givers commit to giving 50% of their income to charity. But if we take a rationalistic approach, can you make an argument for any specific level of giving? If not, what information might be needed to advance a compelling argument for any specific level?