The downside of giga-philanthropy

It’s a fine idea for unspeakably rich folks to give away some of their swag rather than creating a class of hereditarily unspeakably rich folks. But allowing the unspeakably rich to determine which public purposes will, and won’t, get attention isn’t exactly democratic, is it now?

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

23 thoughts on “The downside of giga-philanthropy”

  1. Yeah, more than $4 trillion dollars in spending this year decided by democratic means, but that still leaves trillions of dollars of private decisions. There's still plenty of running room for the revolution.

    At current pace, the gap will be eliminated in a dozen years.

  2. Well its not "democratic" if you define the term in such a way as to suggest that private property itself is undemocratic. There are folks who do just that of course, though they aren't exactly in the mainstream of US politics. Most Americans define "democracy" to mean primarily the equal distribution of political power (one man, one vote). Many people further define it to mean the equal distribution of social dignity. But to suggest that "democracy" neccessarily entail's society's right to determine the "proper" uses of a citizen's private property – well, you might not want to be a too-public support of the currently embattled president if that's your fancy.

    You can argue about tax rates all you want. But the fact is, the Bill Gateses of the World and the Warren Buffets of the world accumulated wealth at a time when Republican and Democratic Presidents alike, and when Republican and Democratic Congresses alike, had the chance to raise income tax rates and chose not to. Now that their income has been earned under the rules of the game in place at the time these individuals own private property. You might not like that they own so much of it. But a guy living under a bridge may not be especially keen on the fact that you own a house and he doesn't. But his claim on your spare bedroom isn't one that society takes very seriously.

    I myself tend to be conservative politically. So I find it frustrating that the dead John D. Rockefeller and the living George Soros are able to bankroll a bunch of leftist causes that have almost zero popular support to the point that the have a meaningful impact on public policy. But I'd never in a million years think that a proper role of the state would be to somehow step in and intervene to prevent this from happeing. Hell, as a pro-life citizen I don't especially like the fact that Mr. Buffet, who seems like a perfectly nice and well-intentioned man but who is as morally sophisticated as a 16 year old is planning to funnel tons of money toward population control programs. But it ain't my cash, and as long as the things he's funding remain legal I don't see any right that I have to get in his way.

    This backlash against the billionaire's pledge has been popping up on liberal blogs a lot lately. Of course, a few weeks ago our lefty friends were making a joyous commotion about the NYT Sunday Mag article about how Warren Buffet was funding a bunch of abortion training programs that the state, which after all has to answer to the tens of milliosn of people who consider themselves pro-life, has chosen to take a pass on. The street goes both aways.

    And BTW, the following bit from the linked article is painfully stupid:

    "Why not? Well, for starters, the "single person" in question is a billionaire, and thus always a man. That means almost by definition that the highest levels of charitable giving will overlook women, though we constitute more than a majority of the population."

    Ah yes, Melinda Gates and Suzie Buffet have had zero influence on the direction of charitable giving in the last 10 years. Socially awkward, commercially driven Bill Gates was passionate about third world disease prevention throughout his teenage years. And painfully reserved, midwestern-to-the-core Warren Buffet was way in to maternal healthcare and population control long before he met his (now deceased) wife. Give me a effing break.

  3. Tyler Cowen linked to this, from Spiegel Online, a couple weeks ago:,151

    >> Germany's super-rich have rejected an invitation by Bill Gates and Warren Buffett to join their 'Giving Pledge' to give away most of their fortune. The pledge has been criticized in Germany, with millionaires saying donations shouldn't replace duties that would be better carried out by the state.

  4. It's not exactly 'democratic' that you get to decide what profession to enter, or who to work for. Shall we have a vote to determine that, too? SD's right, so what? "Democratic" is better than "Authoritarian", (Or usually is, anyway.) but "free" is better still.

  5. "Giga-philanthropy" can be longer-sighted than the democratic process. It isn't always, but the Gates Foundation in particular is doing well on that score. I think this is probably a significant net benefit to the society as a whole; not that I wouldn't welcome alternatives to consider.

  6. I think someone should make a list of where the money is going from people who take the pledge and compare that to what the government spends money on.

    sd, what do you think of this relative to Warren Buffet's efforts?

  7. Diane Ravitch's new book, "The Life and Death of the Great American School System," has quite a lot of discussion on this topic. Turns out, allowing the unspeakably rich to determine how public education is managed isn't just not democratic, but also a surefire way to screw things up.

  8. Omigod! Am I mostly on Brett Bellmore's side of a debate again? The sauce must be slipping off the noodles!

    I agree with Mark's basic point–billionaires determining social priorities is simply undemocratic. But the practice is liberal (in the old Millian sense.) There is often a tension between liberalism and democracy. Although there are a few bright lines, this tension must often be resolved on a case-by-case basis. (I think I part ways with Brett Bellmore on this point; he likes bright lines supporting liberalism, with very little room for democracy.)

    How to resolve it for charity? I think I would go with the American status quo. As a Burkean, the status quo is always a useful tiebreaker. As a consequential matter, private charity is a mixed bag. There are way too many business school edifices, and I've had some sour experience with medical research following funders' priorities. (If rockstars were more charitable, the NIH would probably have a National Institute of Acne.) On the other hand, it is hard to imagine government doing things as imaginative as Bill Gates' or George Soros' work. (Indeed, it is hard to imagine government in the role of George Soros.) I also like heterarchy for its own sake, although some private charity reinforces local power structures.

    The best solution, in my opinion? Let Bill Gates continue do what he pleases with his after-tax money. But tax it quite a bit more. (Was that the sound of Brett blowing a gasket?) And keep the estate tax's encouragement of private charity over dynasty.

  9. Ohio Mom has her finger on the rub. For the country club set charity is a game of social climbing. Sure they want to do good things but mostly within the context of scratching the back of a friend on the board of that oh so worthy charity. I know this from my time on the board of one of those oh so worthy charities. The truth is that it is massively ineficient for a bunch of amatures to set up and run a non-profit just because they think it should be done. Many "charities" are really tax deductable scams so the rich can get their pet recreational passtime on the cheap. If the government can't regulate the egg industry how well do you think they watch every 501c3?

    Besides the ineffectivness of letting random decisions by the mega-rich direct the allocation of resources the more basic truth is that removing excess wealth from private hands is a good unto itself. Our current financial disaster is the direct product of too much loose change rattling around in too few pockets. Better to fund the government so Grama gets a livable SS income than have Daddy War Bucks fund a charity hospital to treat her hypothermia and poisoning from eating chinese cat food. Let Daddy War Bucks keep his mind on his business trying to gat back those buck he paid in taxes or if he needs a deduction he can hire somebody and contribute to keeping the wheels turning in the economy. That is what built the middle class in america. If it was good enogh for Ike it should be good enough for Daddy War Bucks and the GOPers. I know the rich want everything but every time they get it the wheels fall off the economy.

  10. To the extent that the giga-philanthropists are picking up on health issues, this is turning over a substantial chunk of public health policy to private individuals. I'm not about to try to argue that we in the US have done anything like an adequate job with public health policy: the facts are clear, and we haven't done it. But leaving things to whim of a single person necessarily caters to their biases.

    Think about what Jenny McCarthy would do if she were wealthy enough to be among this crowd. She'd likely dump a large chunk of change into autism-vaccination links. That's crap science at this point in time. We need a lot more basic research on the immune system and its controls before we can hope to sort out why some people seem to be more vulnerable to vaccine side effects than others.

  11. It’s not exactly ‘democratic’ that you get to decide what profession to enter, or who to work for. Shall we have a vote to determine that, too?

    From the guy who thinks he should be allowed to vote on who others can marry. Brett Bellmore, ladies and gentlemen!

  12. Joe S's solution is precisely my solution:

    Let Bill Gates continue do what he pleases with his after-tax money. But tax it quite a bit more. (Was that the sound of Brett blowing a gasket?) And keep the estate tax’s encouragement of private charity over dynasty.

    At no point did I suggest that people should have their charity dictated by the public. What I did suggest was that the reverse was also true: the public interest shouldn't be determined by the privately charitable.

  13. Kelly Kleinman wrote:

    "Let Bill Gates continue do what he pleases with his after-tax money. But tax it quite a bit more… And keep the estate tax’s encouragement of private charity over dynasty."

    On a practical level, what exactly should be changed about tax policy? The fact is, most mega-rich people are rich not because they're earned cash income but because they own assets (especially businesses) that have appreciated in value.

    Bill Gates starts a software company. Thirty years later he still owns a big chunk of it and its worth billions of dollars. Thus he's a billionaire. But he doesn't realize any income until he sells off Microsoft stock (i.e. he takes a cpautal gain). You can't tax him "more" on the accumulation of his billions of dollars in wealth because we don't tax accumulation of wealth per se at all.

    You simply can't tax him on a yearly basis on the appreciation in his stock if he doesn't sell it. Not unless you're prepared for the government to write him a big welfare check in years when the stock price goes down. If you taxed people on unrealized capital gain but didn't compensate them for unrealized capital losses then you would tank the economy (Hell – the entire global economic system) like nothing else has in the history of the modern world. You would immediately make every capital asset in the world worth much, much less.

    The only equitable thing you can do is to tax Bill Gates when he sells the stock on the capital gain he's realized. But in this case he's never selling the stock – he's donating billions of dollars worth directly to his charitable foundation.

    FWIW, one issue on which I take leave of my conservative brethren and agree whole-heartedly with most liberals is that I think the estate tax should be incredibly high (with charitable donations exempted). But this whole Billionaires' pledge thing is precisely about the super-rich NOT passing on wealth to their (undeserving) kin. I mean really – even if I bought any of the arguments in the original linked piece (and I don;t) I'd still have to say "is this really what you folks want to spend your time bitching about? Really rich people giving their money away to charity? That's a big 'problem' that needs to be solved?" Come on.

  14. Of course it's a big problem; Private charity undermines government social programs. 😉

  15. Brett:

    You're right. Government simply has to start building more business schools. 😉


    You're quite right that getting rid of recognition treatment would require declaring a loss every taxable period the value of the property declined. And what, precisely, is wrong with that?

    Calling a tax loss a "welfare check" is not an argument. In today's tax code, if you have negative income, you don't pay taxes. You can even get deferred tax losses applicable to future income. If this is a welfare check, there are a lot of businesses getting a lot of welfare checks even today.

    The only normative argument I know of for recognition treatment treatment of appreciating property is that some property is illiquid. This objection becomes weaker with every new financial instrument that is developed. It is particularly weak for the stock of public corporations, such as Microsoft.

  16. Mark:

    Is there anything over which you DON'T support government control? You keep drifting more and more over the line to an outright authoritarian. What will you do, having ceded almost every facet of American life outside the bedroom to government, when we get another particularly odious right-wing government?

    Your continued drift towards the government running seemingly everything is truly disturbing.

  17. I think it's worth noting that most philanthropy/charity goes to the organizations nearest and dearest to the donor. So most people's donations go to their own churches; for the rich, a lot of donations go to their alma maters (how do you think Havard built up such a huge endowment?). The rich also like giving to the art museums, symphonies, etc., that provide them with leisure and social opportunities. Not that there's anything wrong with that, I'm glad my local cultural institutions have patrons that keep them going. Rich people also like putting their names on things.

    A good case in point is the Jewish group home down the block from me. Yes, rich Jewish donors paid in large part for the building, they like having their name up for all to see. But they don't pay for the upkeep or living expenses. That falls mainly to our local Board of Developmental Disabilities, Social Security and Medicaid. These agencies have standardized and transparent procedures for their funding; it's not done on whims. If these agencies disappeared, there would be nothing to take their places. If that's "authoritarian,' I'll take it.

  18. I don't really understand this post. So far as I can tell, this isn't a case of "allowing the unspeakably rich to determine which public purposes will, and won’t, get attention". They don't seem to be hampering government choices, obstructing government funding, or in any way interfering with what government wants to do in terms of public health/charity. They choose to focus a lot of money in one EXTRA area that they don't think governments are doing a good enough job in. What is bad about that?

  19. Sebastian, I'm going to guess that the government(s)(let's count state and local in here) can't do what they used to/might like to because they are collecting much less money than they used to since the ultra rich are paying much less in

    taxes than they used to. (There's lots all over the internet on the reduction in what the rich are contributing).

    P.S. If you don't think the ultra rich obstruct/interfer with government funding, try this:

    If that link doesn't work, trying googling "estate tax + eighteen families," you'll get the same information.

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