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Economics and Conspicuous Charity


My most recent Forbes piece explains how to use the economic way of thinking to ruin Christmas. In this light, I found Steven Landsburg’s take on Yoram Bauman’s claim in the New York Times that economics increases Grinchiness especially interesting. I haven’t read Bauman’s underlying paper, but in his NYT summary he points out that economics majors are less likely to give money to two activist groups (they were given the option during registration for classes).

Willingness to donate to left-of-center advocacy organizations is hardly a robust test of the treatment effect of economics on public-spiritedness for a couple of reasons. To continue some of Landsburg’s examples, it shouldn’t be surprising that economics education reduces a student’s faith in government action in much the same way that med school would reduce a student’s faith in the power of healing crystals. Yes, there are difficult cases to be made for markets, but jumping from those cases (public goods, externalities, incomplete information, etc.) to “we need government intervention to fix it” is a mistake because it doesn’t carry the economic analysis far enough. Sadly, Bauman’s op-ed contributes to the popular view of economics that comes from Gordon Gekko’s “greed is good” speech in Wall Street. For a useful corrective, here’s Michael Munger in last week’s EconTalk.

I think there’s a subtler point to be made, though, and one I address briefly in my Forbes article. I don’t think we can make a correct inference about the treatment effect of a person’s benevolence by looking at how taking economics classes affects his or her giving to advocacy organizations and charities. Economics might make some people more selfish in the socially questionable sense, but it also makes people wiser about how they use their resources. To use just one example from this semester, my students (presumably) learned that raising money to buy people out of slavery might actually make the problem of slavery worse.

Paradoxically, economics can make people less selfish while giving the appearance of increased selfishness. Particularly as I have read Robin Hanson’s blog, I have come to believe more and more that most “charity” is conspicuous: the primary motive is to signal that we care about poor people, and the secondary consequences are just that: secondary. To paraphrase Thomas Sowell, a lot of charitable endeavors are not about actually helping people so much as they are about showing that we are on the side of the angels. For some people who immerse themselves in the economic way of thinking, the Dismal Science helps them look past their (selfish? greedy?) fixation on others’ approval and shows them that a dollar might alleviate more human suffering if it is put in the bank rather than a donation box. I’ll leave an explanation of this as an exercise for the interested reader.

I plan to write a lot more about this in 2012. For now, here’s a bit of advice on better charity that I wrote a few years ago, largely drawing on arguments made by Tyler Cowen in his excellent Discover Your Inner Economist.

Look for more over the next few weeks and months. Good intentions aren’t the same thing as good results, and I plan to discuss a few ways to strengthen those links.


Contact Art Carden

Art Carden is assistant professor of economics, Brock School of Business, Samford University, Birmingham, Alabama.