The Economics of Charity

To the economist, the concept of charity ought to be an aberration, at least when viewed through the lens of rational economics. For a profit-maximizing individual, charity will find no place in his calculations. What then, can explain the acts of giving - from the one rupee to the beggar at the traffic signal to more elaborate forms, ranging from supporting causes to even part some or all of your time to acts of giving. Clearly, the drivers are more than merely economic - and yet, little is known as to what motivates people to go out and part with their money, time or both without any clearly quantifiable economic returns. The Platonic view would be to attribute this quality to the 'goodness' or a sense of morality that is intrinsic to humans - but that is in the domain of philosophy, one area where economists fear to tread.

One immediate cause that comes up is Religion. Religions that were born out of socialist ideals have even taken the trouble of linking charity to social justice and in turn, justice as an essential objective of religion. And so there is the concept of 'tithe' in Christianity (which required individuals to contribute a tenth of their output - be it in cash or kind, to the church). Islam is equally formal about this and even empowers the state to collect such contributions and provide guidelines on spending them (http://www.alrisala.org/Articles/mailing_list/charity.html). The underlying message, of course, is that spiritual enlightenment is tied to charity - in other words, there is a potential upside (however vague that maybe) to charity. As the cynic would retort, would it remain charity any longer? Moreover, this fits in with the age-old role that religious establishments have played - that of custodians of an individual's path to spiritual enlightenment. However, this could easily be interpreted as a way for the individual to 'buy' his/her way to his/her spiritual goals. Which is probably why the more philosophical religions like Hinduism and Buddhism are not explicit about charity - they appear to club charity together with a larger basket of material and spiritual activities that drive a way of life leading up to Nirvana. Not that this approach is devoid of issues - for one, it is difficult, for the average person, to clearly identify what constitutes this way of life. It is precisely this ambiguity that created a 'market opportunity' for the Brahmins to step in and offer to be the guardians of an individual's spiritual roadmap. One rather unfortunate outcome of this is the seemingly paradoxical behaviour in India - lavish temples are built all the time in the midst of all the poverty and deprivation. One interesting area of research would be to assess the evolving trends in charity, as incomes grow.

One suspects, however, that in India, a paternalistic form of charity has always been more popular, given its very long history of caste based feudalism. Historically, the ruling, landowner and merchant castes used to indulge in charity - in its benevolent form, this was money doled out to people who worked for them, which only served to perpetuate the social hierarchy. In its more malevolent form, this would take the form of economic slavery, where the giver explicitly 'bought' out individuals (bonded labour is, in fact, still prevalent). In modern times, while economic growth has blurred the caste-driven social hierarchy, the increasing economic disparities have ensured that the opportunities for paternalistic giving have not gone away. Partly as a means to mitigate guilt and partly as a way of buying loyalty, the economic haves are not averse to paying for the maid's children education or the surgery that the driver's wife had to have. While it may give the warm afterglow that accompanies any act of giving, it also has the potential of buying loyalty. At least in this case, there is no doubt in the economics of charity.

And so the question remains - is charity driven purely by a sense of morality or is it the outcome of a sub-conscious (or deliberate) act of calculated cost/benefit analysis? That is a question for the philosopher to ponder.