Philanthropy in the changing world: a changing attitude to giving?

Philanthropy in the changing world: a changing attitude to giving?

Vladim í r Hy á nek, Marie Hladk á , Masaryk University, Faculty of Economics and Administration, Centre for Nonprofit Sector Research

This is a journal article developed under, and as an outcome of, Project No. 402/09/0941 „ Revision of nonprofit sector theories as a source of public policy towards the nonprofit sector “ supported by the Czech Science Foundation.

Abstract

The topic of philanthropy has been receiving attention internationally for several decades. Like other areas of non-profit studies, charitable giving and volunteering are attracting more and more attention from researchers in a wide variety of disciplines, including economics. Even though philanthropy tends to be considered a sociological theme rather than an economic one, it poses a number of questions that challenge economists as well. Among others we chose the following:

How can economists contribute to the theories related to philanthropy?

Can we consider voluntary giving a demonstration of generosity rather than a market-based solution?

Firstly, we intend to examine the terms that are used in the theory of public economics and to use them to examine the issues of philanthropy. They are as follows: the Samaritan’s Dilemma; the Prisoner’s Dilemma; or the Free-rider Problem, which we consider to be interesting and inspiring (Stone 2008).

Next, we will try to answer the second question by means of sociological theory. The economists who investigate philanthropy are repeatedly faced with the obvious fact that it does not involve any buying and/or selling; it is not a marketplace operation. We have to look for, and identify, social values of donors and volunteers rather than economic values because the economists are not fully able to explain empathy, altruism and helpful behaviour using traditional economic principles (Rutherford 2008).

The theoretical frame should be filled by relevant empirical data. There is, however, a lack of both theoretical and empirical work in this area in the Czech Republic. At the moment, we don’t have relevant information about trends or people’s motivations. We can only speculate people’s behaviour from some ad hoc research or a one-off survey that was made eighteen years ago.

For this reason, we intend to carry out a new representative survey in the Czech Republic. Before starting the large scale survey, we decided to do smaller pre-research probes into people’s attitudes towards altruism, philanthropy and giving. A small questionnaire of fifteen questions testing people’s attitudes towards giving was used in the survey, which was implemented in two waves with the help of students from the Department of Public Economics of Masaryk University.

Even though our sample was not fully representative, the answers from respondents that we collected have generated interesting findings about people’s views and attitudes. The first wave of data was collected between February and April 2009; the second wave between February and April 2010.

After that, we will able to answer questions from the survey, such as: How do people value giving in contemporary society? Do they think that fund-raising organisations are apparent? Who should support charities - individuals or government? Do people trust non-profit organisations? Do people consider giving a moral obligation?

Contacts:

Ing. Vladimír Hyánek, Ph.D. Ing. Marie Hladká

Masaryk University, Faculty of Economics and Administration Department of Public Economics

Lipová 41a, 602 00 Brno, Czech Republic and

Centre for Nonprofit Sector Research,

Vinařská 3, 603 00 Brno, Czech Republic

Introduction

Philanthropy may often be perceived as a sociological rather than an economic topic. There are many perspectives, however, regarding how to approach it, which presents a challenge to economists. Economists have long been prone to prefer a rational scheme of a man, i.e. they viewed a man as somebody who calculates profits and losses of their future behaviour and makes decisions based on the benefit of immediate profit maximization. Shaped by this view, economists are sometimes not able to understand what constitutes and motivates altruistic behaviour in humans. The answer might be found in the so called reciprocal altruism (Frič 2001) according to which an altruist acts without demanding a monetary reward but expects to receive a different kind of reward instead (prestige, personal safety, increased qualifications, etc.)

We may, therefore, suppose that everybody who has the well-being of others in mind always gains something, and awareness of these “gains“ may serve as a motivator for their altruism. If this is the case, why aren’t we all altrusts if altruistic activities bring benefits? The economist could say that profits made on altruism are rather long-term and uncertain. Profits also tend to be uncertain because the influence of a single person on others may be small and insignificant. In other words, altruistic activities start to make more sense only if undertaken by a bigger number of people which leads us to perceive the reality as suggested by the theory of games. Although the profits are uncertain, it is still necessary for an individual to overcome their mistrust to others who might deceive them, i.e. act in an non-altruistic way. Here we refer to the well-known prisoner’s dilemma and its modification in which only mutual trust and cooperation lead to profit maximization and collective catastrophe avoidance (Chuman 1965).

Charity, by its definition, brings benefits to the community as a whole, however, it may or may not benefit the individual (giver). So why should an individual act responsibly when he can pass this “duty“ onto others? Why could not it be him who cheats? Here we again refer to the free rider dilemma (e.g. Olson, 1977). The scope of altruism narrows in a bigger group where the individual feels less responsible. The bigger the group the smaller the altruism performed by its individual members. It is, however, necessary for every community or society to practise charity which means that charity and altruistic behaviour are deemed socially desirable. It is, of course, impossible to create a law which would impose a duty to act altruistically. Informal rules have this force, however. People note with interest the actions and activities of others. They informally control the behaviour (patterns) in their surroundings thus creating the norms of good behaviour which become an important source of the economists altruism.

According to Schaad (1998) some people find it easy to identify with giving and they respond swiftly when confronted with suffering of others. Sympathy with the suffering, feeling of personal satisfaction over joy and happiness of others or love for the neighbour, all represent the deepest roots of philanthropy. By choosing not to behave like “rational idiots“, individuals give the society as a whole a chance to actually behave rationally (Frič 2001).

Definition of altruism

The unresolved question of why people give gifts led to the creation of an economic theory. It is generally assumed that to fully grasp the idea of altruism we must first understand human behaviour. This seems to be the reason why philanthropy is examined and researched by other branches of science. Behaviour, including acts of charity, is very often linked with self- interest (egoism). Altruistic behaviour is explained as egoistical behaviour, the practice of which leads to profit through cooperation with others. So what does the concept of altruism entail? How should it be modelled in theory and what does it say to us? The concept of altruism is rendered well by Rutherford (2008) who explains it as “ a concern for others that is not linked to a concern for oneself. This is an internal state, and is not directly observable. “

While reading this definition we are confronted with an important question. Is it possible to examine and observe altruism from evident and examinable altruistic behaviour? Probably not, as there are distinct differences between observable actions and the inner state and motives of the giver. A wealthy philanthropist may, for instance, give a great amount of money to charity without being genuinely interested in those whom money is provided for. Here “charity“ may play a role of a communication tool with the public. If we label donation or observable altruistic behaviour as generosity, we will come against a huge gap between this act of generosity and inner altruistic state of mind.

Altruism¹ is a modern label used to refer to attitudes and acts performed to benefit other person². Altruism carries in itself a moral principle or motivation which, at least to a certain extent, compels us to give preference to the needs of others over our own needs, to make sacrifices beneficial for others, i.e. the society. Altruism may be defined as any real behaviour aimed at the benefit of others. Sociologists, psychologists as well as economists seek to explain the motivation for such behaviour. In our effort to find out the reasons for such actions we may view altruism from a few different perspectives. Some donors benefit from their giving (even economically) which is classified as altruistic behaviour by some theories but as thoroughly selfish by others. The descriptions below detail two fundamentally altruistic tendencies established by E.O. Wilson, one of the founders of sociobiology, were also used by Hlaváček (1999).

Soft-core altruism

One of the elementary questions pertinent to examination of altruistic behaviour is whether it is possible for the altruist to gain nothing for his actions. This question is repeatedly answered by saying that we can help somebody or give them gifts without demanding a reward which does not mean that we automatically do not link our behaviour with a specific type of reward. We may be getting a feeling of personal satisfaction, prestige or a possibility to network. Some proponents of this theory even doubt the very existence of altruism and claim that as every act is rewarded, it is not possible to talk about altruism. Frič (2001) includes in his book a fitting quotation of M. Giseline, who said: “Take the altruist’s clothes off and you will find a hypocrite!“

Hard-core altruism

The hard-core altruism (also called pure altruism) refers to situations when we act thoroughly selflessly without the slightest hope of reward. Such behaviour which results from “irrational“ motivation and is unselfish occurs very rarely in society. Both the above mentioned requirements (complete selflessness and expectations of zero profits) are easy to challenge, however. Firstly, as emotional and rational motivations function at the same time, it is virtually impossible for a human being to separate emotions and rationale. Therefore, it is virtually impossible to ever act selflessly. Secondly, even if we were able to act purely emotionally, i.e. selflessly, it would still be impossible to avoid all the form of profits and expectations of them. In other words, we always act selfishly and expect the so called “indirect“ profits. Frič points out to us a paradoxical finding according to which a prospect of a reward acts as a deterrent to a real altruist.

Over time, biologists³ came up with an interesting discovery saying that behaviour of an individual only makes sense if viewed from a genealogical perspective. In biology altruism is defined as a form of behaviour which attempts to reduce its own biological fitness and increase the biological fitness of the other being. Pure altruism is therefore not advantageous for the organism itself but if it supports other family members and therefore its own genes than it in effect increases its own inclusive fitness. Thus it may increase the chances of survival of an altruistic group as opposed to the non-altruistic group.

Approaches to philanthropy according to Arrow

The theory of altruism says that charitable behaviour may mean short-term sacrifice but longterm profits for a giver. In some cases, financial or other-type reward may even bring about repercussions as illustrated in the following passage.

The debate on what role altruism plays in economic behaviour was launched in 1970. Titmuss (1970) wrote an article where the subject matter is explained using the example of blood donation. Titmuss describes the process of continually deteriorating blood donated following the introduction of monetary reward for donors. If blood donation had been an altruistic deed before that, it quickly became a means of obtaining money for the unqualified and poor. The donor checks were found to be inadequate and the quality blood started to be replaced by the “lower quality“ one. As the altruistic givers did not want to “sell“ their blood, their contributions were becoming scarcer whereas the number of paid donors started to rise (Phelps 1975).

Titmuss claimed that the introduction of payment for donors would result in the decreased amount and quality of the donated blood. Economists disagreed at the time. Kenneth Arrow, for instance, used the new utility theory (Phelps 1975) and determined three motives which may cause altruistic behaviour. These are:

Social contract - the benefit of an individual does not depend on others but cooperative behaviour tends to be effective Pure altruism - the benefit of an individual is directly affected by the benefit of the other individual.

Impure altruism - the benefit of an individual is determined by the extent of help to the other person.

Charity as a social contract

In the 1970’s, charitable behaviour was not directly linked with altruism. The prevailing theories mostly focused on self-interest as the main driving force. This theory views charitable activities as a consequence of the social contract and a tool to overcome some of the failures. Here we refer mainly to governmental and market failures. Governmental failures include situations where the profit making sector is unable to effectively provide some public goods and where the state seeks to rectify the situation through state interventions. There are, however, many constraints consequently leading to state failures.

[...]

¹ The term altruism was introduced by a French sociologist August Comte. The word has been derived from the Latin word alter (the other) and is supposed to be the term of the opposite meaning to egoism.

² http:// cs.wikipedia.org/wiki/Altruism

³ http://cs.wikipedia.org/wiki/Altruism