Edited by Gordon E. Shockley, Peter M. Frank and Roger R. Stough
Chapter 5: The Political Economy of the Philanthropic Enterprise
Peter J. Boettke and Christopher J. Coyne INTRODUCTION Warren Buﬀet recently pledged to donate the majority of his estimated $44 billion estate to the Bill and Melinda Gates Foundation. The pledge, valued at $37 billion, is the largest charitable donation ever. To put the magnitude of this donation in context, compare Buﬀet’s pledged contribution to two well-known American philanthropists, John D. Rockefeller and Andrew Carnegie. Rockefeller and Carnegie’s total philanthropy was $7.6 billion and $44.1 billion respectively.1 Buﬀet’s donation makes the Gates Foundation the largest charitable foundation in American and Europe with total assets valued at $60 billion.2 This highlights an increasing trend in private giving by the wealthy in the United States.3 In 2000, Bankers Trust conducted a study of 112 wealthy households to examine the notion of ‘wealth with responsibility’. The underlying motivation was to obtain a measure of how much the wealthy were giving to society in terms of charitable donations. Ninety percent of respondents stated that they have established an estate plan, which leaves 16 percent of their assets to charities, 47 percent to their heirs, and 37 percent goes to government in the form of taxation. The most signiﬁcant ﬁnding, for the purposes of what we wish to discuss in this chapter, is that the Bankers Trust study reports that 66 percent of respondents indicated that they would give more if they had better information on the eﬀectiveness of their charitable donations. However, measuring the eﬀectiveness of charitable giving...
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