September 10, 2013

Horse 1541 - Charity Sucks Because People Do

Every year the Australian Taxation Office publishes all sorts of really neat statistics (okay, I'm strange, I know) to do with Tax Returns that were lodged in the previous year. We get to find out some really cool things like (okay, I already admitted that I'm sad; strange little man, I know) peoples' wages, the ratio of income derived from sources like dividends and interest as well as the amount declared as charitable donations.

I had a ramble through the figures for 2011/12 and found a pretty sorry looking tale. At least as far as the Australian Taxation Office is concerned, we're just not terribly charitable as a nation at all, despite whatever lies we like to tell ourselves.
During 2011/12, as a nation Australia gave a paltry 0.5% of GDP away as charitable donations; that's pretty poor (now who's sad and strange?). When you consider that we spent 0.7% of GDP on "snack food" for the same period, it's downright scandalous. It seems that we would rather stuff chips down our faces than help those in worse circumstances than ourselves.
Forget the "lucky country", if anything we're the "stingey country".

So then, being disappointed by this "lucky country, run by second-rate people who share its luck", I decided to see how we fare against other countries and their rates of generosity; sadly, they don't tend to do much better either.
The UK's HM Revenue & Customs Office puts British giving at 0.77% of their GDP. The United States appeared to be way more generous with the figures produced by their Internal Revenue Service at 2.1% of GDP but they also included 1.15% of GDP which is tithes and offerings to church organisations, which are tax deductible. Still, at 0.95% of GDP, Americans are still more generous than the people of Australia.
I found that the Canadian Revenue website was hard to navigate and Germany and France's were simply impossible because I don't know enough German or French but by that stage, I'd lost heart and given up the search anyway.

I suppose that an argument could be made that people who make charitable donations aren't reporting them because of some weird piety or something but Occam's Razor (the principle that the simplest explanation is usually the correct one) leads me to believe that as Adam Smith said in his 1776 book "The Wealth Of Nations" that people act according to their own rational self-interest and self-love (though I'm not terribly sure about it being rational most of the time).
It makes sense for instance that because of that Self-interest, people are more likely to spend that next dollar on themselves (me included) then give it away to charity.

Usually what people are likely to do with the next dollar they earn is described by their marginal propensity to consume or save; it's reasonably easy to calculate that ratio. However, when it comes to giving to charity, if there is such a thing as a marginal propensity to be charitable, it's going to be far harder to calculate.
Probably because there's not actually a direct benefit between the dollar given to charity and the benefit conferred on the person being charitable other than a sense of well-being and/or piety, charitable giving tends to be far more erratic.
Then there's the rather annoying fact that some people are just more generous by nature anyway. Granted that there is a general tendency for people statistically to be less generous as a percentage as their incomes increase but I don't know if that's more to do with the effect of increasing the size of the denominator in calculations or if richer people actually are generally more stingey.
There's a third problem in that people are way way way more generous after they've died than they ever are when they're alive. The realisation that you genuinely can't take it with you, does result in very big portions of some people's estates being given away to charity.

Thinking about all of this, I wondered if there's some sort of way to induce people to be more generous because if America is anything to go by, there must be at least a grain of hope there. What could be done to improve the system? Is there some sort of solution via the market? How do you induce people to be more charitable anyway?
Currently in Australia there is a tax deduction for charitable donations. What if there was some sort of bonus loading say of 25% on that? What if for donations to medical research, there was a specific deduction in one's Medicare Levy?

I will say this though, precisely because charity is such a poor mechanism, I'd prefer government intervention to solve some of societies problems. I'm reminded of the difference for instance of the impact of governments providing schooling in the 1900s as opposed to charities doing it in the 1800s; similar sorts of stories can be drawn from the history of governments providing hospitals as well.
What this does say though is that by force of taxation, society finds a better way to address issues than by leaving it up to the presumed generosity of people.

Don't get me wrong here, I'm not saying that charities aren't extremely valuable and that the work that they do is somehow bad, I am suggesting something even more fundamental than that; something darker about human nature itself.
I think I've come to the general conclusion that as a mechanism, charity sucks because people do.

No comments: