Arthur Brooks, President of the American Enterprise Institute, gave a fascinating talk today at Brigham Young University about the effects of charitable giving. He started out with a quote from John D. Rockefeller who seemed to think that charitable giving was the source of his financial success, rather than a function of it. In trying to disprove Rockefeller's hypothesis with data, Brooks explained that he found more and more evidence in support of it.
Brooks first showed the correlation between charitable giving and increases in standard of living. He then went on to propose (although not explain how) that he did rigorous statistical tests on panel data showing that the causality runs primarily from charitable giving to standard of living increases.
He then went on to detail the channel through which this effect could be transmitted. Human subject experiments show that people who give have lower levels of stress hormones in their brains and are more likely to be elected as leaders, among other results. These two results, in turn, are highly correlated with productivity and success.
Some of his statistics were the following: Americans donate 3 times more to charity per capita than the French, 7 times more than Germans, and 13 times more than Italians. These rankings were also robust when controlling for income and taxes. In addition, the state of Utah gives two times more to charity per capita than the next closest state in the United States.
Brooks' final conclusion was that America's prosperity is derived in large part from our culture of giving. With all the talk of multipliers, Brooks estimated a U.S. charitable giving multiplier of 3.75. That is, an increase of $1 billion in U.S. charitable giving would result in a GDP increase of $3.75 billion. That is a much bigger multiplier than the level of somewhere between 0 and 2 estimated in the fiscal multiplier literature. I haven't looked at any of Brooks' papers or read his book, Who Really Cares, America's Charity Divide: Who Gives, Who Doesn't, and Why it Really Matters, but the subject was very provocative and interesting.
He then went on to detail the channel through which this effect could be transmitted. Human subject experiments show that people who give have lower levels of stress hormones in their brains and are more likely to be elected as leaders, among other results. These two results, in turn, are highly correlated with productivity and success.
Some of his statistics were the following: Americans donate 3 times more to charity per capita than the French, 7 times more than Germans, and 13 times more than Italians. These rankings were also robust when controlling for income and taxes. In addition, the state of Utah gives two times more to charity per capita than the next closest state in the United States.
Brooks' final conclusion was that America's prosperity is derived in large part from our culture of giving. With all the talk of multipliers, Brooks estimated a U.S. charitable giving multiplier of 3.75. That is, an increase of $1 billion in U.S. charitable giving would result in a GDP increase of $3.75 billion. That is a much bigger multiplier than the level of somewhere between 0 and 2 estimated in the fiscal multiplier literature. I haven't looked at any of Brooks' papers or read his book, Who Really Cares, America's Charity Divide: Who Gives, Who Doesn't, and Why it Really Matters, but the subject was very provocative and interesting.
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