Should excess wealth go to measured impact, cultural patronage, or back into markets?
Otto H. KahnvsAdam Smith
I grew up poor, and the public library's CD collection changed my life. Now, I'm retired, with more money than I need, and I want to give back. My interest is music. I could fund a world-class music education program in underserved schools, or endow a concert hall, or support emerging composers. It wouldn't save as many lives as giving to some NGO that hands out malaria nets, but it might create beauty that lasts for centuries. My wife says the money is mine, that I earned it through the market, and the market is where it should go back—invest in companies solving problems. Create jobs. She thinks philanthropy itself is the wrong approach. What's the best use of wealth that exceeds any person's needs?
"The financier who merely knows how to make money is a poor financier indeed—culture elevates civilization"
The "effective altruism" crowd would reduce philanthropy to a spreadsheet calculation, as if human flourishing could be measured in lives saved per dollar. But what kind of lives? Lives devoid of beauty, of music, of the arts that make existence more than mere survival? You discovered the transformative power of music in a public library. How many children will never discover what you discovered because no one funds the institutions that preserve and transmit culture? Malaria nets save lives today—essential work. But the Medicis' patronage shaped civilization for five centuries. I funded the Metropolitan Opera not because it was "effective" by narrow measures but because great art elevates the human spirit in ways that cannot be quantified. Your music education program might produce the next great composer whose work brings meaning to millions. Fund both if you can. But do not let the measurers shame you out of supporting what you know transformed your own life.
"The market, guided by self-interest, allocates resources better than any individual judgment—even well-intentioned"
Your wife makes the strongest argument, though perhaps not for the reasons she states. Both you and the effective altruists share an assumption: that you know better than the market where resources should go. But the market is an information-processing system more sophisticated than any individual mind. When you invest in companies solving problems, you allow millions of consumers to vote with their choices on what problems most need solving. When you donate to causes you personally favor—whether malaria nets or concert halls—you substitute your judgment for theirs. I do not say philanthropy is wrong. I say it is less efficient than you imagine. The wealth you accumulated came from creating value others voluntarily paid for. Reinvesting that wealth in productive enterprise continues the same process. Fund your music program if it brings you joy—but do not imagine you are serving society better than you would by funding the next company that creates jobs and products people want.
58 votes total