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Why the rich give money to charity

Some do it for tax breaks and public recognition. But happiness, rather than self-interest, is a prime motive.

By Correspondent / November 20, 2010

New York City Mayor Michael Bloomberg gestures as he speaks during the 2010 meeting of the Wall Street Journal CEO Council in Washington, November 16.

Jonathan Ernst/Reuters

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With billions of dollars swirling around a global charitable ecosystem, experts are trying to pinpoint, with scientific precision, why people give. Call it CSI: Charity.

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Take, for instance, this statement from New York City Mayor Michael Bloomberg. "We're put here on this earth to share and to help each other," he said during an August press conference. "And nothing I will ever do – or you or anybody else that's generous – will give you as much pleasure as you get when you look in the mirror just before you turn off the light and say, 'Hey, you know, I'm making a difference.' "

Are the roots of giving, in the end, personal satisfaction and happiness, in addition to the more pragmatic reasons of tax relief and recognition? If so, can charities figure out how to maximize the amount people donate?

Scholars, using the quantitative language of science, note a "diminishing margin of value" in the relationship between wealth and happiness. The more money a person has, the less power money has to influence happiness. While this simple truism is the stuff of pop songs and novels, classic economic theory often ignores the elusive concept of the pursuit of happiness.

"The idea is that, if you look at classic Econ 101, it says ... everyone just goes around doing things that make them have more stuff, because then they're happy," says Michal Ann Strahilevitz, a professor at Golden Gate University in San Francisco, who contributed to the book "The Science of Giving: Experimental Approaches to the Study of Charity." But, as it turns out, research shows that just trying to satisfy their own selfish needs doesn't actually make people happier.

Happiness, rather than self-interest, is far more important in the decision to make a purchase or to give to a charity. "If you've already eaten a big meal, eating more food doesn't make you happier; it gives you a stomach ache," says Ms. Strahilevitz. "So there's this sense that more is not always better. Some of our happiness is tied into making other people happy."

Social research finds a marked increase in happiness when people go from being poor to lower middle class. This jumps again when they go from lower middle class to middle class. But going from upper middle class to affluent doesn't do much for long-term happiness. That's where charities come in, knowing that getting the rich to part with their money can be central to their satisfaction – and the charities' self-interest. Right Mr. Mayor?

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