Who is More Generous, Continued

But why do the poor give more (relative to their income), my sister asks.  I don’t really have enough background in the subject to give a definitive answer, but I’m willing to engage in a little bit of uninformed speculation!

First, the data for the McClatchy chart seems to have come from the Bureau of Labor Statistics (BLS) here, specifically, this set of tables.  I’m not sure which rows McClatchy uses to indicate giving, but I’m guessing it is “Cash contributions” and not “Gifts of goods and services”.  BLS defines “cash contributions” thusly:

Cash contributions includes cash contributed to persons or organizations outside the consumer unit, including alimony and child support payments; care of students away from home; and contributions to religious, educational, charitable, or political organizations.

I would love to see a breakdown of this statistic’s components.  Unfortunately, BLS doesn’t give one in the file I link above (but shout out if you have one!).

Here is the take-home point.  Economic theory assumes that people have decreasing marginal utility in their consumption – and yes, economists include “charitable givings” somewhere in that “consumption” – just as BLS does!  The “utility” you get from giving to charity is the general good feeling you have about yourself – for living up to your personal codes of humanitarianism and validating your innate sense of your humanity – or perhaps the expected reward that may follow your demonstration of altruism.  But for each contribution you make, the utility of the next contribution is diminished.  You’ve already stroked your ego by giving once – the emotional pay-off of a second donation cannot be as great.  The cost, however, will be just as high.

Contributions to religious organizations (which I suspect, but can’t know for sure, make up a substantial percentage of BLS’s “cash contributions”) give us a great example.  Many people belong to churches, and they donate or pay membership dues to those churches.  But how many richer people join a second church just because they can afford it?  Few, I would imagine.  What would be the point?  Involvement in a second church community would mostly just eat into your time with the first one.  And I’ve never heard anyone say that going to heaven becomes more likely with multiple church memberships.  This part of the utility of church dues – going to heaven – has a steeply decreasing marginal utility: you only go to heaven once (and as the first church will be happy to tell you, the second church is not going to get you there)!

Thus all charitable giving.  The marginial utility of giving decreases more quickly than greater wealth decreases the opportunity costs of further giving.

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