In Project Syndicate, Robert Shiller writes on the “Gospel according to Gates.” The article is about the Carnegie idea that wealth concentration is justified by an evoluntionary argument that those who are best able to give money for charitable or social causes are those who have been best able to make money in the first place. Shilller wonders whether it really is the case that those who are good at accumulating money are also good at giving it away. 

Shiller’s question is, of course, interesting and hopefully some clever researcher might work it out. But it is also only part of the story. What these guys have done is not simply win some contest. Instead, they have exploited an opportunity to tax essentially the middle class and then to, as I understand it, pick projects for their later in life charitable causes that give to the abjectly poor. Rockerfeller did this to cure hook-worm in the South. The Gates Foundation is doing similar things for blindness and malaria in Africa.

Now, of course, we have another ‘tax -> public good’ institution and that is a democratically elected government. The main difference is input on both the tax and public good side by the people. Here is where some of these charitable things seem to differ on the public good end. On the face of it, they may be more redistributive than democractically elected governments. Under a voting model, those governments will take from the median voter to give to the median voter. However, the alternative is to take from the middle to give to the poor. Thus, there is a difference in terms of what might happen. Of course, charitable given by the rich can also be for the arts — hardly a redistributive type of public good.

In economics, we tend to think of public goods as some homogeneous lump that equally impacts on all. In reality, there are different sorts of public goods that will impact differentially on difference parts of society. Democracy seems to have a natural averaging effect. The alternative Carnegie style system is anything but that. Which one is better is hard to tell from afar. One thing is for sure: it is much easier to find moral justifications for capitalism when the rich are actively giving their money away as opposed to when they are not.