The Great “Charity” Storm

Around 1800 in England and Russia, the three main do-gooder activities were medicine, school, and alms (= food/shelter for the weak, such as the old or crippled). Today the three spending categories of medicine, school, and alms make up ~40% of US GDP, a far larger fraction than in 1800. Why the vast increase?

My explanation: we long ago evolved strong feelings of respect for these activities, but modern context changes have allowed out-of-equilibrium exploitation of such feelings. Details:

1. Foragers who personally taught kids, cared for sick folks, and gave food/shelter to weak folks, credibly signaled their loyalty to allies, at least when such needy were allies. Weak group selection helped encourage such aid as ways to signal loyalty, in place of other possible loyalty signals. Humans eventually evolved deep feelings of respect for such activities.

2. Farmers inherited such feelings, and thus also gave social credit to those who donated money instead of time to promote these three classic charities. Rich farmer elites felt this more strongly, as they had more forager style attitudes. As such donations were less observable than forager help, farmer donors had weaker incentives to help. Also, the indirection often resulted in money being spend badly.

3. Industry era folk also inherited such feelings, strengthened by wealth. Voters today get social credit for supporting tax-funded activities that look similar to the three classic charities: medicine, school, alms — even though one can fake such signals without having the loyalty that such signals are seen as showing. That is, votes supporting spending taxes on medicine, school and alms are interpreted as showing loyal “caring” for one’s community, even though most of this spending is on typical voters, not those in special need, and even though one person’s vote doesn’t change outcomes. And even if a vote did change outcomes, paying via taxes doesn’t sacrifice personal income relative to local rivals, making this signal mostly “cheap talk.” Indirection continues to hurt effectiveness. All this creates a perfect storm of vast voter support for tax-funded medicine, school, and alms. So we can all feel fantastic about how caring we all are. Yeah us.

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  • http://thecandidefund.wordpress.com/ dirk

    My theory is that we have over-inflated the value of a human life in recent times. Artists such as Tolstoy himself played a major role in this process. In the 19th century novelists wrote works detailing the private lives of individuals as had never been done before. Since then, movies, TV and journalism have also put the life of the individual under close, constant scrutiny. “The masses” don’t exist anymore. Hunger everywhere is represented by the face of a single hungry child. A politician at town hall will explain his position on medical care by telling a harrowing anecdote about one individual woman who couldn’t afford the medicine she required to live, always naming her by name.

    Tolstoy’s Count Pierre didn’t know his serfs personally. They had no individual identities to him. For him, a token gesture of goodwill to these faceless peasants was enough to satisfy his charitable instincts.

    But the modern world, with its ever-present cameras, has made human tragedy more tragic than it ever was before. Suddenly, after all these centuries of progress, we are in a full blown “health care crisis” in the richest country in the world. Why? Everyone has a face, or potentially has one, or has another face used as a proxy for their own. So our world is more like an extended family and we feel morally compelled to help our extended family more than we would some nameless, faceless serfs.

  • http://omniorthogonal.blogspot.com mtraven

    Yes, that’s definitely the problem with this country, too much caring. We are collapsing under the weight of our boundless generosity. Perhaps that’s why this is the only country in the developed world that allows people to die from lack of health insurance.

  • Mustard Tiger

    If I can quibble for a moment, the ~40% figure probably doesn’t paint as clear a picture of the increasing share of social resources devoted to charity as it could; insofar as programs like Medicare and Social Security function more as glorified insurance plans than alms. Which isn’t to say that they’re regressive, obviously, but certainly their payout structures tend to be less progressive on a dollar-for-dollar basis than the sort of 19th century “do-gooder activities” referenced above.

  • Douglas Knight

    The distinction between medicine and alms is probably an Enlightenment development (“the deserving poor”). Is there any evidence for pre-Enlightenment school-as-charity? Universal schooling is a quite recent idea. Was taking apprentices seen as noble?

    Religion is and always has been a standard charity. I’m not sure how well it fits this forager story, but I don’t understand HG religion.

  • http://entitledtoanopinion.wordpress.com TGGP

    We have secret ballots. How can citizen voters (leaving aside elected representatives) effectively signal and get credit under such circumstances?

    • http://thecandidefund.wordpress.com/ dirk

      Keep in mind that most signaling is unconscious, therefore even when our thoughts go unheard we often feel as if they have been.

      Also, many voters like to shout at the top of their lungs who and what they are voting for. It’s rare to know someone well without knowing their politics.

      • http://thecandidefund.wordpress.com/ dirk

        Let me reverse that formula: many of our thoughts broadcast themselves even when we think we have kept them secret.

  • Max

    TGGP: the act of voting is mostly signalling, even with secret ballot: http://www.econ.upf.edu/docs/seminars/funk.pdf

    So perhaps voting for these initiatives lets voters more plausibly describe how they care to others through later communications. It is easier to claim “Oh yes, I voted for Sorenson because the other guys have run the Health Service into the ground” if that is actually true.

  • Marcus

    come on, resources are more scarce, and self-grown food is far less culturally valued. you’re making a complicated explanation full of previously stated theories *none* of which is solidly grounded in facts. how about simple and obvious explanations: no one has a friggin plot of land to grow food (this is not a value judgement).

    does someone really have to blog as prolifically as you in order to compete on these theories? are you writing future common wisdom? is this on purpose?

    i mean, seriously, you have good insights, but some of this stuff just defies any sort of reasonable assumption of intellectual honesty on your part.

    call me a troll, whatever, does someone really need to write a blog post or two a day to point to all the holes in your leaps of logic?

  • Marcus

    what’s really disturbing is you don’t appear to draw distinct lines to accurate categorizations of your work:

    as in Utilitarianism.

    your thesis seems to be, “let the AIs and markets sort out all the problems of utilitarianism.”

    yes. if we turn the unnecessary people into plant food then life will really be awesome for your set.

  • http://alexandra-thorn.dreamwidth.org Alexandra Thorn

    Speaking as another ivory tower intellectual, I find the structure of this argument pretty strange. You note that the funding structure has changed, but does that automatically make it a bad thing?

    Take the example of education. I would argue that the world is, in fact, more complicated than it was 1800. Maybe it’s a good idea to invest more in education so that we can have more sophisticated decision-makers at all levels.

    Health care and “alms” (which I’m honestly still pretty confused about as a category) may be more complicated. In the last century antibiotics and vaccines were used as real game-changers in terms of public health. Having solved so many problems we might expect for health spending to be able to decrease, but if it hadn’t been high in the first place I’m not sure that we would have seen the eradication of polio, etc.

    On the other hand, while one commenter points out that the US lets people die because they don’t have insurance, I think the flip side is also a problem: we are so terrified of death that we refuse people the option of dying when they want to, regardless of how much it’s going to cost to keep them alive. (This is a complicated issue, though, since there’s a small step between letting someone choose death and having the choice made for them.)

  • http://omniorthogonal.blogspot.com mtraven

    That paper on voting starts out: The fact that people vote is a longstanding puzzle to economists.

    That says something about the worthlessness of economics as a discipline, in that its models of human behavior are completely inadequate to deal with reality.

    You could start here for a better approach. My own take is here.

    At the root of the error is this dismissal of the social aspects of human behavior as mere “signaling”, as if humans were ideally isolated, atomized utility-maximizing units and our communicating with each other was just some accidental distraction from the real business of living. That couldn’t be more wrong.

  • Drewfus

    Robin, your point 3 about industry era folk absolutely nails it. People nowadays are awarding themselves and each other social credit for supporting health care, education, and alms paid for by taxpayers, that in an earlier era would have been paid for by themselves. A runaway process!

    We have to stop clapping people who want to look good, without actually doing good.

  • comingstorm

    Um, what about the possibility that all three elements are functionally necessary and/or structurally demanded in modern society — much more so than at the end of the 18th century? Never mind the motivation to supply them: could we run a modern industrial nation-state without them?

    Education might be the most obvious — our technological society requires more literates, and much more functional literacy, than in 1800.

    Aside from the empathetic problems with people dying in the streets and so forth, there are practical problems with widespread misery: crime and revolution. I understand that the largest factor in the rise of mafias is the lack of other opportunities for advancement. As for the other, a dense, well educated populace is harder to keep down than a sparse, marginally literate one…

    Finally, modern medicine didn’t exist in 1800, and functional medicine is the kind of thing that sells itself, so that demand can be taken as given.

    Insurance in general is the classic example where a “free” market simply doesn’t work (due to information asymmetry). So, never mind the cruelty: the fact is that private medical insurance is naturally inefficient and wasteful compared to a government monopoly.

    More generally, if you’re looking for the most effective way to provide social insurance of all sorts, government — specifically, Big Government social programs of the Great Society stripe — is *the* sustainable, efficient way to provide them.

    Finally, the functional effect of such institutions is to increase the efficiency of their society. Failure to provide functioning programs of this sort constitutes a crippling competitive disadvantage in the modern world: a population without skills, without opportunities, without basic preventative maintenance, cannot effectively support a modern technological culture.

  • Brandon

    Maybe I’m overly cynical or ultra-capitalist – but I see both education and medicine as potentially huge positive externalities to society. From a purely selfish standpoint, spending money on either category makes my life better. Smarter people produce more, consume more, and are more likely to make phenomenal contributions to society as a whole. The same applies to healthier people (especially when compared to dead people). For every dollar I spend on the education or health care for others, I may get two dollars back (in the long run).

    Alms are harder to justify. I typically see it as a guilt-effect from the realization that a not-insignificant portion of my success is due to luck (where I was born, who my parents were, being in the right place at the right time, etc.) – and that an equally significant portion of others’ lack of success is likewise due to factors beyond their control. Selfishly, I can see it as an act of reciprocal altruism, but it could also just be assuaging my conscience.

    As for why the contributions to these areas has increased over time – the easiest explanation is that more people have come to these same conclusions. If that’s too easy, then maybe more smart people have come to these conclusions, and, after realizing that these beliefs should be universal within a society, have worked to influence others through advertising and rhetoric.

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