Why people give to charity (well, sort of…)

It’s an interesting fact that, in countries with more intense religious belief, charitable donations are higher but wealth inequality is also higher. This tends to suggest that religious people are not intrinsically more generous, but that they are more likely to prefer charity as a tool for income redistribution, rather than collective agreement (e.g. by state mediated redistribution).

So the reasons people have for giving to charity are interesting, from a humanistic perspective. A recent study on this, by University of Texas Professor Rachel Croson, has just won the 2007 Best Article Award from the journal that published it, Economic Inquiry.

The study (preprint here) used a lab model of charity in which participants are given a sum of money which they can either keep or contribute to a common pool. Contributing to the common pool benefits everyone equally. For example, in the first experiment participants were given 25 tokens which they could either keep (earning them 2¢) or donate (earning each of the four participants 1¢). So the total value of each token is doubled by donating, although the individual loses out.

Using this game, Croson tested three theories of charitable giving:

• Altruism – caring about others’ consumption. In this case, an individual’s contributions should rise as the average contribution falls (and vice versa).
• Reciprocity – contributing because others contribute: an individual’s contribution should fall as the average contribution falls (and vice versa).
• Commitment – individuals choose the actions they would most prefer everyone
  would choose. i.e. they do “the right thing”. Individual’s contributions should not be affected by what others give.

The results support the idea that reciprocity, not commitment or altruism, is what governs charitable giving. In fact, it seems that the players tried to match the median level of giving from other participants (rather than the lowest or the highest gift).

Notably, Croson didn’t test another motivation for charity – that charitable donations might bring an indirect (i.e. non financial) benefit. For example, high levels of public giving might enhance an individual’s reputation, or (in the case of religious individuals) might ‘purchase’ favour with their god, and increase their imagined potential for benefits after death.

Ref:
Press release
Croson R. Theories of Commitment, Altruism and Reciprocity: Evidence from Linear Public Goods Games. Economic Enquiry Volume 45 Issue 2 Page 199-216, April 2007. (open access preprint)