The Altruism of the Rich and the Poor
Understanding who gives to charity and why
Posted Aug 12, 2015
Altruistic behavior is a fascinating topic. On the first hand, it’s something of an evolutionary puzzle as to why an organism would provide benefits to others at an expense to itself. A healthy portion of this giving has already been explained via kin selection (providing resources to those who share an appreciable portion of your genes) and reciprocal altruism (giving to you today increases the odds of you giving to me in the future). As these phenomenon have, in a manner of speaking, been studied to death, they’re a bit less interesting; all the academic glory goes to people who tackle new and exciting ideas. One such new and exciting realm of inquiry (new at least as far as I’m aware of, anyway) concerns the social regulations and sanctions surrounding altruism. A particularly interesting case I came across some time ago concerned people actually condemning Kim Kardashian for giving to charity; specifically, for not giving enough. Another case involved the turning away of a sizable charitable donation from Tucker Max so as to avoid a social association with him.
Just as it’s curious that people are altruistic towards others at all, then, it is, perhaps, more curious that people would ever turn down altruism or condemn others for giving it. To examine one more example that crossed my screen today, I wanted to consider two related articles. The first of the articles concerns charitable giving in the US. The point I wanted to highlight from that piece is that, as a percentage of their income, the richest section of the population tends to give the largest portion to charity. While one could argue that this is obviously the case because the rich have more available money which they don’t need to survive, that idea would fail to explain the point that charitable giving appears to evidence a U-shaped distribution, in which the richest and poorest sections of the population contribution a greater percentage of their income than those in the middle (though how to categorize the taxes paid by each group is another matter). The second article I wanted to bring up condemned the richer section of the population for giving less than they used to, compared to the poor, who had apparently increased the percentage they used to give. What’s notable about their analysis of the issue is that the former fact – that the rich still tended to donate a higher percentage of their income overall – is not mentioned at all. I imagine that such an omission was intentional.
Taken together, all these pieces of information are consistent with the idea that there’s a relatively opaque strategic element which surrounds altruistic behavior. While it’s one people might unconsciously navigate with relative automaticity, it’s worthwhile to take a step back and consider just how strange this behavior is. After all, if we saw this behavior in any other species, we would be very curious indeed as to what led them to do what they did; perhaps we would even forgoing the usual moralization that accompanies and clouds these issues while we examined them. So, on the subject of rich people and strategic altruism, I wanted to review a unique data set from Smeets, Bauer, & Gneezy (2015) concerning the behavior of millionaires in two standard economic games: the dictator and ultimatum games. In the former, participants are in charge of deciding how €100 will be divided between themselves and another participant; in the latter, the participant will propose how €100 will be split between themselves and a receiver. If the receiver accepts the offer, both players get paid the division; if the receiver rejects it, both players get nothing.
In the dictator game, approximately 200 Dutch millionaires (those with over €1,000,000 in their bank accounts) where told they were either playing the game with another millionaire or with a low-income receiver. According to data from existing literature on these games, the average amount given to the receiver in a dictator game is a little shy of 30%, with only about 5% of dictators allocating all the money to the recipient. In start contrast, when paired with a low-income individual, millionaire dictators tended to give an average of 71% of the money to the other player, with 45% of dictators giving the full €100. When paired with another millionaire recipient, however, the millionaire dictators only gave away approximately 50% of the €100 sum which, while still substantially more generous than the literature average, is less generous than their giving towards the poor.
Turning to the data from the ultimatum games, we often find that people are often more generous in their offers to receivers in such circumstances, owing to the real possibility that a rejected offer can leave the proposer without anything. Indeed, the reported percentage of the offers in ultimatum games from the wider literature is close to 45% of the total sum (as compared with 30% in dictator games). In the ultimatum game, the millionaires were actually lessgenerous towards the low-income recipients than in the dictator game – bucking the overall trend – but were still quite generous overall, giving an average of 64% of the total sum, with 30% of dictators giving away the full €100 to the other person (as compared with 71% and 45% from above). Interestingly, when paired with other millionaires in the ultimatum game, millionaire proposers gave precisely the same amounts they tended to in the dictator games. In that case, the strategic context has no effect on their giving.
In sum, millionaires tended to evidence quite a bit more generosity in giving contexts than previous, lower-income samples had. However, this generosity was largely confined to instances of giving to those in greater need, relative to a more general kind of altruism. In fact, if one was in need and interested in receiving donations from rich targets, it would seem to serve your goal better to not frame the request as some kind of exchange relationship through which the rich person will eventually receive some monetary benefits, as that kind of strategic element appears to result in less giving.
Why should this be the case, though? One possible explanation that comes to mind builds upon the ostensibly obvious explanation for rich people giving more I mentioned initially: the rich already possess a great number of resources they don’t require. In economic terms, the marginal value of additional money for them is lower than it is for the poor. When the giving is economically strategic, then, the benefit to be received is more money, which, as I just suggested, has a relatively low marginal value to the rich recipient. By contrast, when the giving is driven more by altruism, the benefits to be receiver are predominately social in nature: the gratitude of the recipients, possible social status from observers, esteem from peers, and so on. The other side of this giving coin, as I also mentioned at the beginning, is there can also be social costs associated with not giving enough for the rich. As building social alliances and avoiding condemnation might have different marginal values than additional units of money, the rich could perceive greater benefits from giving in certain contexts, relative to exchange relationships.
Such an explanation could also, at least in principle, help explain why the poorest section of the population tends to be relatively charitable, compared to the middle: the poorest individuals are facing a greater need for social alliances, owing to the relatively volatile nature of their position in life. As economic resources might not be stable, poorer individuals might be better served by using more of them to build stronger social networks when money is available. Such spending would allow the poor to hedge and defend against the possibility of future bad luck; that friend you helped out today might be able to give you a place to sleep next month if you lose your job and can’t make rent. By contrast, those in the middle of the economic world are not facing the same degree of social need as the lower classes, while, at the same time, not having as much disposal income as the upper classes (and, accordingly, might also be facing less social pressure to be generous with what they do have), leading to them giving less. Considerations of social need guiding altruism also fits nicely with the moral aspect of altruism, which is just one more reason for me to like it.
References: Smeets, P., Bauer, R., & Gneezy, U. (2015). Giving behavior of millionaires. Proceedings of the National Academy of Sciences, DOI: 10.1073/pnas.1507949112