Keynote 2: The Economics of Giving: What makes us give? What stops us from giving more?

Michael Spence gave Day 1’s final keynote address by considering the characteristics and challenges that underpin the economics of giving, followed by a discussion with moderator Stephen Cheung.
 
Spence started by acknowledging the vast scope of philanthropy including areas such as disaster relief, cultural institutions, sustainability, and research. In particular, he noted how philanthropy now plays a crucial role in funding basic research. In the United States, for example, it accounts for one-third of non-proprietary research funding, alongside government and major tech companies. Spence remarked that philanthropy should mostly be a complement instead of substitute to government funding. He also outlined the complexity of the economics of philanthropy: while the fundamental motivation of philanthropy is the desire to do something good for one’s fellow human beings, recognition also matters, as seen when patrons supported the arts in churches during the Renaissance and the Met Gala in modern times. 

Spence also addressed the efforts to assess impact in the context of Environmental, Social, and Governance (ESG). Any serious attempt to create impact will produce very different patterns of activities across different kinds of companies, he said, so measurement is important to determine real impact, especially in distinguishing serious efforts to create impact from “greenwashing” or marketing attempts. He also elaborated on the need for a credible and reasonably objective third party to undertake and communicate the measurement. In summary, paying attention to the incentives and measurement systems is a worthwhile exercise, he said.  

On the motivations of giving and of making philanthropy more meaningful for donors, Spence and Cheung noted that different causes offer differential signalling opportunities. While donation to universities often provides more visible recognition (e.g. naming buildings) or tangible benefits (e.g. lifelong social networks), serving the homeless and underprivileged might appear less attractive. Spence suggested that existing foundations which are already well recognised could take up some of the less prominent causes.

Spence and Cheung also touched upon the use of digital technology to close the information gap in philanthropy and address the more complex matching problem. In response to audience questions, Spence highlighted the ongoing challenge of efficiently allocating resources across causes such as climate change. The session concluded with a call for a better framework for thinking about the structural characteristics of the world we are in, and where philanthropy may contribute.