Charity as conspicuous consumption


Jason Collins


July 8, 2012

At the end of Moav and Neeman’s paper on conspicuous consumption and poverty traps, about which I posted yesterday, the authors suggest an experiment:

It is well known that the rich spend a lot more on charitable contributions than the poor. There are at least three different explanations for this behaviour: charitable contribution is a luxury good, there is stronger social pressure on the rich to contribute more to society and our suggestion that charitable contributions provide a signal about unobserved income (‘success’). Consider the effect of the revelation of information about individuals’ incomes. Such a revelation should have no effect on charitable contributions if they are mostly a luxury good. It should lead to a rise in charitable contributions if they are mostly due to social pressure on the rich to contribute to society and it should lead to a decrease in charitable contributions if they are mostly about signalling. It ought to be possible to examine empiricaly the effect of such a revelation of information on charitable giving.

I like the idea, but how could this experiment practically be implemented? Their suggestion reminded me of the closing paragraph of an article by Griskevicius and colleagues, in which they reported the results of experiments that tested the desire to engage in benevolent activity in response to priming with mating motives. They write:

[M]edia mogul Ted Turner once bemoaned the influence of the Forbes 400 list of richest Americans, pointing out that it discouraged the wealthy from giving away their money for fear of slipping down in the rankings (Plotz, 2006). He suggested instead that a public ranking of top philanthropists could inspire the wealthy to compete in a more beneficial way—in essence, by shifting the signaling arena from conspicuous consumption to blatant benevolence. Perhaps it was not a coincidence that just such a list—the Slate 60—was established the same year that Ted Turner pledged $1 billion to humanitarian relief. When asked about the reaction of his then-wife Jane Fonda to this donation, Turner fondly reminisced, “It brought tears to her eyes . . . . She said, ‘I’m so proud to be married to you’”

The need to engage is conspicuous consumption drops away if your wealth is published each year.