I remember my freshman economics class at Sewanee when Dr. Sharp asked us, “Why does government exist?” The hands rose quickly. “To provide defense!” True. “To enforce the law of the land!” True. “To build and maintain transportation lanes!” Also true. Answers fell fast and furiously until someone blurted, “To provide comedic material for late-night talk-show hosts!” Polls closed.
The common denominator within (most of) the responses, we came to learn, was the theory of the public good. A public (social) good is a product or service paid for by government that improves the quality of life for its citizens. In theory, social goods and services fill a void left by the private sector, which assumes that the profit-seeking private sector will not care for the weak, the poor, or the underprivileged; nor will it build parks, conserve resources, or educate those without ability to pay. Also, the private sector will not develop transportation infrastructure, libraries, educational TV programs, etc. Therefore, as the logic follows, we need governmental benevolence to offset self-interested malevolence. So how much government benevolence do we need? Well, that depends on your view of how selfish we are as individuals.
Each year, the Charities Aid Foundation releases a survey of global philanthropy titled “The World Giving Index.” This survey polls citizens across 140 countries and asks them if, within the past month, they have helped a stranger or someone they didn’t know who needed help, donated any money to a charity, and volunteered their time to an organization. The responses might surprise you classical economists: 51.4 percent of global citizens reported helping a stranger last month, 31.4 percent contributed capital, and 21.6 percent donated their time to an organization.
Interestingly, the affluence of the nation doesn’t determine its generosity. The top nation for helping a stranger? Iraq. The top nation for charitable giving? Myanmar. The top nation for volunteerism? Turkmenistan. The most generous nation on the planet? Myanmar with a per capita GDP of $1,275 a year. Who is No. 2? The United States of America.
Americans have significant resources and offer them freely. In a recent month, 73 percent of us helped a stranger, 63 percent of us donated money, and 46 percent of us volunteered for an organization. Americans donated $360 billion to more than a million charities last year. This reveals that average American households donated $2,500-$3,000 and 26 hours of volunteer time last year. Yet, while Americans are a generous lot, Memphians are more generous still. On average, Memphis residents donated nearly twice as much as the national average. So much for the cold self-interested economic man theory.
In Adam Smith’s lesser read compendium, The Theory of Moral Sentiments, he observes, “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.” As Dr. Sharp taught me that day, the more you believe in the virtue of your fellow man, the less you believe in governmental expanse. Communism’s failure further punctuates that point. As humans, we give. As Americans, we give even more. As Memphians, we give more still. Should we be giving governments less?
David S. Waddell is CEO of Waddell and Associates. He has appeared in The Wall Street Journal, Forbes, Business Week, and other local, national, and global resources. Visit waddellandassociates.com for more.