An Economist’s Look at The Practice of Giving

Buddhism, and the practice of mindfulness, place a great deal of importance on the practice of dana—generosity, giving, charity. The practice of giving claims a place of special eminence in virtually all faiths. It is in a sense the foundation and seed of the giver’s spiritual development.

Giving is one of the most basic human virtues, a quality that testifies to the depth of one’s humanity and one’s capacity for self-transcendence, especially when the giving is done in the face of great difficulties. This unique capacity of giving – to allow the giver to practice non-self-centeredness – makes it one of the most important gateways to freedom from suffering.

Given that we accept the importance of giving, what is the most effective way to give from a Buddhist (an general mindfulness) perspective? When we give, we are attempting to address a need of the recipient. When we attempt to address a need, it is helpful to do so in a mindful way so that our efforts are maximally effective. Typically, we first identify a need we are concerned with. Say, for example, we are concerned about hunger and malnutrition in our community. How can we address that need?

We could attempt to personally identify individuals in need within the community and arrange for food or other assistance. This is likely to be very inefficient. When we encounter an individual in need, we should of course acknowledge that need, but attempting to address hunger as a broader community problem by ourselves is not likely to be the best use of our resources, and certainly isn’t efficient or mindful. Mindfulness reminds us that we have jobs, limited free time, and skill sets that generally are not focused on addressing community hunger. Spending our evenings driving the streets with a trunk full of sandwiches may be personally fulfilling, but it is almost certainly not an efficient or mindful way of reducing hunger in our community.

Instead, we can take advantage of what economists call division of labor. Division of labor just means that it is better to have people specialize in different things and work together toward some common goal rather than having everyone trying to do everything for themselves. For example, we have both farmers and chefs. Farmers specialize in farming and chefs specialize in sourcing and preparing food. It is possible for one person to do both, but that is rare. Of course, there are always exceptions, but as we see in these examples, it is usually better to have a really good farmer and a really good chef than two people who are mediocre at both of these tasks. It is certainly more mindful and efficient.

With respect to addressing a need in our community, we can look for a person or institution that devotes most or all of its time to this particular need, such as a food bank. These people and institutions develop what economists call human capital – expertise in this particular area. They can address the need in a more efficient and effective way than we operating as individuals on a part time basis could, just as a tax accountant can work through our tax filings more efficiently than we as individuals typically can.

So after having identified a need, a useful next step is to identify whether there is some person or institution with expertise in addressing that need already in place. After we have located such an institution, we would like to donate resources to assist them. We could donate time, in-kind resources (e.g., canned food), or cash. Almost any kind of donation will be of some help in addressing the need, but different types of donations may be more or less efficient. In particular, cash is almost always the most efficient mechanism for assisting a charity, and it is certainly the most mindful solution to how to give. Cash is by its very nature a medium of exchange for goods and services. A food bank with cash can purchase whatever goods and services will most efficiently address the need it is focused on. In-kind resources (such as cases of canned peaches in heavy syrup), by contrast, limit the options of the food bank and will almost always be less efficient.

Consider a gift of $500 worth of canned goods as compared to a gift of a $500 check. If the food bank needs canned goods, it can spend that check on canned goods (and, in fact, can likely obtain more canned goods, and more of the type of canned goods that are needed, for that amount of money than the donor, because the food bank has expertise, contacts and access to wholesale suppliers that the donor does not). However, the food bank may believe that the money is more efficiently spent on other things. Maybe it has plenty of food on hand that month, but could really use help with rent or the electricity bill. With cash, the food bank has the option to use the donated resources in what it views as the most efficient approach. By contrast, with a donation of physical goods, the food bank must use the goods provided, even if those goods are a poor fit for the current population being served.

The same lesson applies to cash donations with strings attached. Any donation that limits the choices of the institution will generally make that donation less efficient for the simple reason that the institution could always spend the money in the desired way if the institution agrees that is most efficient, but if the institution feels there is a more efficient approach, then an unrestricted donation provides the institution with more options. There is nothing sexy about donating copier paper but that my be exactly what the institution needs!

Donations in-kind or with strings attached are effectively substituting the judgment of the donor for the judgment of the institution. That’s certainly not mindfulness, as the whole point of dedicated institutions is to take advantage of their expertise. If the donor does not trust the institution to efficiently use the resources, then the donor should reconsider whether to support the institution at all. That is, the screening process up front is important, but if the donor has concluded that the institution does in fact have expertise in this area and is operating in an efficient enough way, then the most efficient approach is to trust the institution to use donations appropriately.

A Buddhist Look at The Practice of Giving

Generosity should be appropriate to the conditions. Conditions are conventional stories we create to explain other things that are happening. The closer our conventional understanding is to being consistent and reliable, valid and accurate, the more effective our giving will be. We start on our doorstep because it is almost the only place we can write any kind of reliable story about the conditions, and it is the only place we have much expertise. The more accurately we can perceive conditions, and the more useful our generosity will be, to us and to others.

So there are two directions for the giving: (1) giving that progressively moves out from our doorstep into the broader community, and (2) giving that is limited to individuals on our doorstep.

ONE, As the economist above suggested, reaching out from our doorstep:

  1. If it is an individual, say a homeless person on the street, generally it is best to give them money as we can never know or guess their need. When they ask for money, don’t offer them food. Let them determine the best way to meet their need. Might there be unforeseen consequences? There are always unforeseen consequences! (Similarly, if someone borrows money from us, we don’t try and control how that person spends it.)
  2. If there appears to be a broader community need, do your homework. Check out organizations in your neighborhood who might service people with the need you have a particular interest in, like a food bank, and if the local food bank seems effective and honest and well-run, donate cash to them. Don’t try and guess what they need. If you have done your homework, giving money is best. In other words, trust that organizations can be more effective than you can as an individual as this is their area of expertise.
  3. Unless there is a specific request from a chosen institution, say for donations to a building fund, donate to the general fund.

Note that with there should be a connection to you if you are donating to organizations or institutions. Random acts of kindness are not, from a Buddhist perspective, desirable, as they are essentially self-centered and ego building, not positive qualities in Buddhism, and they rarely meet any need. Paying for the coffee of the person in line behind you at Starbucks doesn’t meet a need (they wouldn’t be in line if they could afford the coffee) and thus isn’t generous.

TWO, donating constantly to individuals:

  1. Be generous with time and talent and treasure to individuals in your social circle.
  2. Make this generosity a constant event. Always find ways to be generous to those around you, every day. This indicates a bottom up belief as the way to change to world for the better.

The point of generosity, from a purely Buddhist perspective, is to change one’s character so that there is less suffering present. Generosity is a key practice in accomplishing the shift from self-centeredness to the peacefulness of a compassionate, wise life resulting from the weakening of self-centeredness.

Finally, we should recognize that it is not desirable, from a Buddhist perspective, to abrogate responsibility for one’s giving. Simply writing a check to a United Way-type organization, for example, is an abrogation and so has very little impact on one’s personal development into a person with less suffering, a person for whom patience, compassion and generosity are defaults. It is simply too easy to “outsource” giving and generosity in this way, which stands in the way of a personal connection with the giving that encourages true engagement and thus maximizes the lessening of self-centeredness.

Thanks to economists Gary Becker and John List of the University of Chicago for providing ideas and research prompting this article.