Until “effective altruism” figures out what drives innovation, those recommendations simply aren’t that reliable.
Addendum: John Sterling just wrote this in the MR comments section:
I think Steven Landsburg made the definitive “pro-Paulson gift” argument in his classic Slate piece defending Ebenezer Scrooge. Paulson could have pulled a “Larry Ellison” and built himself a $200 mm yacht. He decided to forgo (some) of his conspicuous consumption and instead let the Harvard Management Company steward some additional capital.
I’ve sometimes wondered whether the Harvard endowment is the ultimate way to be an “effective altruist” for an Austrian-leaning type. If you believe, like Baldy Harper did, “that savings invested in privately owned economic tools of production amount to … the greatest economic charity of all.” then the Harvard endowment makes a pretty interesting beneficiary. I can’t think of another institution in the world today that is more likely to hold on to its capital in perpetuity than the folks in Cambridge.
I am not saying he is right, just don’t be so quick to conclude he is wrong. By the way, I do not in fact donate my own money to Harvard.
















Is it effective altruism in the Austrian sense to donate large sums to a college that will promote effective altruism in the Austrian sense?
The thieves are sure lining up to give millions to Universities which will never spend the money, aside from the 4% they are required to disburse by law. For the millions who suffered because they did not know what Paulson knew, tough shit, you just contributed to Harvard.
Paulson made a vanity gift – he gets his name on a building in Harvard in exchange for the donation. It’s his own personal Harvard monument. Larry bought a Yacht. Paulson bought a monument. The building at Harvard will likely look more tasteful…
If Paulson wanted his money to ‘do good’ there are indeed far more places it could have gone. And “savings invested privately” means nothing – is this to build valuable infrastructure, or savings invested in a company that profits off of strip mining and dumping toxic waste in the 3rd world? But regardless, it misunderstands what he’s trying to do – not give to charity, but to buy a personal monument to himself on the Harvard Yard.
Should have just bought a sports team like Steve Ballmer or Paul Allen
Gonna need more than $400 million for that unless you want to buy a couple of mid-tier hockey teams.
You can get two or three MLS teams for $400 million.
Yeah but who would want to?
So?
What’s the cost of adding his name on a building? Essentially zero as they had to name is something anyways. It’s simply a transfer of wealth to Harvard’s management corporation, which, as noted above, should be holding his money and using it to invest in long term capital projects.
It’s only the ends that matter.
The cost of getting your name on a building is obviously $400 million – since that’s what it took. And the next donor who wants their name on a Harvard building should take heed, because that’s the new price. Although it isn’t essentially zero on the practical level; the building construction itself will likely be $50-75 million or more, plus other various associated costs, admin, overhead, bonuses to the Dean and other staff who pat themselves on the back for raking in the big donor bucks…I’d say about 1/2 to 1/3 of it will actually get invested (in who knows what). And I’ll guess that including a shiny new building that does have some utility, about 1/4 of the money can be said to have been invested ‘usefully.’
I’m surprised there aren’t more college sports analogies: Ohio State hands out diplomas in exchange for running a not-for-profit football team. Harvard hands out diplomas in exchange for running a not-for-profit hedge fund, (not that I agree with this!)
If one presumes that a major donor to Harvard believes the combination of HMC making good financial investments combined with Harvard University making good human capital investments and investments in innovation, then it seems perfectly reasonable. Paulson could take his $400 (or a heck of a lot more) and set up a foundation. Presumably his foundation could invest reasonably well. Possibly (probably) not as well as HMC. He could then have his foundation staff make “high impact”, “specialized” whatever grants to support innovation, education and research. Harvard University probably does this better than his team would.
Would people be happier if he gave his $400 million to the Gates Foundation, a la Warren Buffet? That’s a gigantic endowment that presumably cannot really get rid of its money efficiently in any finite time either.
If people’s opposition to the gift focus on substantive issues, (for example, again, not my view entirely,) such as: Harvard is a bloated institution with so much infrastructure supporting good works, it becomes a bad allocator of capital. That would be a “real” argument against the gift.
I see the decision as pretty darn reasonable.
Why would effective altruism need to figure out what drives innovation before being able to give recommendations? Isn’t giving to Against Malaria Foundation objectively better than giving to the ice-bucket foundation if saving the most lives if your objective? This argument seems analogous to saying that “energy efficiency” recommendations are useless until they figure out nuclear fusion.
+1
The Holy Roman Catholic Church, despite its lower rate of return, has a 1600 year lead on Harvard. I know where my money goes.
+2 millenia
Are you the catholic troll on EJMR?
While the Church also has a lead in size, their trajectories are not equivalent
One thing I wonder is if people are approaching this question of the have vs have nots all wrong.
Maybe you need a certain amount of capital to invest in the truly ‘big’ ideas that could be world changing.
A university with a $200 million or $2billion or even $20 billion endowment might not take a chance on a huge new initiative that is highly capital intensive, but a university with $50billion? Maybe. Maybe having tens of billions at your disposal is a requirement in an age where the low hanging fruit are all gone. (Look at something like the LHC now vs. simple tubes a hundred years ago, it’s orders of magnitude differences).
What was the last time you saw a university “take a chance on a huge new initiative” that didn’t involve building a new library?
My sense is that universities are no longer building libraries. Too much stuff has gone online. These buildings are now the most underutilized on campuses and universities are finding new uses for them.
I still love the university library. You can pry the shelves of books no one has checked out in 50 years out of my cold, dead hands
Berkeley has just signed a deal with China’s Tsinghua University to set up a joint campus in Shenzhen:
http://newscenter.berkeley.edu/2014/09/06/uc-berkeley-and-tsinghua-university-launch-research-and-graduate-education-partnership/
So UC Berkeley is joining New York University and Duke in running a campus in China. I would call that a taking a chance on a huge new initiative.
I assume the Chinese are interested because they want some pointers on running an intellectual monoculture and stamping out dissident opinions. Another great American export – Microaggressions!
If you want a huge new innovative library, check out NCSU!
http://www.lib.ncsu.edu/huntlibrary
but a university with $50billion? Maybe
The way the thieves are lining up, Harvard(whose endowment was ~1 billion in 1960, now 36 billion) should be able in about a decade to put your theory to the test. I bet it won’t
Harvard could build another ITER Tokamak experimental reactor for about $15 billion. But it won’t…
nationally televised potlatch. think of the honor paulson could accrue by throwing $400m into the bonfire.
This is an odd discussion. Whenever I choose to eat at a restaurant, or drink at a bar, instead of giving money to the homeless people whom I encounter en route to those establishments, I am prioritizing my own pleasure over the welfare of people who are much less fortunate than I am. This may be a bad ethical decision – although perhaps not from an economics standpoint – but few people would criticize it. So why the uproar regarding a discretionary spending decision by a very rich person?
How else am I going to use up all this moral outrage I’ve got pent inside?
It’s a good question; as a blogger who would love to get formally published someday, I wish that I had better tools for self-expression; or, more accurately, a larger audience for my writing. Nevertheless, the discussion about Paulson’s gift is an extension of the anti-1% theme that has become a regrettable characteristic of American political discourse. For anyone who is interested, I wrote a brief post on this issue which considers the new IRS data on average tax rates – http://ivan-anya.blogspot.com/2015/06/a-defense-of-rich-people-001-edition.html.
When you are buying dinner and drinks, you are redistributing your wealth by paying workers to provide you with goods and services.
FDR in 1935 said of the two choices you offered:
“A large proportion of these unemployed and their dependents have been forced on the relief rolls. The burden on the Federal Government has grown with great rapidity. We have here a human as well as an economic problem. When humane considerations are concerned, Americans give them precedence. The lessons of history, confirmed by the evidence immediately before me, show conclusively that continued dependence upon relief induces a spiritual disintegration fundamentally destructive to the national fiber. To dole our relief in this way is to administer a narcotic, a subtle destroyer of the human spirit. It is inimical to the dictates of a sound policy. It is in violation of the traditions of America. Work must be found for able-bodied but destitute workers.
“The Federal Government must and shall quit this business of relief.
“I am not willing that the vitality of our people be further sapped by the giving of cash, of market baskets, of a few hours of weekly work cutting grass, raking leaves, or picking up papers in the public parks. We must preserve not only the bodies of the unemployed from destitution but also their self-respect, their self-reliance, and courage and determination. This decision brings me to the problem of what the Government should do with approximately 5,000,000 unemployed now on the relief rolls.
:
“…It is a duty dictated by every intelligent consideration of national policy to ask you to make it possible for the United States to give employment to all of these three-and-a-half million people now on relief, pending their absorption in a rising tide of private employment.
:
“All work undertaken should be useful – not just for a day or a year, but useful in the sense that it affords permanent improvement in living conditions or that it creates future new wealth for the Nation.”
If you could, it would be better if you were spending $50 to rebuild a bridge, instead of just eating dinner, making that bridge available for all, and thus giving the homeless guy a job building a bridge he live under in the future. But the scale of the problem requires collective action – I’m not sure you can build a model train bridge for $50.
And by paying for the food and drinks, you pay taxes which do collectively pay for things like jobs building and maintaining schools, and those workers then pay other workers to serve them food or fix their cars.
Larry Ellison paid workers $200 million.
Paulson has not set out to pay anyone to work, except the guys who will churn assets as a reason to take a fee of millions of dollars a year as “fund managers” but in reality are just rent seekers.
Maybe I’m too harsh as I’m not sure of the terms of the contribution. Perhaps the money can be used to build a building which will create hundreds of millions in wages. Or pay the tuition, room, and board for poor kids attending which will pay wages of professors and food service workers and building maintainers. And those getting an education will “… creates future new wealth for the Nation.”
You are, but waiters, bartenders, cooks, farmers, and truck drivers are getting the money, they earned it, and most of them are also probably worse off than you. Don’t feel bad…
Your dinner and drinks aren’t tax deductible. As long as Paulson’s claiming his donation as charity, I don’t find the uproar to be misplaced.
I confess I do not understand the Landsburg piece, at least on first reflection.
If Scrooge spends a dollar, isn’t the world a marginally better place? Even is Scrooge himself is no happier (and provided he is not sadder, either), then counter-party to his exchange is happier. Small step toward a much better world?
Tyler – I trust Steven Landsburg is right on this, and not me. Can you explain this in a blog post?
Paulson is not spending a dollar. He is putting ownership of intangible assets in different hands. Nothing is produced or consumed.
Criticism of Paulson seems geared toward reducing the “credit” one receives for gifts to (elite) universities. This is reasonable to the extent that such gifts often look like consumption rather than charity: the donor’s name is plastered across the campus on buildings, etc., and the donor gains face time and influence with internal leaders.
There is nothing wrong with such spending, and it almost carries greater social value than a new yacht. Still, it is a stretch to call it charity. Instead, such gifts should be non-events outside the university community. Criticism moves us closer to an equilibrium in which donors do not receive accolades for charity on top of university inducements.
Yeah, putting signs and plaques on buildings creates lots of jobs compared to designing and building a yacht.
Larry Ellison created $200 million in jobs building several yacht, spurring others to create hundreds of millions dollars in jobs.
Paulson contributed $400 million to asset price inflation to turn over priced derivatives of assets into excessively priced derivatives of assets. In many cases, the CEOs responsible for the assets are directed to justify the inflated derivative prices by killing jobs, especially killing jobs in the US and outsourcing to other nations, while doing everything possible to limit innovation by tightening monopoly control to prevent competitors from hiring workers to compete.
You can not win a yacht race by selling shares in the yacht and then cutting the crew to boost stock prices. Share prices are going up because less labor is being paid for and outstanding shares are being reduced through buy-back with the savings from killing jobs.
Ya but consider the fact that Harvard can theoretically invest the money in useful projects or invest in municipalities etc. that want to spend on infrastructure. Or whatever. Whereas Larry Ellison is taking useful capital, labor, and materials to build a megayacht that he loans to Leonardo Dicaprio and uses millions of gallons of fuel.
I’d be very surprised if Harvard University’s School of Engineering and Applied Sciences produces any more or more useful research due to Paulson’s gift. If that’s the case, then society really would be better off if he’d bought a yacht.
I’m not sure why you would be surprised if Harvard hired a bunch of talented academics and they produced some useful research. Pretty sure Harvard produces a lot of research right now.
Has Harvard been producing more research as their endowment grows? Have they expanded the number of students they educate? Have they hired more?
Because I don’t think that’s how they use their endowment. And given that, I would also be surprised if this led to hiring more academics.
$400 MM doesn’t make the eye of the needle any larger.
If I had squillions to spare I probably shouldn’t bother to dedicate myself to full time philanthropy. I’d still be an amateur hour dilettante.
I’d probably give it to the Gates and Buffet team assuming they’ve got pros to know how to have maximum impact.
I wonder if Paulson has some under performing kids and this is his way ensuring that they get into Harvard. Suppose he has 4 kids (I mean this guy does signal his wealth), splitting the donation in 4 would be chump change to each one of them. The Harvard degree (combined with billions in wealth) sends a much stronger signal than 100M at the margin.
Innovation is great, but making sure innovation doesn’t screw us over as a species is even better. That seems to be the consensus position in the EA movement.
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