11 Responses to “How much influence should a ‘mega-foundation’ have?”

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1. Laura Makar Says:
   June 26th, 2008 at 5:09 pm

   Dave- Teresa Odendahl has a great book on the subject called Charity Begins at Home; Generosity and self-interest among the philanthropic elite. The book has some great material about the influence wealthy philanthropists have over social policy.

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2. David Cherney Says:
   June 27th, 2008 at 6:43 am

   Thanks!

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3. Mark Bahner Says:
   June 27th, 2008 at 10:29 am

   Hi Roger,

   You write, “However, their concentrated wealth raises serious democratic and scientific questions.”

   What democratic questions does it raise? Are you thinking that all U.S. citizens should get to vote on how the Gates Foundation spends its money? Or that there should be a law that appropriates the Gates Foundation money and puts it into the federal government, for funding all the worthy things the federal government funds?

   http://en.wikipedia.org/wiki/Image:U.S._Federal_Spending_-_FY_2007.png
   

   I’m only half-teasing here.

   “In a June 9th WSJ article, Melinda Gates rightly points out that $20,000 helping ‘a child who needed a kidney’ is ‘$20,000 that doesn’t go to buy life-saving vaccines’ to children in developing countries.”

   Yes, her assessment is correct. Even the Gates Foundation money is not infinite. Do you agree with her priority (to fund life-saving vaccines in developing countries rather than a kidney for a child in the U.S.)? (Note: I do agree with her priority.)

   “Who is best suited to make such decisions?”

   Well, you and I are obviously more qualified than Bill and Melinda Gates in deciding how they should give away their money.
   

   “Is it too much for one foundation to control 5%, 10%, 25%, or 50% of total foundation giving?”

   It seems unlikely that numbers much above 5% will ever be achieved (unless you’re writing about total foundation giving to a particular area, e.g., HIV/AIDs).

   “Is it possible for a single foundation to drive research and programmatic agendas? If so, how much control/influence should a foundation have?”

   Certainly, a foundation could drive research and programmatic agendas in a certain area. For example, I saw a 60 Minutes rebroadcast of a piece on the Howard Hughes medical foundation just a week or two ago. They apparently heavily fund stem cell research (and since they don’t get federal funding, they don’t have to use only existing stem cell lines).

   If the H.H. medical foundation is a huge player in stem cell research, is that a bad thing (to be limited by “democracy”)?

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4. Roger Pielke, Jr. Says:
   June 27th, 2008 at 11:51 am

   Mark- This post was by David Cherney

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5. David Cherney Says:
   June 28th, 2008 at 4:49 am

   Mark,

   “What democratic questions does it raise?”

   For one: What should the relationship be between private foundations and decision that impact the public?

   While the answer may be clear to you, it is certainly up for debate!

   The amount of money a foundation can give to a candidate running for office is regulated. Surely, this is good thing? So, it seems that we should have some restrictions on foundation giving. As a society, we seem concerned about the influence that monopolies can have on the marketplace. Is it too much of a stretch to suggest that private foundations may possibly exert similar monopoly pressures? At the very least, we should be open to the possibility.

   “Are you thinking that all U.S. citizens should get to vote on how the Gates Foundation spends its money? Or that there should be a law that appropriates the Gates Foundation money and puts it into the federal government, for funding all the worthy things the federal government funds?”

   No. I am simply suggesting that we look at how foundations impact various levels of decision making with a more critical eye.

   “Do you agree with her priority/”

   Yes, I agree with Melinda Gates’ assessment of the $20,000. I also agree with your point that even the Gates Foundation is resource limited. However, “My point is not about effectiveness…I am speaking to the influence donors can have.”

   “If the H.H. medical foundation is a huge player in stem cell research, is that a bad thing”

   Maybe, maybe not! However, we should be open to asking that question.

   Thanks!

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6. Mark Bahner Says:
   June 29th, 2008 at 7:50 pm

   Hi David (and Roger),

   Sorry about that, Roger. It seems like you post 90 percent of the stuff on Prometheus…I forgot it wasn’t 100 percent.

   David, you write, “What should the relationship be between private foundations and decision that impact the public?”

   What decisions do they make that “impact the public”? For example, from wonderful Wikipedia, the Gates Foundation apparently gives a phenomenal 17 percent of WORLDWIDE funding to eradicate polio.

   Does that decision “impact the public”? Not in my opinion. Not the public in the U.S. (It has a huge impact on people where polio still exists.)

   “The amount of money a foundation can give to a candidate running for office is regulated. Surely, this is good thing?”

   I’m not a lawyer, but I would be very surprised if a tax-exempt foundation (e.g., the Bill and Melinda Gates foundation) CAN give to a candidate running for office. Bill and Melinda Gates can give to a candidate, but I’d be surprised if their tax-exempt foundation can give to a candidate.

   “As a society, we seem concerned about the influence that monopolies can have on the marketplace. Is it too much of a stretch to suggest that private foundations may possibly exert similar monopoly pressures?”

   Yes, I think it’s too much of a stretch. We don’t like monopolies because firms that corner the market (in markets that have high barriers to entry) can then raise prices for items people want. A charity isn’t selling anything; they’re giving money away.

   “At the very least, we should be open to the possibility.”

   It doesn’t make sense to be “open to the possibility” of something, if there is not a logical reason why it should be. For example, one could say we should be “open to the possibility” of flying pigs. But other than a good Pink Floyd song and great album cover, we have no evidence that pigs on the wing actually exist or could exist. And the physics just doesn’t support such a possibility.

   How is it possible for the Gates Foundation to “monopolize” charity? I can give money to the Durham Rescue Mission or the Grameen Bank, regardless of whether or how much the Gates Foundation gives to either of those worthy causes. And I can give as much as I want. Just because the Gates Foundation gives $1.5 million (or whatever they’ve given) to the Grameen Bank, that doesn’t raise the price or make it more difficult for me to give to the Grameen Bank.

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7. David Cherney Says:
   June 30th, 2008 at 10:22 am

   Mark,

   “What decisions do they make that ‘impact the public’?”

   Are you suggesting that foundations don’t make decisions that impact the public? It seems to me this is the express purpose of many, if not most, foundations. The $20,000 trade-off speaks to this point directly; the Gates Foundation wants their charitable giving to do the most good for the most number of people. They want to impact the public. According to foundation’s mission statement, the Gates Foundation strives “to help all people lead healthy, productive lives…it focuses on improving people’s health and giving them the chance to lift themselves out of hunger and extreme poverty….have access to the opportunities they need to succeed in school and life.”

   I think that we both agree that the Gates Foundation’s organizational goals — including their desire to impact the public in both the US and abroad — are good things. However, this does not mean there are unintended consequences to their giving.

   “How is it possible for the Gates Foundation to ‘monopolize’ charity?”

   While it may not meet the technical economic definition of a monopoly (e.g. ability to manipulate price), it certainly is reasonable to suggest an extremely wealthy foundation may have the ability to exert dominate control over a charitable market. Price is not the only reason we are concerned about monopolies. We are also cautious about monopolies distorting supply. Mega-foundations have the ability to shift research priorities and programmatic agendas. In this sense, a mega-foundation can distort the supply of research topics and programs. Dr. Arata Kochi of the World Health Organization has levied one such accusation of how the Gates Foundation might be negatively impacting (effecting the supply) of malaria research and programs. I am not talking about “flying pigs.”

   To be clear, I am not criticizing specific giving programs of the Gates Foundation. Rather, I am suggesting that we continue to refine our understanding of the impacts (direct and indirect) of foundation giving. If you reread my questions, they are not specific to the Gates Foundation. The unprecedented concentration of wealth in a single foundation raised the question in my eyes: are there impacts associated with mega-foundations for which we should be wary? Your answer appears to be “no.” I respect that position. However, I see grounds for exploring the issue further.

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8. TokyoTom Says:
   June 30th, 2008 at 9:21 pm

   Dave, you ask a bunch of questions that I think, in a capitalistic democracy, have rather obvious answers:

   “I am speaking to the influence donors can have.”

   1. “Who is best suited to make such decisions?”

   Why, those giving away their own money, of course, and those who choose to accept it after considering their own priorities.

   2 “How much influence should one private foundation have? Is it too much for one foundation to control 5%, 10%, 25%, or 50% of total foundation giving?”

   These are fundamentally misguided questions. Private foundations are just a sliver of the world’s economic activity, and like other economic enterprises their activities reflect the preferences of their owners/funders, as well as the preferences of other institutions with which they interact. As global wealth increases, the absolute size of private foundations will increase correspondingly – as the owners of wealth can’t take it all with them when they die.

   The influence of private foundations depends not only on their funding but how well they are managed and their choices of how to spend. Whatever influence they have is up to them (as freely accommodated by others), as it should be. There may at one time or another be a relatively outsized foundation, but it’s not like they’re monopolies seeking to control markets and then jack up prices.

   Your question begs another – is it better for wealthy individuals to dispose of their rightfully acquired wealth as they see fit, or for government to confiscate it and dispense it bureaucratically?

   3. “Is it possible for a single foundation to drive research and programmatic agendas? If so, how much control/influence should a foundation have?”

   There may be both outsized and focssed, effective foundations that are relatively effective in the areas that they choose to focus on. That, of course, is precisely their purpose. That some are more effective than others, again, does not squeeze out others, which remain fully capable of determining their own agendas. If an inflow of wealth and growth in expenditures by funds increases the demand for particular talents on the fund-recipient side, then that will of course send signals to markets to provide more skilled workers in such areas. It’s no different from how our employment and capital markets work.

   Unless you are willing to argue that the public better served if private wealth is simply confiscated and bureacratically managed, then a foundation should be allowed to have whatever influence its resources and objectives enable it to achieve.

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9. David Cherney Says:
   July 1st, 2008 at 7:49 am

   TokyoTom,

   Thanks for your comments.

   You assert, “Unless you are willing to argue that the public better served if private wealth is simply confiscated and bureacratically managed, then a foundation should be allowed to have whatever influence its resources and objectives enable it to achieve.”

   Nowhere do I suggest that a government should confiscate the proceeds of a foundation and dispense it bureaucratically. Mark Bahner asked me directly if I though this should be the case. My response was “no.”

   The set of extremes you assert is simply a false dichotomy. Foundations are subject to a number of laws that regulate and place incentives on foundation giving. Such laws influence how foundations distribute their resources. I have already mentioned that there are restrictions on campaign contributions. (Mark pointed out that private foundations are limited to contributing $0. We discourage private foundations from contributing to direct lobbying efforts by taxing such grants. We require private foundation to distribute a certain portion of their income every year. We limit the holdings of private foundations in private businesses. Etc.

   Altering laws that regulate and incentivize private foundation activities is one way to influence the behavior of private foundations without confiscating their resources or allowing private foundations to have whatever influence they want. The issue is not black and white.

   Thanks!

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10. TokyoTom Says:
    July 2nd, 2008 at 1:43 am

    David, thanks for pointing out that private foundations in the US already operate under specific rules and are subject to our general laws. But while you dismissed my starkest case, you failed to address any questions of principle, justification or efficscy.

    The question you posed is whether we ought to implement new laws/rules to further micromanage bureaucratically how private foundations choose to employ their assets in order to moderate their relative influence; most of my comment was addressed squarely to that.

    Let me make myself clear – I vote no, for the simple reasons that (i) such further regulation would serve no meaningful purpose, in light of the functions of such foundations, their lack of any monopoly power, and the larger world in which they operate; (ii) laws and rules that regulate private behavior are indeed an interference with and a partial socialization of private wealth, that is inconsistent generally with the principles of our society; not (iii) further bureaucratic and legislative micromanagement is likely to counterproductively waste resources and thus undermine the public good that these foundations produce.

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11. David Cherney Says:
    July 2nd, 2008 at 4:04 pm

    TokyoTom,

    “The question you posed is whether we ought to implement new laws/rules to further micromanage bureaucratically how private foundations choose to employ their assets in order to moderate their relative influence; most of my comment was addressed squarely to that.”

    The title of my post is “How much influence should a ‘mega-foundation’ have?” I clarified in the comments that the central motivation for this post was in regard to the following question: “are there impacts associated with mega-foundations for which we should be wary? The five questions at the bottom of the original post were intended to be thought provoking to this end. I have found both your and Mark’s comments helpful.

    It is clear that you agree with Mark. Your answer to the question — are there impacts associated with mega-foundations for which we should be wary? — is ‘no.’ I remain unconvinced of this answer, even though I am losing 2 to 1!

    The question of whether or not we “should be wary” is different than the question of “what we should do.” I never raised the second question. You and Mark did. I have not advocated for any particular policy option. My previous response to you was not intended to be patronizing. The purpose was to demonstrate that there are other possible options besides the two you asserted: confiscating the assets of a mega-foundation and doing nothing. Before I start working on the question of “what to do,” I want to get clear on if we “should be wary.”

    Thanks!