Jan

1

The article Please Give at the Office on page 18 of Monday’s Barron’s discusses an article by Baruch Lev, Christine Petrovits and Suresh Radhakrishnan, which found that “for every tax-deductible dollar the average corporation gives to charity, it should expect profits to rise by roughly $2-$3.” As one might expect, the connection between increasing sales and charitable giving is especially strong for consumer-oriented companies, presumably because of the good will effect.

…there is a lesson in all this for the way we perceive the behavior of people in markets. According to the “Chicago school” of economics, consumers seek to maximize their own utility according to narrow self-interest. By contrast, the less well-known “Austrian school” allows for the possibility that consumers might be motivated by broader social interests. If corporate charity improves human welfare, is it a cynical comment on capitalism that companies might seek profits by catering to those interests? Or is it faintly inspiring?


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