Thursday, June 29, 2006

The Charity of Night

Much has been made of the massive donation ($30-ish billion or so) Warren Buffett has made to the Gates Foundation, and it is indeed admirable that he is willing to donate this sum of money to charity. (Best line about it goes to Stephen Colbert: “Warren Buffet is so rich he just hired Bill Gates to spend his money.”) But two points arise from this story that put it into perspective:

1. Not to take anything away from Buffett’s philanthropy, but as Greg Mankiw points out, the current proposal to reduce trade barriers (that is almost certain to fail) at the Doha round of trade talks would produce global gains of about $54 billion annually. So these improvements (lowering tariffs, cutting domestic support payments, elimination of export subsidies) would give the world every year almost double what Buffett can give once after a lifetime of being the world’s most successful investor. Makes it pretty clear: lower trade barriers.

2. I had the pleasure of meeting Don Boudreaux today, chair of the very libertarian economics department at George Mason University (one of the perks of working for a free-market think tank). In addition to meeting with us in the Cascade office this afternoon, he gave a public speech in the evening on the economic foundations of liberty. One interesting point he made was that if you wanted to measure what Warren Buffett has contributed to the world, his charitable donations would pale in comparison to the positive macro effects his brilliant investing has had on global wealth (Boudreaux didn’t have concrete numbers for this, but estimated that this would fall upwards of $100 billion based on standard multipliers used in economic models). With Buffett’s investments in successful ventures, he has given people capital which they have used to create wealth, and we shouldn’t ignore this even in light of his recent altruism.


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