Individualism in market societies is often criticized as corrupting morality and discouraging charitable giving, but these authors disagree

Cai, Meina and Caskey, Greg and Cowen, Nick and Murtazashvili, Ilia and Murtazashvili, Jennifer Brick and Salahodjaev, Raufhon, Individualism, Economic Freedom, and Charitable Giving (May 28, 2021). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3855820

Abstract: We investigate the role of individualistic social rules and norms in charitable giving. Individualism in market societies is often criticized as corrupting morality and discouraging charitable giving. We contest that view. We propose direct and indirect mechanisms through which that occurs. In the direct channel, individualism encourages self-interested giving. In the indirect channel, individualism contributes to charity by reinforcing economic freedom. We use evidence from a large cross-section of countries and several measures of individualism to investigate both channels. Our empirical findings confirm each channel and support the insights of classical liberals, such as Adam Smith and David Hume, and more recent studies in the humanomics tradition, which argues that there is virtue to individualism.

Keywords: Philanthropy, Culture, Individualism, Institutions, Classical Liberalism

JEL Classification: B52, D64, D31, L14

This paper investigates the role of individualism in charitable giving. Individualistic societies are those that value individual fulfillment, personal responsibility, and relationships with those outside one’s in-group. Though critics suggest individualism undermines virtues such as generosity, we consider contrary mechanisms first developed in the tradition of classical political economy, especially the “doux commerce” hypothesis (Hirschman 1982), which posits that self-interested pursuit of gains through trade has broader, usually positive, effects on the attitudes and behavior (Matson 2020). Originating in French Enlightenment–era works—especially Montesquieu (1777a, XX.2)—and later found in Mandeville (1988 [1714]), Smith (1982 [1759]), and Hume (1994 [1742]), these arguments fell out of favor within mainstream economics for much of the twentieth century (Boettke 1997). But interest in these works has reemerged alongside growing interest in endogenous preferences (Bowles 1998) and the cultural dimensions of economic activity and as experimental evidence identifying success in trade as a cause of prosocial conduct has accumulated (Smith and Wilson 2019).

[...] To test our hypotheses, we use evidence from a large cross-section of countries and several measures of individualism, including Hofstede’s (2001) individualism-collectivism index, the index of survival versus self-expression from the World Values Survey (WVS) (Inglehart and Oyserman 2004), and measures of generalized tolerance. Each represents a quantitative measure of culture, or what David Hume referred to as national character (Sent and Kroese 2020). Our empirical results show that individualism is indeed associated with charitable giving, as is economic freedom. The results support the argument of classical liberals thatcommercial society and the social and cultural institutions that support it are sources of the common good.