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Rob Reich makes a two-pronged case for private foundations. He offers a “pluralism argument”—that foundations fill a gap in centralized public good provision by supplying minority public goods—and a “discovery argument”—that foundations serve as mechanisms for experimentation in social policy. I don’t disagree with either of these arguments. However, I would like to suggest a broader argument for foundations: that they represent an important form of voluntary choice in a free society.
Foundations are often thought to provide funding for public purposes. Indeed, foundations do fund many initiatives that affect the broader public. However, this view neglects the purposeful choices of those financing foundations. An alternative view of foundations is that they are a form of consumption for the financier. Some people prefer to consume their wealth in the form of material items. Others consume their wealth by transferring it to members of their family. And still others consume part of their wealth by funding foundations, which then provide support to a variety of projects and initiatives. When we appreciate that foundations are a voluntary form of consumption, they appear less as institutional “oddities” and more like any other form of consumption behavior.
Of course one might believe that the way certain foundations allocate their resources is wasteful. But this is no different from disagreeing with a friend about a car he purchases or a charity he donates to. We must remember that a core characteristic of a free society is tolerance. I don’t have to agree with the spending decisions of foundations, but I do have to tolerate those decisions as long as they do not violate my property rights. Ultimately, arguments against the behaviors of foundations are really arguments against private property rights and voluntary choice. Such arguments rest on the conclusion that some person or group knows better than the donors how best to allocate their property.
But aren’t the activities of foundations different from other forms of private consumption because there is some public element to many of those activities? This is precisely the reasoning underpinning calls for more transparency, accountability, and oversight of foundation behaviors. However, these calls are overblown if one understands foundations as voluntary consumption by donors. The reality is that all private activities affect other people in some way or another. The concern is that the activities of some will harm others. But this is precisely why we have private property rights. As long as foundations are not engaged in violating the rights of others, it is unclear why they need more transparency, accountability, or oversight than other forms of private consumption.
Another argument against foundations is that government mechanisms might do a better job representing and providing for the “public good.” For this to be convincing, however, one must make an argument that there are superior mechanisms of accountability, transparency, and oversight of government activities. In this regard, Reich emphasizes the role of the median voter and the voting booth as a check on the behavior of politicians. However, the effectiveness of this mechanism is overstated.
First, most voters are unaware of the specifics of how their representatives vote. Do you know if your representative supports the ballet? What is her voting record on cancer research spending? Second, voters must choose on the basis of a bundle of issues rather than on individual issues—funding of the arts might be important to you, but not as important as abortion or gun control. Third, there is no means of registering the intensity of preferences across voters. You and I each get one equal vote, even though you might care greatly about spending on space exploration while I care very little. Fourth, there are many unelected bureaucrats involved in the production of public goods. Voters have little to no control over these officials. Fifth, representatives’ efforts are often felt across constituencies, further limiting the influence of any one voter.
Taken together, these realities mean that public decisions regarding public goods generate outcomes lacking clear lines of responsibility and accountability. Who will ensure that education or cancer research, or any other public good, is provided in the best means possible for the intended recipients? Unfortunately, the answer is often no one. Instead, special interests routinely co-opt public policy for their own narrow benefit at the expense of ill-informed voters who foot the bill.
Combining these insights with Reich’s arguments makes the case for private foundations even stronger. Foundations do allow for pluralism and discovery as Reich points out. And equally, if not more, important, foundations are a form of voluntary choice. If we are truly committed to a free society, we should embrace foundations as a manifestation of private citizens making their best judgments with their own property.
The modern foundation is an institutional oddity in a democracy. A democratic society is committed to the equality of citizens, but foundations are the voice of plutocracy.
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