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Providing the Poor the Tools to Fish

John Paulson’s contribution of 400 million dollars to the Harvard Engineering Department has been greeted with a chorus of criticism, mostly from the left. The complaint is that he should have given the money to the poor instead. Malcolm Gladwell’s tweet is representative: “It came down to helping the poor or giving the world’s richest university $400 mil it doesn’t need. Wise choice John!”  

If I had 400 million to contribute, I might well have directed elsewhere myself. But Paulson’s contribution is a sensible idea. The anger from the left reflects its inability to understand that in the long run technology allied to markets is likely to help the poor more than direct aid.

Engineering departments are the locus of modern alchemy where basic science is turned into the technology that produces gold in the modern world. Cellphones have proved transformative, and they are an example of a technology generated by thousands of discrete engineering ideas. To be sure, cellphones initially were the playthings of the well-off, but they have rapidly diffused down the income chain as engineers find cheaper ways of producing them. And their effects in the developing world have been dramatic.  For instance, fishermen now know what the prices of fish is in various places and direct their catch to where they will receive the highest return. Desalination methods can help poor farmers turn a barren field into a far more fertile one.

Harvard and a few other elite institutions have the brightest engineering professors and students. (I would not say the same about all other units of the university whose hiring decisions are distorted by politics and political correctness). These people are best poised to accelerate technological transformations. In doing so, they will bring new tools for self-improvement to the poor faster than they would otherwise appear. Such tools can lead to dramatic growth in income and self-sufficiency through the dynamism of the market.

Paulson’s contribution is a bet by a member of the richest one percent that the giving money to the brightest one percent will improve the lives of the poor more than direct aid. It is a bet that the history of science and the markets in the West suggest is as good as any Paulson has made in his brilliant hedge fund career.

Reader Discussion

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on June 13, 2015 at 11:49:04 am

In Economic Development circles, people sometimes compare the education practices of Africa and Asia. In broad terms, Africa has tended to focus a lot of education on a few leaders; Asia had a greater emphasis of promoting general education for the masses. There's some thought that this "spread the education resources" policy has tended to produce better results.

On the other hand, in The Great Stagnation Tyler Cowen argued that the US had already derived all the likely benefits we could achieve through mass education, and in Average is Over he basically argued that the optimal future development strategy involves promoting the productive capacity of the geniuses at the expense of everyone else's capacities.

Cowen (and McGinnis) may well be right. But we should bear these trade-offs in mind when it comes time to evaluate wealth redistribution policies.

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nobody.really
on June 13, 2015 at 14:13:15 pm

What do you think about the marginal benefit of that $400 million? I would suggest that the marginal increase in the performance of the top 1% is less that the marginal increase of performance of the middle quintile for the same money. I also think that Professor McGinnis is arguing against himself somewhat here: technology makes it possible to wring more benefit out of that 400 million by making innovative education more widely available to those who do not go to Harvard, than concentrating it in a single institution, as though it were a medieval library.

I also disagree with the notion that "Harvard and a few other elite institutions have the brightest engineering professors and students." Bright students are found in lots of places, and may not go to Harvard, or MIT or Stanford for lots of reasons: money, family, social, and personality. Those institutions may also make admissions decisions on grounds that have nothing to do with high tech potential. The notion that the elite beget the elite was a military doctrine in place since at least the Roman Republic, but geniuses like Genghis Khan realized the benefits of a more merit based approach, and his commanders, such as Jebe on the basis of skill rather than origin. Worked out okay for him.

I believe there is a great deal of potential and even genius in the proletariat (since that concept naturally arises when we begin talking about "the elite"), and I am skeptical that the admissions committee at Harvard is the optimal institution to tend the gate of America's technological progress.

Mr. Paulson can do what he wants with his money, but I am not convinced we should applaud his choice as reflecting enlightened policy.

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z9z99
on June 14, 2015 at 10:11:44 am

Aahhh Z!

McGinnis stands in awe of technology - it is his fountainhead from whence all good comes!

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bongo
on June 15, 2015 at 08:15:27 am

[…] Providing the Poor the Tools to Fish […]

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Accepting the Risks that Come with Liberty - Freedom's Floodgates
on June 15, 2015 at 12:39:25 pm

From The Atlantic’s “The Greatest Good,” by Derek Thompson:

John Paulson pledged $400 million to Harvard University's School of Engineering and Applied Sciences, the largest private donation in Harvard’s history. A month earlier, Blackstone Group CEO Stephen Schwarzman announced a $300 million donation to Yale University…. Harvard and Yale's combined endowments are more than $50 billion and growing by billions annually. "It came down to helping the poor or giving the world's richest university $400 [million] it doesn't need,” Malcolm Gladwell wrote sarcastically on Twitter…. Many people countered that Harvard is a singular fount of engineering research and technology.

But, as Vox’s Dylan Matthews (who is, overall, one of the media’s smartest commentators on effective altruism) pointed out, this counter-argument failed a certain “next-dollar” test. Harvard already has a $20 billion endowment and one of its science and engineering buildings is named after Mary Maxwell Gates and Beatrice Dworkin Ballmer—the mothers of former Microsoft CEOs Bill Gates and Steve Ballmer—whose families have collectively given almost $100 million. "This is what philanthropists like to call a ‘crowded' funding space,” Matthews wrote. "It’s wasteful to make crowded spaces even more crowded.”

In other words, the wisest question is not “What is the greatest good?” but rather “What is the greatest good where the next dollar could have the greatest impact?"

I have not found any "affective altruism" organization that identified Harvard University School of Engineering as the optimal place for making a charitable donation. Does this mean that McGinnis rejects the quantitative types of analysis conducted by affective altruism advocates?

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nobody.really

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