1980s AD

National Review, August 31, 1992 by Richard B. McKenzie

When measured per capita, individual giving and corporate giving both followed the same pattern that we have already observed. Total per-capita giving in real dollars expanded relatively rapidly in the late 1950s and 1960s, rising from $208 per person in 1955 to $324 per person in 1970. Percapita giving dropped as a result of the economic slump brought on by the OPEC oil-supply shocks in the first half of the 1970s, but remained within the range of $308 to $343 for the rest of the decade. Total per-capita giving then began rising markedly in the 1980s, from $340 in 1980 to $486 in 1989. The annual compound growth rate over those years-4 per cent a year--is robust when compared with the 2 per cent average annual increase in the 25 years prior to 1980.

The same trends are observed in charitable giving as a percentage of national income. Charitable giving has never absorbed more than a very small fraction of national income in the United States, remaining below 3 per cent of national income between 1955 and 1989. However, total giving as a percentage of national income began a marked decline in the 1970s, and made a marked turnaround in the late 1970s and continued generally upward throughout the 1980s. Specifically, total giving as a percentage of national income rose irregularly from 2.3 per cent in 1955 to 2.5 per cent in 1970, only to fall to a low of 2.1 per cent in 1979. By 1986, total giving as a percentage of national income had surpassed its former high; it reached 2.7 per cent in 1989.

The unusual surge in giving in the 1980s could be explained in part by favorable changes in economic conditions during the decade. It might be said that Americans were giving more not because they were more charitable, but because they had higher incomes and varying tax rates. Some also point to a long-term upward trend in giving that could be attributable to a host of difficult-toquanlify factors, such as changes in religious convictions. Thus it might be argued that the growth in giving in the Eighties was merely an extension of economic changes and historical trends.

The Real Reason

BUT IF that were the case, a statistical analysis of the economic determinants of total, individual, and corporate giving for the 1955-80 period should have predicted actual levels of giving in the 1980s. That was not the case.

Giving in real dollars is directly related (to a statistically significant degree) to real GNP per capita; to the tax rates; and to the population. The levels of total real dollar giving by year were computed for the Eighties, using the regression formulas developed from 1955-80 data, and the predicted total giving is shown by the dashed line in the second graph on p. 53.

But the actual real level of total giving during the 1980s was higher in every year than would have been predicted from the statistical relationships established in the 1955-80 period. Indeed, actual total giving exceeded predicted total giving by an annual average of $14 billion, or by 16 per cent. Real individual giving exceeded predicted real individual giving by an annual average of $13 billion, or 18 per cent.