The Value of Philanthropy: Some Economic and Ethical Perspectives from Adam Smith to the Post-World War II Era

Abstract

This chapter discusses philanthropy from the perspective of economic theory. The aim is to deepen our understanding of philanthropy and CSR by means of this. Adam Smith, in the eighteenth century, integrated moral philosophy in his classical economic theory and gave room for altruism. From about 1870, the neoclassical economists developed formal models with the aim of deducing the conditions for optimal resource allocation. Neoclassical economists in the 1930s had the ambition of being value-free and viewed the dissociation of economics and ethics as necessary. After World War II, economists integrated moral and ethical arguments in their models. The chapter concludes by relating the stakeholder–shareholder dichotomy in CSR discourses with a corresponding dichotomy in the interpretation of Adam Smith’s ‘invisible hand’, with and without morality and ethics included.