Discounting for patient philanthropists

Abstract

Philanthropists must decide to what extent to spend their resources on present philanthropic projects and to what extent to invest them for use on future philanthropic projects. Furthermore, when a philanthropist aims to provide public goods for which he is not the only funder—and, in particular, when he and the other funders have different rates of pure time preference—he must consider the ways in which his spending schedule affects that of the good’s other funders. I investigate some features of the resulting discounting problem in a relatively general setting in which the cost of the public good, the interest rate, and the discount rate can vary and covary arbitrarily over time, and in which the patient philanthropist has the opportunity to subsidize future spending by his less patient partners (if any). In the presence of other funders, I find that the patient philanthropist often does best to exclusively invest he is wealthy enough to fund subsidies which implement the patient-optimal funding schedule, and that the relative gains to doing so increase without bound as the relative wealth of the patient philanthropist decreases to zero. Finally, I explore how the model interacts with discussions among philanthropists regarding the optimal timing of (a) direct efforts to improve near-term human welfare and (b) efforts aimed more directly at increasing the expected value of the long term. In both cases, I conclude that standard assumptions imply that patient philanthropists should invest most of their resources in most circumstances.