Good Works

• Author: Marina Primorac
• Position: Managing Editor of F&D.

Charity and social entrepreneurship are nothing new. Andrew Carnegie, John D. Rockefeller, and the Vanderbilt family helped build the cultural infrastructure of the United States. Maria Montessori, John Muir, and Florence Nightingale were early social entrepreneurs in the fields of education, conservation, and public health.

But philanthropy is becoming an increasingly important part of the fabric of the global economy. While many governments contemplate pulling back, rich people are becoming more creative and strategic about their giving, and—if Bill Gates has his way—more generous and proactive.

Warren Buffett and Bill and Melinda Gates established The Giving Pledge in June 2010: a public commitment by some of the world’s richest people to give away at least half of their wealth, which in turn is meant to inspire more giving. To date, 81 billionaires have signed on, with Buffett alone pledging $37 billion.

Philanthropists are motivating their peers to do the same, and more. Donating fortunes and solving social problems today has taken on more cachet than passing on a huge inheritance or setting up posthumous monetary contributions.

U.S. universities, from Stanford to Georgetown, from Duke to Michigan, have established courses and even centers for the study of philanthropy. One approach is to study how to increase philanthropy, to get more funds for a project. Another is how to measure the effect—the impact—of philanthropy, to get more out of giving. But there are gaps in the research: limited data are available on private giving from countries other than the United States, though anecdotal evidence tells us that it is becoming more important. For example, Li Ka-shing, a Hong Kong–based businessman and billionaire, has given away over $1.5 billion and has pledged a third of his fortune—an estimated contribution of $9 billion—to charitable causes.

How much a person gives is one thing. How much change it effects is another. So philanthropists and academics are focusing on impact—what difference a contribution makes—and the best way to measure that impact.

Gates says the private sector underinvests in innovations because investors—those taking the risk—receive only a small portion of the returns. The state has traditionally interceded to meet needs that fall between the cracks, but Gates argues that governments—at least those democratically elected—don’t take the long view and are averse to risk.

That is where the philanthropist can fill the...