The Great “Charity” Storm
Around 1800 in England and Russia, the three main do-gooder activities were medicine, school, and alms (= food/shelter for the weak, such as the old or crippled). Today the three spending categories of medicine, school, and alms make up ~40% of US GDP, a far larger fraction than in 1800. Why the vast increase?
My explanation: we long ago evolved strong feelings of respect for these activities, but modern context changes have allowed out-of-equilibrium exploitation of such feelings. Details:
1. Foragers who personally taught kids, cared for sick folks, and gave food/shelter to weak folks, credibly signaled their loyalty to allies, at least when such needy were allies. Weak group selection helped encourage such aid as ways to signal loyalty, in place of other possible loyalty signals. Humans eventually evolved deep feelings of respect for such activities.
2. Farmers inherited such feelings, and thus also gave social credit to those who donated money instead of time to promote these three classic charities. Rich farmer elites felt this more strongly, as they had more forager style attitudes. As such donations were less observable than forager help, farmer donors had weaker incentives to help. Also, the indirection often resulted in money being spend badly.
3. Industry era folk also inherited such feelings, strengthened by wealth. Voters today get social credit for supporting tax-funded activities that look similar to the three classic charities: medicine, school, alms — even though one can fake such signals without having the loyalty that such signals are seen as showing. That is, votes supporting spending taxes on medicine, school and alms are interpreted as showing loyal “caring” for one’s community, even though most of this spending is on typical voters, not those in special need, and even though one person’s vote doesn’t change outcomes. And even if a vote did change outcomes, paying via taxes doesn’t sacrifice personal income relative to local rivals, making this signal mostly “cheap talk.” Indirection continues to hurt effectiveness. All this creates a perfect storm of vast voter support for tax-funded medicine, school, and alms. So we can all feel fantastic about how caring we all are. Yeah us.
Maybe I'm overly cynical or ultra-capitalist - but I see both education and medicine as potentially huge positive externalities to society. From a purely selfish standpoint, spending money on either category makes my life better. Smarter people produce more, consume more, and are more likely to make phenomenal contributions to society as a whole. The same applies to healthier people (especially when compared to dead people). For every dollar I spend on the education or health care for others, I may get two dollars back (in the long run).
Alms are harder to justify. I typically see it as a guilt-effect from the realization that a not-insignificant portion of my success is due to luck (where I was born, who my parents were, being in the right place at the right time, etc.) - and that an equally significant portion of others' lack of success is likewise due to factors beyond their control. Selfishly, I can see it as an act of reciprocal altruism, but it could also just be assuaging my conscience.
As for why the contributions to these areas has increased over time - the easiest explanation is that more people have come to these same conclusions. If that's too easy, then maybe more smart people have come to these conclusions, and, after realizing that these beliefs should be universal within a society, have worked to influence others through advertising and rhetoric.
Um, what about the possibility that all three elements are functionally necessary and/or structurally demanded in modern society -- much more so than at the end of the 18th century? Never mind the motivation to supply them: could we run a modern industrial nation-state without them?
Education might be the most obvious -- our technological society requires more literates, and much more functional literacy, than in 1800.
Aside from the empathetic problems with people dying in the streets and so forth, there are practical problems with widespread misery: crime and revolution. I understand that the largest factor in the rise of mafias is the lack of other opportunities for advancement. As for the other, a dense, well educated populace is harder to keep down than a sparse, marginally literate one...
Finally, modern medicine didn't exist in 1800, and functional medicine is the kind of thing that sells itself, so that demand can be taken as given.
Insurance in general is the classic example where a "free" market simply doesn't work (due to information asymmetry). So, never mind the cruelty: the fact is that private medical insurance is naturally inefficient and wasteful compared to a government monopoly.
More generally, if you're looking for the most effective way to provide social insurance of all sorts, government -- specifically, Big Government social programs of the Great Society stripe -- is *the* sustainable, efficient way to provide them.
Finally, the functional effect of such institutions is to increase the efficiency of their society. Failure to provide functioning programs of this sort constitutes a crippling competitive disadvantage in the modern world: a population without skills, without opportunities, without basic preventative maintenance, cannot effectively support a modern technological culture.