Let Us Give To Future

18 months ago I wondered:

Franklin … [left] £1000 each to Philadelphia and Boston in his will to be invested for 200 years. … by 1990 the funds had grown to 2.3, 5M$. … Why has Franklin’s example inspired no copy-cats?

Thanks to Gwern, I now know of several copy-cats, mostly failures (quotes below). This confirms that many are willing to donate to distant future folks, but are prevented by law, largely from fears that donor funds will eventually dominate the economy. Alas, as these are the likely consequences of allowing donations to the distant future:

1) The fraction of world income saved would increase, relative to consuming not-donated resources immediately. This effect starts small but increases with time, until savings become a large fraction of world income, after which diminishing returns kicks in.

2) While funds are in saving mode, world consumption would be smaller at first, relative to immediately consuming donor resources, but then after a while it would be higher, though it might eventually fall to zero difference. When such funds switch from saving to paying out, or when thieves steal from them, the consumption of thieves and specified beneficiaries would rise.

3) As investment became a large fraction of world income, interest rates would fall, and the market would take a longer term view of the future consequences of current actions.

4) Some would change their behavior in order to qualify for benefits, according to the conditions specified by the original donors and the agents they authorize to later interpret them.

These changes seem good overall, especially if, as I estimate, the future will have many folks in need. Not only would donors actually get to do what they want with their resources, but policy-makers usually lament that savings rates are too low, and interest rates too high, leading us to neglect distant future consequences of our actions. The added consumption given to future folk is mostly stuff that would not exist if not for their donations, so it is hard to begrudge them giving to whom they wish. Our evolved instincts to resist domination makes less sense here, as “dominating” donors are long dead, influencing the world only via largely-altruistic explicit visible instructions.

Note that once physical, if not economic, immortality is feasible (i.e., paying enough lets you survive indefinitely), then original donors can stay around to manage their growing funds. Those promised quotes:

Thanks to an eccentric New York lawyer in the 1930s, [Hartwick] college … inherited a thousand-year trust that would not mature until the year 2936: a gift whose accumulated compound interest, the New York Times reported in 1961, “could ultimately shatter the nation’s financial structure.” …

Benjamin Franklin got there first. Upon his death in 1790, Franklin’s will contained a peculiar codicil setting aside £1,000 (about $4,550) each for the cities of Boston and Philadelphia to provide loans for apprentices to start their businesses. The money was to be invested at compound interest for one hundred years. .. After a portion of the funds were to be paid out for a first set of public works, the remainder was then to grow for another century—until, by Franklin’s estimate, in 1990 both cities would receive a £4,061,000 windfall from their most famous native son. …

Franklin’s experiment inspired Peter Thellusson, a London merchant and a director of the Bank of England, to even dizzier heights. Thellusson had an impressive fortune of some £600,000 by his death in July 1797, worth about $68 million today. … Most of [his] estate was to be invested at compound interest until every currently existing heir was dead, whereupon upward of £19 million would cascade onto their distant descendants. … The Thellusson will occupied courts for decades, … over one hundred lawyers [were] involved in the judgment. … “The fear was that when the trust expired these two or three mega-rich men would be able to exert a massive influence through buying up seats in the House of Commons and that they would establish dynasties of peers; worse, that others would follow suit.”

By the time the case was resolved sixty-two years later in 1859, much of the fortune had been consumed in legal fees, and Parliament enacted the Perpetuities Act barring Britons from ever attempting Thellusson’s stunt again. Perhaps, in the end, a dynastic trust that locked up money for generations simply smacked too much of feudalism for Britain’s new industrial economy. “A fortune in circulation,” explained one judge from the case, “even if spent in luxuries, waste, and dissipation, did more good to the public.” …

As the founder of what he christened “The Futurite Cult” … [New York lawyer Jonathan Holden] concluded that the earth had achieved “a stage of civilization when vested property rights will be unmolested even in the case of conquest.” … Beginning in 1936, he sluiced $2.8 million into a series of five-hundred- and thousand-year trusts [to benefit] … the Unitarian Church, … the state of Pennsylvania … [and] Hartwick College. … The trustees overseeing these immense funds would be Holden’s own children, and perhaps in turn their own descendants. …

Ten years after Holdeen’s death, in a Pennsylvania courtroom in 1977, economist Jack Rothwell laid out the Armageddon that awaited the state. … The Holdeen Trusts, he argued, would grow until “They would absolutely own the world.” “Any time you wanted to make a telephone call or take a trip…You would be paying money to the Holdeens,” added economic forecaster Michael Evans. “Everyone in the world would work for the Holdeens.” …

Within his own lifetime, Holdeen’s plans nearly disappeared into a maze of lawsuits. … The trusts, the IRS argued, would in any case wreck “the tax base of the nation, if not the world.” … The funds … survived a number of early challenges. Their survival owed much to their being more high-minded than Thellusson’s scheme for enriching his family. Although nearly all states had perpetuity laws like Britain’s, there was more leeway given to charitable trusts like Holdeen’s. One hundred-year account, set up by suffragette Anna C. Mott, dumped $215,000 on Toledo in 2002—rather more than the thousand dollars she started with—and similar funds were created in the 1920s to relieve Britain from its national debt. In 1919, the Indiana legislature even passed a law to allow a charitable five-hundred-year [non-growing] trust by Charles Fairbanks, an Indiana senator who had also served as vice president under Teddy Roosevelt. …

Eventually the Holdeen trusts were allowed to stand, but they paid out yearly instead of accumulating and compounding. The matter was not truly settled until 2005, a full ninety-two years after Jonathan Holdeen first wrote his will. That was when Haldis Holden MacPherson, the sole surviving original trustee, died in Poughkeepsie. …

The past can dictate the terms of a will, but the future dictates who it actually cares to remember. And so it is that Jonathan Holdeen—the man whose trusts were once said to threaten the U.S. economy with annihilation—does not have so much as a picnic table named after him. (more)

Added 3p: Tyler argues that, unless catastrophic risks are large, investment returns may fall below growth rates. Yet historically, investment returns have consistently exceeded growth rates.