Morally, it’s rather despicable for some news outlets to be essentially questioning the value of Steve Job’s life based on how much he did or didn’t give to charities, as the Washington Post does today.
Economically, it doesn’t make any sense either. My piece in the Daily Caller yesterday described the many ways that entrepreneurs like Jobs help society attain higher levels of income. But it really comes down to one thing: Jobs helped generate large profits for a major corporation in a competitive industry. Profits are net returns on investment. They are a beacon to producers and innovators that their hard work is paying off. As profits steer money and efforts toward their best uses, standards of living rise as the production of goods and services becomes ever more efficient.
Indeed, the benefits to society of Steve Jobs is far more than the cumulative sum of profits he was left with, apparently about $8 billion. Because Jobs was a high-tech entrepreneur, we’ve all probably enjoyed huge positive externalities from his innovations. Jobs and Apple shareholders probably only captured a tiny fraction of the broad social benefits generated by the firm’s investments.
The economic problem with charitable investments is that there is no solid way to know whether they pay off. If a wealthy person gives $1 million to a charitable group, presumably it will create some positive benefits. But how much is hard to measure. If the benefits are low, society is worse off because the investment could have produced a higher return elsewhere. But we don’t have the transparency or discipline in charitable markets that profits create in business markets, so it’s likely that a fair bit of charitable investment is wasted.