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Beyond homo economicus: the prosocial brain & the charitable tax deduction.

3. Identity salience and persistence

Compared with compulsory tax transfer allocations, the deduction also better integrates identity salience and persistence into indirect government subsidization of public goods. Because giving often directly involves reputation and personal identity, distributing resources in ways that foster or preempt such dimensions will generally yield disparate outcomes. Empirical data suggest that individuals act more generously when actions are observed than when they are anonymous, (228) and that face-to-face solicitations elicit higher donations than those made through impersonal means. (229) The effectiveness of campaigns to harness "conspicuous compassion," such as wearing pink ribbons, yellow bracelets, or red poppies further highlights this effect. (230) Whether to cultivate a positive self-image, (231) avoid damaging social relationships (232) or achieve other ends, (233) identity plays a central role in altruistic giving.

Neuroscientific research corroborates these findings. In one experiment, researchers used functional magnetic resonance imaging (fMRI) to scan the brains of donors while they freely decided whether to donate to various actual charities or to keep the money for themselves. (234) The researchers added another dimension by introducing outside observers while the donors decided whether to give. When individuals were being observed, there was significantly higher activity in regions related to reward processing (right and left ventral striatum) when participants decided to give compared with controls. In other words, giving is more rewarding when personal reputation and social judgment are salient. (235)

In this manner, the deduction provides an incentive that can attach to persistent and salient forms of social identity. In one's social milieu it may be respectable to donate to Boys & Girls Clubs, patronize the arts, or promote cancer research. Different donation targets carry divergent reputational weight in different networks and communities, and can encourage public goods transfer in more specific, socially relevant ways. Even if donations serve to advance one's self-image or social reputation rather than promote pure altruism, these acts can strengthen social cohesion, establish prosocial norms, and promote patterns of behavior through example. Since public perceptions of legitimacy and motivation to contribute public resources remain relevant tax policy concerns, (236) tapping into identity salience, personal values, and duties is germane to societal welfare because the motives and means by which individuals transfer public goods can carry distinct social benefits.

B. Prosocial Behavior and Reinforcement

To connect charitable processes and decision-making to the unique features of the charitable deduction, it is important to understand how the effects of current decisions extend beyond the immediate conditions of transfer. Treasury efficiency presumes that the deduction only impacts the current amount a donor decides to give, and that the deduction does not create new value outside of the increased amount of goods donated, does not change other people's giving patterns, and does not strengthen social networks or giving habits. Indeed, the deduction has a one-off effect, the impact of which is restricted to the price-based decisions of the donor.

By contrast, advances in psychological and particularly neuroscientific research suggest that such a characterization is overly restrictive. Historically, it has been relatively uncontroversial that engaging in specific iterative actions, including altruistic or prosocial ones, often socializes people in particular ways. (237) Indeed, observers of the human condition have intimated as much for millennia. (238) More recent research builds upon these observations to show that iterative actions rarely leave an actor's identity, future behavior, beliefs and preferences untouched. (239) It is possible that "engaging in the initial prosocial behavior changes the actor's self-perceptions ... [and] attitude about helpfulness," (240) alters personal norms, (241) and strengthens empathic responses. (242) Passive observation of prosocial behavior tends to increase like behavior in the observer, (243) while interactive prosocial action tends to increase later prosocial habits, even in longitudinal samples. (244) Increased volunteering, for example, correlates with increased moral development and belief in one's personal responsibility to help. (245) Prosocial behavior may also portend specific welfare gains to one's community. (246)

However, while it may seem plausible to most policy analysts that the relationship between tax policy and acts of charity is more complex than a one-time economic exchange, inadequate public provision, or sensitivity to price, actually correlating vague benefits to substantive tax measures may appear unrealistic or unworkable. Fortunately, innovative research is expanding our knowledge of the mechanisms underlying prosocial behavior, altruism, and social capital at the neural and chemical level. (247) Said research provides more detailed, sophisticated means of identifying a broader range of effects stemming from charitable decision-making and the deduction in ways amenable to policy analysis.

1. Neural functions

Formerly, examining or testing complex phenomena such as altruism, cooperation, or reputation has been largely restricted to sociological, philosophical, or social psychological study. Yet groundbreaking developments in neuroimaging, brain stimulation, electron recording, and neurochemical manipulations have significantly expanded the means with which we can examine social behavior, motives and interpersonal dynamics. (248) In particular, neuroscientists have done extensive research correlating prosocial decision-making and behavior to activity in specific regions of the brain. (249) For instance, neuroimaging reveals that when individuals donate, reward regions show preferentially greater activity. (250) These same regions are implicated in other rewarding behaviors, such as drug use, (251) romantic love, (252) attachment, (253) and positive interaction. (254) In other words, altruistic motivation may rely, at least in part, on identifiable neural correlates of reward.

Still, not all forms of charitable giving may be equally rewarding. For instance, in one study, individuals were scanned using fMRI while they either voluntarily made donations to charities or executed compulsory, tax-like transfers. (255) They found that neural activation in reward areas increased with both voluntary and coerced transfers, but significantly more so in the case of the former. (256) Moreover, these reward regions are implicated not just in "feelings of pleasure" but, more importantly, in behavioral reinforcement and learning. These results suggest that voluntary giving is not only more rewarding, but also has a greater potential for becoming a reinforced habit. They are also consistent with research showing that voluntary more than compulsory contributions and cooperation better strengthen social networks and increase future willingness to give. (258)

In addition, there is neural evidence that individuals continue to care about their philanthropic goals even after donating. For example, Kuss et al. had subjects either receive money or donate to charity, after which the donation was eliminated, or the money taken away from the participant--all while the researchers scanned their brains to assess how participants reacted cognitively. (259) They found that a reward prediction signal representing surprise and disappointment occurred after both a loss to self and a loss to one's preferred charity. (260) This suggests that individuals continue to care about the impact of their gift, as they do about keeping earned money, and that this enduring prosocial concern may be identified in a shared neural substrate. This evidence may provide some neurological basis to explain why donors are willing to expend time and effort to ensure that their contributions are used effectively and as intended. (261) It may also supply preliminary groundwork for future means of ascertaining what monetary value, if any, such concern might entail. Crystallizing and then connecting a biological marker for post-donative monitoring to the macroeconomic benefits of said monitoring would enable tax policymakers to thereby connect particular tax incentives to specific salutary outcomes.

Besides implicating reward regions, charitable giving, and altruistic behavior also appear to implicate neural correlates linked to empathic response, perspective-taking, self-control, social influence, and human attachment. In decisions to give, individuals must usually make a sacrifice and overcome the enticement of selfish ends to advance the well-being of others. This requires mental exertion, as evidenced by neuroimaging data of altruistic decisions to give that are costly. (262) Individuals do not just select a level of public goods that satisfies a certain utility function, but instead appear to employ frontal regions of the brain that prioritize abstract goals, such as the welfare of others, above selfish or immediate gains. (263)

These facts suggest that charitable giving is more complex than merely executing an internal preference set; instead it often involves some cognitive antagonism between self-interested input on the one hand, and altruistic motives on the other. In fact, neural regions involved in empathy and prosocial behaviors are integrated into the overall decision to give. (264) One key neuroimaging study indicates that the subgenual/septal area is recruited in charitable decision-making. (265) Figure I shows that both (a) reward regions and (b) areas implicated in empathy are active during decisions to give--evidence amenable to more nuanced measurements and analysis than conventional neoclassical economic methods. (266) In particular, this study suggests that different cognitive dimensions of giving may respond differently to incentive types and frameworks.

The study is also important because it connects charitable giving with other prosocial behaviors. The subgenual/septal area is implicated in trust, (268) prosocial sentiment,269 perspective taking, (270) and caring for loved ones. (271) As charitable giving can be neurobiologically linked to these phenomena, such knowledge can guide policymakers in better crafting incentives to increase charitable giving. Moreover, as illustrated in Figure 1(c), that the subgenual/septal area is more involved when decisions are costly may indicate that this area is relied upon to overcome selfish interests. If donating requires exerting additional cognitive effort at each decision to give, an individual's capacity to advance the welfare of others, even when aversive or unpleasant, may partially differentiate selfish and altruistic decisions.

Combined, such evidence suggests that frontal, reward and septal areas of the brain serve as mechanisms that mediate, at least in part, the influence of initial decisions on subsequent behavior, preferences, and social interaction. These findings are also consistent with the broader literature indicating that brain circuitry and morphology are far more plastic than previously assumed. (272) Studies in neural plasticity demonstrate that repeatedly engaging certain behaviors can strengthen corresponding neural connections, activity, or functioning. (273) Undertaking iterative patterns of interaction or behavior has been shown to change brain connectivity or even gray matter volume in regards to navigational experience, (274) musical proficiency, (275) and motor skills. (276) In terms of prosocial brain plasticity, research indicates that iterative prosocial behavior or interaction can modify neural connections, (277) increase the rewarding character of particular behaviors, (278) foster prosocial bonding, (279) and alter the weight individuals place on the well-being of others. (280) These results also appear to confirm psychological and sociological evidence on the effects of prosocial behavior and habits. (281)

2. Neurochemical dimensions

Further evidence connecting the deduction to specific societal benefits comes from research on the neurochemicals dopamine, oxytocin and cortisol. Dopamine is a key neuromodulator that acts as a prime factor in motivation and learning for both basic and social rewards. (282) Indeed, much of the activity in reward regions implicated in altruistic and prosocial behavior appears to be mediated partly or entirely by dopamine. (283) As such, it plays an important role in cognitive processes underlying cooperation, charitable giving, reputation and other social behaviors. Far from just a "feel good" chemical, dopamine acts to reinforce seeking behavior towards a broad array of substances and experiences ranging from cocaine to effective social cooperation. Just as drug use and other pleasure-inducing activities reinforce behavior, so too can social interactions. (286) Indeed, activities as diverse as social cooperation and norm conformity implicate dopamine and reward systems. (287) Dopamine also plays a direct role in social habit-formation, and appears to reinforce trust and prosocial behavior. (288)

Neural and neurochemical data linking the functions of dopamine and reward regions to charitable giving may be particularly useful for improving upon traditional economic construals of charitable motives and behavior framed in terms of "psychic utility." For instance, various scholars have suggested that the utility of giving is tantamount to that derived from obtaining standard economic goods, and can be modeled as such. (289) They have criticized the deduction as merely subsidizing donors in obtaining "warm glow" or "guilt relief"--equivalent to the utility of purchasing a "bag of Ruffles" potato chips. (290) It is easy to draw such conclusions because of the inherent difficulties of fitting complex altruistic behaviors into self-interested utility functions. (291) While rational choice models theoretically take "people's tastes as given"--individuals may be "altruists, sadists, masochists ... or solely concerned with advancing their own material interests"--in reality they tend to "proceed to ignore all motives other than material self-interest" in modeling actual behavior.

As such, attempts to rationalize altruistic behavior in economic terms can easily skew or constrain descriptive analysis by framing donations as sources of psychic utility or fuzzy feelings equivalent to those of buying a new car or pair of shoes. Under such view, it would be far more difficult for policymakers to justify treating charity as distinct from other forms of consumption, and thus deserving special tax treatment. Furthermore, when economists presume to capture the significance of charitable motivation dynamics under the rubric of "warm glow" or psychic utility, they may easily, albeit problematically, overlook additional welfare value arising from said dynamics. (293) However, parsing the underlying neurochemical components of charitable giving can help preempt unwarranted conclusions and provide policymakers more sophisticated, tractable alternatives to vague units of "psychic utility" and "moral satisfaction." (294)

In addition to dopamine, other neurochemicals such as oxytocin and cortisol provide important biological markers that can inform policymaking, and serve as physical links between structural dimensions of the deduction and related positive externalities. Oxytocin, for instance, is an important hormone in the nervous system shaping human attachment, affiliation and trust. Prosocial and affiliative interaction can elicit internal oxytocin release in human beings, (296) such as caring for one's child, viewing a loved one, and experiencing romantic relations. (297) Oxytocin also appears to mediate positive feelings associated with comfort, safety, interpersonal touch, and increased trust.

Not only do certain behaviors and types of interaction initiate oxytocin release, but oxytocin release appears to foster prosocial behavior as well. One study found that individuals infused with oxytocin who face decisions to donate are 80% more generous than those given placebo. (299) Moreover, increases in oxytocin induced in laboratory settings augment empathic feeling, enhance accurate judgments of others' emotions, foster prosocial learning, and increase willingness to trust others. (300) Donors infused with oxytocin are also substantially more generous towards philanthropic organizations, and not just towards individuals. (301)

Prosocial, neurochemical processes may be particularly germane to the structural advantages associated with autonomy, dynamism, and identity salience. For instance, individuals show higher levels of endogenous oxytocin when others reciprocate or cooperate despite the possibility of defection. (302) One key experiment allowed individuals to voluntarily give monetary transfers that exhibited trust where risk of defection was either possible or not possible. Individuals who were recipients of the trustful giving where defection was possible exhibited a 41% increase in levels of plasma oxytocin over those who just received automatic, risk-free transfers. (303) This process may apply to a donative setting where a donor risks giving to a local community group, church, cooperative, or homeless shelter that can "defect" by misappropriating funds, and where a donor can "defect" by not giving in the future. Such dynamics may offer increased possibilities for developing more trusting or cooperative associations than those where such opportunities are preempted or simply bypassed as in centralized resource distribution. (304)

Furthermore, research on cortisol, prosocial behavior, and physical and mental well-being substantiates the claim that preferences for altruistic giving involve more than just the quantity of public goods provided, and that the charitable deduction does more than just increase the amount a donor is willing to give. Cortisol is a stress hormone that increases in response to anxiety and stress. (305) Chronically high levels of cortisol are linked to various psychiatric disorders and poor health outcomes. (306) Nonetheless, reducing cortisol to healthy levels can mitigate these deleterious health effects. (307) In fact, extensive research demonstrates that engaging in prosocial acts can reduce high cortisol levels, and improve health outcomes. (308)

One of the more prominent of such acts is charitable giving. Laboratory tests indicate that giving to others significantly reduces cortisol, but only in voluntary conditions of giving. (309) These results are consistent with findings that charitable giving correlates with subjective reports of happiness and good health. (310) If the charitable tax deduction increases voluntary giving, individual levels of cortisol may thereby be affected, yielding salutary health outcomes relevant to social welfare. Cortisol may thus provide yet another possible marker linking the deduction to specific social welfare benefits. Indeed, as future research develops even more advanced methods of identifying key mechanisms related to subtle benefits of the deduction, (311) tax policy will likely need to depend less significantly on traditional neoclassical economic assumptions and analysis.


A. The Concept of Externalities

Neuroscientific and psychological research offer key improvements over economic approaches that rely on limiting assumptions and neglect significant benefits of the deduction. Translating the research into material fit for policy analysis and quantitative measurement, however, is another matter. To do so, it will be useful to employ externality or spillover analysis. (312) Externalities constitute useful economic characterizations when transactions, behaviors, or decisions involve welfare gains or losses that accrue outside the immediate transaction or exchange, (313) but which are not fully accounted for or recognized by the agents producing them. As illustrated in Figure 2(a), externality analysis is generally used to ascertain whether a party should subsidize or bolster production of an underproduced good with positive externalities, and charge or diminish the production of a good with negative externalities. (314)

Nevertheless, in the present case the goal of using externality analysis is different in that it aims to determine whether already existing social benefits of the deduction are being fully incorporated in tax policy appraisals, as illustrated in Figure 2(b). Rather than ascertain the presence of market or government failures, or whether a particular good is underproduced or underconsumed, the relevant question here is whether the current methods of measuring the benefits of the charitable tax deduction are exhaustive. Treasury efficiency, for instance, accounts solely for the treasury efficiency marginal benefit (TEMB) of the deduction, rather than its comprehensive societal marginal benefit (CSMB). (315) By presuming that TEMB and CSMB are tantamount, prevailing methods of assessing the value of the deduction ignore positive externalities consequential to tax policy.

B. Positive Externalities of the Charitable Tax Deduction

The peculiar structure of the charitable tax deduction harnesses specific positive externalities that should be identified, measured, and included in any cost-benefit analysis of the deduction. (316) These positive externalities include improvements in (1) social networks and generalized trust, (2) altruistic habits, (3) norm enforcement and compliance, (4) charitable contagion, and (5) health outcomes. The externalities pertain generally to valuable forms of human capital or the capital stocks of skills, habits, decisions, or networks that can be developed to produce economic value. (317) Improvements in these sets of competencies, knowledge, and attributes of individuals can be highly valuable to an economy or society, and mutually reinforcing. (318) These externalities also implicate social capital, or the strength of particular social networks and generalized trust in society, and its related societal benefits. (319) They are amenable to robust measurement, (320) and although perhaps negligible at the individual level, can be considerably valuable in the aggregate.

The externalities enumerated here apply not only to charitable giving and altruistic behavior, but also to those tax incentives such as the deduction, which evidently augment the frequency of charitable giving or level of generosity. Although attempts to distinguish specific positive spillovers of the charitable deduction for purposes of law are comparatively sparse, (322) such attempts are part of a substantial literature. Namely, extensive research demonstrates that specific foreign direct investment (FDI), homeowner, and energy efficiency tax incentives often yield significant positive spillovers in greater technology and R&D, (323) reduced property depreciation and neighborhood crime, (324) and lower environmental risk and harm, (325) respectively.

In the present analysis, psychological, sociological and particularly neuroscientific research offers substantial evidence linking the charitable tax deduction to specific, yet previously neglected positive externalities. Although not econometrically measured here, (326) the causal effect of the charitable giving subsidy on the outcomes associated with the additional externalities can be further identified statistically using, for instance, variation in the charitable giving tax subsidy rate at the state and year level in a differences-in-differences quasi-experimental research design. Measures of the outcomes could be related to charitable giving tax subsidy rates in a multiple regression that controls for state and year dummies to account for confounding variables, endogeneity, and unobserved factors that could be correlated with tax subsidy rates. In this way, said analysis could corroborate neurobiological and psychological evidence pertaining to the deduction. For now, available evidence amply demonstrates that future charitable tax policy warrants broader assessment of these and related positive externalities than treasury efficiency and third sector theory offer.

1. Social networks and generalized trust

The charitable deduction can indirectly augment the strength and number of social networks, and improve generalized trust. Social capital exists largely in relationships, consists of interaction, commitments, and social bonds, and can be measured in terms of density or number of networks among individuals. Social networks are significantly valuable to an economy and society (329) because they facilitate the flow of information, signal opportunities, and better mobilize resources. (330) The deduction fosters these gains because, rather than preempt or replace the organic development of horizontal networks during public goods transfer as a compulsory, centralized transfer scheme generally does, the deduction "draws individuals into the public sphere" to initiate or foster these networks. (331) Individuals often create or deepen social networks inadvertently as they seek to perform tasks requiring collaboration. Being a donor to a cause because of shared objectives can build a sense of fraternity with other community members as they collectively seek to ameliorate problems or address specific medical, humanitarian, artistic or other philanthropic needs. (332)

Channeling government resources through the deduction can also improve information flow, and better match resources with more effective means of public goods delivery, thereby reducing transaction and other costs. (333) It can establish networks that provide ongoing structures for future collaboration. (334) There is also a notable correlation between the strength and breadth of one's social networks and one's generosity. (335) Donations of goods, services, and even plasma and blood have been found to increase donor identification with and support for charitable organizational goals, which, in turn, often augment future giving. (336) Indeed, a compounding effect can occur in which the stronger and deeper an individual's social networks become, the greater her likelihood of donating to charity, and vice versa, thereby stimulating a generosity--social capital feedback cycle. (337)

Government policies such as the deduction are also apt to enlarge generalized trust by encouraging citizens to initiate voluntary resource transfers or engage more fully in their communities. (338) By encouraging cooperation in networks of civic engagement and prosocial action, the deduction can strengthen social capital. (339) Indeed, giving time or money to causes involving diverse ethnic, socio-economic or age groups is considered a "hallmark of generalized trusters." (340) Increased generalized trust is highly valuable in terms of improved economic growth, (341) and greater redistribution of wealth. (342) Citizens with higher generalized trust participate in civic duties (343) and initiate cooperative endeavors at higher rates. (344) Societies with higher levels of measured trust exhibit less government corruption and crime, more democratic stability and reduced transaction costs. (345) Conversely, communities with low generalized trust exhibit lower public goods contribution rates and less citizen willingness to engage with others beyond immediate kinship and ethnicity. (346) The previous discussion of neurochemicals and correlates demonstrates, in part, how underlying processes involved in building social networks and generalized trust can be identified at the neural level, making them potentially more amenable to measurement and evaluation. (347)

2. Altruistic habits

Institutions and incentive structures that foster prosocial dispositions can be of great value to both individuals and communities. As a form of human capital, prosocial dispositions are developed through charitable and other social interactions to produce sets of skills, attitudes, and preferences that enhance aggregate welfare. (348) These benefits come not in the form of improvement of labor performance per se but instead in value to communities and relationships as well as mitigated costs from antisocial behavior. (349) The positive impact of increased prosocial preferences and behaviors can be measured by econometric and other calculations; conversely, it is possible to correlate charitable volunteering and donations, since they are general complements. (350) For instance, although there is no explicit tax deduction for volunteer labor, (351) research shows that charitable subsidies indirectly increase volunteering as a byproduct of increases in monetary donations.

Research also indicates that charitable giving and repeated altruistic acts can generally foster long-term prosocial attitudes and preferences/53 The deduction does not merely provide a purchase discount where donors can consume more public goods; rather, it encourages individuals to more fully invest in a particular community group, a local homeless shelter, or a breast cancer center on behalf of their loved ones. For instance, research on blood donations shows that motivation to give often changes over time, and that iterative giving can foster greater prosocial behavior and thus become a "good habit." (354) Examining the motives of blood donors, Ferguson et al. find that after engaging in multiple acts of giving, individuals show greater trust and concern for the welfare of others, which "sustain[s] ... helping toward all people regardless and indeed may be reinforced from the act of helping itself." (355) At the neural level, researchers have found that encouraging prosocial helping and feelings of compassion in laboratory settings can easily extend to everyday behavioral domains, and lead to long-lasting changes in altruistic preferences and behaviors towards a broader range of people. (357) In such cases, scientists have identified altered activations in brain regions associated with empathy, other-concern and prosocial behavior, thereby offering evidence for neural plasticity in the brain circuitry mediating altruism. (358)

These findings cohere with numerous other studies showing that prosocial interaction can become habituated, altering individuals' social value orientation and preferences for altruism. (359) Admittedly, not all forms of prosocial behavior may be equally amenable to habituation and lasting concern for the welfare of others or one's community. Nor is all charitable giving equally altruistic or prosocial: some gifts may be motivated by altruism as well as reputation, self-esteem, or additional considerations. (360) Strictly enforcing quid pro quo deduction restrictions and reasonably assessing which organizations qualify as charitable may therefore be a useful means of strengthening the deduction's potential for altruistic habituation. In any event, evidence suggests that acting on even partially altruistic motives often encourages donors to shift gradually from narrower scarcity to broader sharing mentalities, (361) and to identify more empathically with community causes and groups. (362)

Individuals with stronger prosocial orientations also tend to take into account the impact of their actions on second and third parties more rigorously than those with less prosocial orientations. (363) In terms of real- life experiences, increased social awareness and other-concern is correlated with heightened civic involvement and political participation. (364) Greater prosocial orientations have also been found to significantly reduce particular antisocial costs to society, such as those related to illicit drug use, (365) aggression, and violence. (366) They have even been linked to reduced criminal behavior. (367) For instance, prisons and criminal reform programs that require volunteering and charitable service show lower recidivism rates than when other types of rehabilitation are employed. (368)

As to the value of such changes, even small behavioral improvements can be significant. Although further research integrating the biology, sociology, and econometric analysis of prosocial dispositions is required, preliminary evidence suggests that the cost of crime, injury, property damage, loss of life, incarceration, policing, and other associated costs of antisocial behavior in the United States may reach as high as $3 trillion annually. (369) Given the substantial costs of crime and antisocial behavior, any diminution in antisocial tendencies or increase in prosocial behaviors could non-negligibly reduce social costs. Similarly, as the above neurochemical studies suggest, increased prosocial dispositions can, in turn, elicit greater future generosity. (370) To directly measure the effects of the charitable deduction on these behaviors, appropriate measurements of reduced crime, drug use, and antisocial behavior, as well as increases in civic-minded behaviors, could be examined using detailed information on household giving correlated with these variables. (371) Similarly, questionnaire responses or conviction rates for illicit drug use, rape, theft, or other criminal acts could be measured along with charitable giving behavior to extrapolate the association between deduction policies and specific community outcomes. (372)

3. Norm enforcement and compliance

The deduction can also provide positive externalities in the form of enhanced nonprofit and philanthropic norm enforcement and compliance. In experimental economic games, individual participants' willingness to enforce norms that overcome opportunistic behavior or freeriding can prove valuable when undertaken voluntarily and without compensation. (373) Such motives usually derive from commitments to fairness, equality, or reciprocity. (374) These efforts translate into informal punishments and rewards that alter others' behavior and generally increase collective welfare. (375)

The charitable deduction may harness these dynamics in ways that direct government allocations cannot by allowing individuals to select causes, groups, and missions to which they feel personally attached and committed. (376) When consumers purchase something, they care that the product delivers on its promise. Dissatisfaction with the product often yields complaints and returned merchandise. Voluntary donations capitalize on a similar concern that is redirected from personal welfare towards that of others. Such ongoing interest can redound to the benefit of society inasmuch as donors exert additional effort, without cost to government, to ensure effective delivery of goods and services. (377) Certainly not all donative gifts will be observed closely, but the added, relatively inexpensive monitoring value of even a few million or hundreds of thousands of donors would be substantial. The deduction can thus yield positive externalities involving opportunities to share information, withhold future funds, and informally promote efficiency of public goods distribution.

4. Charitable contagion

A potential oversight in treasury efficiency analysis is the presumption that donors can be adequately modeled as individual consumers of public goods whose decisions are divorced from those of other donors. (379) Such isolated evaluation ignores the possibility of charitable contagion, where one donor's decision to give influences the generosity of others. As the research above illustrates, social judgment significantly influences altruistic decision-making. Sociological and psychological data indeed confirm that donors influence the giving behavior of both acquaintances and family members. (380) There is a strong correlation between an individual's level of generosity, and that of her peers. (381) Individuals who receive information that a particular peer has donated to a charity are, themselves, more likely to donate. (382) Field experiments demonstrate that informing individuals of the generosity of their peers or friends increases the amount they themselves tend to give, generating positive social reinforcement. (383) In the aggregate, generous, as well as stingy, social behavior tends to spread quickly through social networks. (384) One study measured the spread of altruistic norms by isolating the influence of simply sitting next to a co-worker who either donated or declined to give. (385) The researchers found that a one-dollar increase in donation by one worker correlated with an increase of fifty-three cents in the amount an adjacent co-worker gave. (386)

In addition to influencing peers, changes in individuals' charitable decisions may also significantly impact how much their family members give. (387) Alterations in parental levels of charitable contributions modify the giving patterns of their offspring, even while controlling for income, praise motivation, and other confounding factors. (388) Econometric analysis confirms that the strongest predictor that a child will be a generous future donor is his or her parents' current contribution level. (389) Researchers have also employed specification tests, regressions, field experiments, and other methods to show that transmission of parental giving patterns is robust. (390) Yet, most economic studies on the intergenerational effects of wealth transfer focus primarily on debt and Ricardian equivalence, rather than address the significance of intergenerational effects for charitable tax policy. (391) Moreover, treasury efficiency and third sector analyses ignore these effects when calculating the deduction's value, (392) although these effects represent sizable contributions to aggregate welfare.

5. Health outcomes

Charitable giving, volunteering, and altruistic behavior impact health outcomes as well, which have discernible consequences for societal welfare. (393) Altruistic behavior is directly and positively correlated with salutary psychological and physical health, both at the time of giving and years later. (394) Generous levels of giving and volunteering are associated with longer life expectancies and better physical functioning. (395) At least in part, these effects appear to be mediated, directly: giving has been shown to reduce stress hormones, such as cortisol, that contribute to greater rates of psychiatric disorders, disease, and morbidity. (396) Experimental research also shows that generously contributing to others significantly increases protective antibodies vital to immune system functioning. (397) In addition, prosocial behavior increases oxytocin levels, which in turn have been found to have salubrious effects such as reduced depression, anxiety, blood pressure, and cardiovascular risks. (398)

The monetary value of health improvements depends on numerous factors besides reductions in stress hormones and increases in prosocial behavior. Moreover, at the individual level, the economic gain related to health and prosocial giving linked to the deduction may be modest. When the effects on millions of citizens are aggregated, however, said gains will likely be substantial. Even marginally improved health, longer life expectancy, and fewer illnesses have strong positive and statistically significant effects on economic growth, productivity, and social welfare. (399) For instance, healthier workers tend to be more mentally robust and productive, (400) while individuals with ill health have significantly longer intervals of unemployment, more lost labor time, and lower wages. (401) Estimates correlate an extra sick day per month with a 1% decline in the hourly earnings of male workers in the wage sector and a 3% decline among the self-employed. (402) One study found that suffering from diabetes, asthma, stroke or cancer tends to appreciably reduce employment and thus labor productivity. (403)

The influence of increased giving due to the deduction on health outcomes can be conclusively measured. Analyses of the interrelationship between health, productivity, and economic welfare have been conducted at individual, regional, and national levels. (404) Health assessments, such as the General Health Status (GHS) and Activities of Daily Living (ADL) surveys, predict future morbidity, mortality, and wellness (405) and could easily incorporate the effects of charitable giving into their assessments. Edward Miguel and Michael Kremer's analysis of the spillover effects of deworming treatments in Kenya provides another useful model. (406) Finally, Baris Yoruk uses multi-year data of household giving, health status, and other variables from a philanthropy panel study of 17,970 samples to compare charitable giving's impact on health outcomes. (407) He found that, compared with controls, those who give to charity have noticeably higher scores on standard health indexes. (408) The study indicates that increases in the charitable subsidy rate lower the probability of suffering from health problems such as lung disease, arthritis, and emotional disorders. (409) The author concludes, "[F]urther expansions in the subsidy to charitable giving not only would increase the amount of charitable donations but also may positively affect the health status of the individuals in the United States." (410)

As such, even controlling for income, geographic, and other confounding factors, tax subsidies for charitable giving can have positive spillover effects on health outcomes, healthcare costs, and economic productivity. Improved health outcomes, like improvements in social networks, trust, altruistic habits, norm enforcement and compliance, and charitable contagion, are directly relevant to measurements of the deduction's impact. These externalities accrue directly to donors, beneficiaries, and third parties, and indirectly to society through general improvements in social welfare. Moreover, unlike a direct grant or public goods allocation, the costs of said externalities fall disproportionately on the donor, above all other taxpayers combined. (411) Overlooking such externalities or relying solely on treasury efficiency or third sector approaches leaves the deduction more vulnerable to criticism and calls for reduction or elimination than a fair assessment of the evidence warrants.

C. Potential Criticisms

1. The peril of instrumental rewards

Despite well-founded evidence for additional neglected externalities that are generated by the deduction, some outlying concerns may linger. For instance, a few scholars have characterized financial subsidies for charity as misdirected or counterproductive. (412) Others have conjectured that subsidizing charitable or selfless giving tarnishes its virtue. (413) A more germane criticism might suggest that financial incentives such as the deduction could undermine key externalities identified here. Although many economists and policymakers view financial rewards as unambiguous sources of behavioral reinforcement, (414) some have argued that financial incentives can have unintended behavioral consequences. (415) Richard Titmuss famously claimed that monetary incentives could decrease willingness to donate blood, (416) while others have suggested that incentives may crowd out intrinsic motivations, (417) shift an individual's perspective from a social to monetary frame, (418) or dilute the signaling value of prosocial behavior. (419)

Although the behavioral effects of incentives should not be taken for granted, it appears that said criticisms are of limited concern to the present analysis. First, numerous studies confirm that financial incentives can, and do, foster prosocial behavior and motivation. (420) Second, regarding the question of intrinsic motivational crowd out, psychologists have criticized these motivation theories' measurements, experimental validity, and binary character. (421) Third, it is questionable whether the experimental extrinsic motivators predominantly employed in the relevant literature--cash offers in advance of performance--accurately resemble the motivational characteristics of the charitable deduction. Governments use myriad tools to foster specific behaviors; it is unjustified to presume that every tool influences social and behavioral responses in uniform fashion. (422) In fact, psychological data indicate that alternative indirect financial incentives, such as reductions in penalties or labor requirements, do not have the distorting effect of direct cash offers on prosocial behavior. (423) Finally, in relation to the signaling value of giving, the charitable tax deduction stands as a background norm that applies to giving generally. Because itemizer status is anonymous, and remuneration comes as a private, delayed reduction in tax burden--rather than as a direct reinforcer--it is unlikely that the deduction considerably dilutes the signaling value of giving, as a cash offer may. (424)

On the contrary, the deduction's incentive structure lends itself to fostering the intrinsic, charitable motives and positive externalities in question. Although statistical analysis has yet to provide a precise numeric figure as to the price elasticity of the demand for giving, it is clear that charitable giving is responsive to tax subsidies. (425) As such, the deduction provides adequate incentive to encourage greater giving than would an alternative scenario in which policymakers simply reduce federal income tax rates, thereby making available additional resources for charitable giving. At the same time, given its scope, size, and character, the deduction's behavioral influence is not likely to induce the deleterious effects of incentives in the form of direct cash transfers. In fact, research suggests that the most propitious grounds for developing intrinsic, internalized motives consist of opportunities to act autonomously, (426) make a personal impact, (427) and enjoy social connection. (428) The deduction tends to allow greater personal initiative than direct tax allocation schemes, and provides opportunities for individually tailored donations to charities of one's choice. Individuals can also monitor the use of their funds, and can withhold future funds when beneficiaries fail to act ethically or deliver public goods as promised. As presently constituted, the tax relief associated with each contribution is also comparatively smaller than the financial cost to the donor, (429) thus ensuring that the preponderance of personal sacrifice falls on the donor initiating the contribution. The deduction qua financial incentive thus appears to navigate fairly adeptly between the Scylla of having no behavioral influence and the Charybdis of overwhelming prosocial sentiment and motivation with instrumental cash rewards.

2. Beyond Tocqueville's America?

A second potential criticism is that the above analysis only applies to specific populations or economies. For instance, would the supposed advantages of a tax deduction that complements centralized public goods distribution schemes dissipate beyond Tocqueville's America, for example, in European or specifically Scandinavian societies? In other words, given reputedly different preferences or perceptions of centralized social welfare structures, might brain scans of Swedes, for instance, show aversion rather than preference for voluntary giving compared with taxation?

These questions deserve greater attention and research, but one can delineate a few preliminary considerations. First, even if the aforementioned externalities were restricted to U.S. institutions and society, said analysis would remain significant. Moreover, nothing expressed here suggests that robust levels of social capital, cooperation, trust, and generosity are not possible under multiple governmental forms, including those that may not offer a charitable tax deduction. A charitable tax deduction is certainly not necessary for prosocial behavior, and is unlikely to be the most significant influence on a society's levels of altruistic giving and human and social capital.

Critics might also suggest that individuals who prefer more centralized social welfare distribution structures are impervious to the types of processes and research discussed above. There are, however, important reasons to believe that such a claim is implausible. It appears to overly essentialize psychological traits and differences, while failing to consider key institutional and demographic factors. Indeed, much of the difference in preference for social welfare or centralized distribution of public goods is better explained by macroeconomic factors like population size, labor force composition, racial fragmentation, political structure, and fiscal illusion than by innate characteristics of people.

First, more populous developed countries are far less likely to favor centralized distribution than those with smaller populations, (430) a trend that appears to be partially endogenous to their different economies of scale of state-provided services. (431) Second, support for social welfare policies differs among private employees, public employees, and the self-employed; the particular ratio of these groups in a given economy thus influences general public support for centralized public goods distribution. (432) Third, countries that are more ethnically or racially diverse, such as the United States, spend smaller fractions of their budget on direct government allocations of public goods than do more racially homogeneous countries, such as Sweden and the Netherlands. (433) Fourth, statistical analysis also indicates that, among the developed nations, countries such as Belgium and Sweden that employ proportional rather than geographically-based public resource allocation systems, such as the United States, tend to more strongly favor large, centralized allocations of resources. (434) Finally, the supposed entrenched support for state-based allocation of public goods in some countries may be due to a fiscal illusion, in which the actual tax rate is far higher than the visible one. (435) Thus, preference differences for public goods distribution appear more likely to stem from macro-level conditions than innate psychological, or other propensities.

More direct experimental and statistical analyses provide perhaps the strongest reason to reject the notion that the present analysis is limited to a few select populations. Research across various developed countries validates extensively shared beliefs and preferences regarding philanthropy and charitable giving. (436) Meta-analyses of hundreds of studies indicate that despite stark differences in tax policies, European and North American citizens generally share similar behavioral and cognitive responses and patterns of giving. (437) In addition, experimental responses to coercion, autonomy, and dynamism are largely consistent. (438) In one set of experiments, Germans were required to provide compulsory charitable funds in the form of a small tax, in addition to their current voluntary giving. Researchers found that the introduction of the small, compulsory charity tax actually decreased total giving, crowding out voluntary giving by more than 100%. Other European studies have found that subjects are just as likely as their North American counterparts to increase cooperation as a result of dynamic interaction or face-to-face contact. (440)

In sum, Scandinavians and Europeans more generally do not appear impervious to the socialization, (441) neurochemically-mediated attachments, (442) and other dynamic influences conducive to a deduction's potential external benefits to society. (443) To be sure, further empirical work will be necessary to test the influence of culture, institutional organization, and political structure on the externalities enumerated here. Nonetheless, on the whole concerns about generalizability do not appear to refute the present analysis. At the same time, the Scandinavian question offers an interesting set of considerations with which to test and further develop the conclusions derived above. For instance, to what extent do national beliefs, preferences, or circumstances at least partially constrain these externalities? (444) Might a deduction offer diminishing returns in countries that have already attained high levels of social and human capital? As political and economic events pose new challenges to public goods distribution, and as greater pluralism and social complexity increasingly define North America and Europe, these questions may shed further light on whether tax instruments such as the deduction usefully complement centralized resource distribution amidst the evolving welfare needs of diverse societies.


Despite its historical popularity, the charitable tax deduction today faces increasing criticism. Among the more daunting challenges are accusations that, when viewed as a subsidy, the deduction is simply unjustifiable, incoherent, or not worth the cost. Third sector and treasury efficiency approaches have traditionally played central roles in justifying and assessing the deduction's value, but key constraints and inadequacies render their support somewhat tenuous. In this light, developing broader, more rigorous rationales and assessments of the deduction is essential. In the future, the cognitive and behavioral sciences, in particular neuroscience, should play a more prominent role informing tax policy, and addressing questions about extending charitable tax incentives to nonitemizers, introducing floors or ceilings on the deduction, and converting the deduction to a tax credit. At present, any comprehensive evaluation of the deduction's worth ought to account for externalities associated with improvements in social and human capital, social networks, altruistic habits, donor monitoring, health outcomes, and charitable contagion. Failure to incorporate more robust, innovative accounts of the deduction's benefits into theoretical debates and practical decision-making gives short shrift to a policy that confers more public good than is now recognized.


Authors                                     Elasticity (range)
Apinunmahakul and Devlin (2004)             -1
Auten and Rudney (1990)                     (-.14 to-1.4)
Auten, Cilke, and Randolph (1992)           -1.11
Auten and Joulfaian (1996)                  (-1.1 to -2.50)
Auten, Clotfelter, and Schmalbeck (2002)    (-.52 to-.95)
Auten, Sieg, and Clotfelter (2002)          (-.4 to-1.26)
Bakija (2002)                               (-.2 to -2.52)
Bakija, Gale, and Slemrod (2003)            -.162

Barrett (1991)                              -1.09
Bradley, Holden, and McClelland (2000)      (-.78 to -2.56)
Brooks(2002)                                -6.68
Brown and Lankford (1992)                   (-1.62 to-1.79)
Choe and Jeong (1993)                       -2.45
Christian and Boatsman (1990)               -2.0
Chua and Wong (1999)                        (-.98 to -6.15)
Clotfelter (1985)                           (-.35 to -2.66)
Dunbar and Phillips (1997)                  -3.36
Duquette (1999)                             (-.64 to-1.24)
Greene and McClelland (2001)                -.54
Greenwood (1993)                            -.43
Jones and Posnett (1991)                    -.07
Joulfaian (1991)                            -3.00
Joulfaian (2000)                            (-.74 to -2.58)
Joulfaian and Rider (2004)                  (-1.14 to -2.15)
Kingma (1989)                               -.43
Newsome, Blomquist, and Romain (2001)       (-.27 to -.58)
O'Neil, Steinberg, and Thompson (1996)      (-.47 to -2.24)
Randolph (1995)                             (-.51 to-1.55)
Ricketts and Westfall (1993)                -1.06
Robinson (1990)                             (-1.43 to -7.07)
Taussig (1967)                              (0 to-.l)
Tiehen (2001)                               (.02 to -2.41)
Wu and Ricketts (1999)                      (+.12 to-.2)

Ryan S. Keller, J.D., Yale Law School; Ph.D., Cambridge University, expected 2015. For valuable comments and encouragement, I sincerely thank Henry Hansmann, Susan Rose- Ackerman, Anne Alstott, Ellen Aprill, John Colombo, Sarah Ryan, Noah Messing, Rob Atkinson, Ann Diamond Harrison, Taylor Steelman and Evelyn Brody. 1 am also grateful to economists Jon Bakija, Joel Slemrod, Arden Pope, Olga Stoddard, Brigham Frandsen, psychologist Nancy Eisenberg, neuroscientist Jeremy Gray, and Jane Gravelle at Congressional Research Service for valuable discussion and feedback.

(1) Richard Steinberg, Taxes and Giving: New Findings, 1 Voluntas 61, 68 (1990).

(2) 2 Alexis de Tocqueville, Democracy in America 580 (Jim Manis ed., Henry Reeve trans., The Pennsylvania State University 2002) (1840) available at

(3) E.g., Statute of Charitable Uses, 1601, 43 Eliz., c. 4 (Eng.). Although the individual federal income charitable tax deduction is the largest charitable deduction in terms of tax savings--and the subject of this article--multiple classes of the deduction exist, including federal and state income tax deductions for corporations, and gift, estate, and income tax deductions for individuals at the federal and state level.

(4) The term "charitable giving" is employed throughout the article to mean the general act of giving one's own resources with the ultimate goal of increasing the welfare of another who is not kin. See C. Daniel Batson, The Altruism Question: Toward a Social- Psychological Answer 6 (Psychology Press 2014) (1991). This encompasses sharing, donating, and providing prosocial help, often but not always with some personal sacrifice. See Gian Vittorio Caprara et ah, The Contribution of Agreeableness and Self- efficacy Beliefs to Prosociality, 24 Eur. J. Personality 36, 36 (2009). The article avoids debates as to what qualifies as altruistic and charitable, and generally follows federal and state laws that define "charity" in terms of giving to organizations that qualify to receive deductible contributions, such as nonprofit charitable organizations, hospitals, and religious groups. See I.R.C. [section] 170 (c)(2); Bob Jones Univ. v. United States, 461 U.S. 574 (1983); Hernandez v. Commissioner, 490 U.S. 680, 699-701 (1989); Jackson v. Phillips, 96 Mass. (14 Allen) 539, 556 (1867); I.R.S. Publication 526: Charitable Contributions 2-3, Cat. No. 15050A (Nov. 13, 2013). The studies cited herein employ a definition of charity or altruism that is not incompatible with the legal definition. See, e.g., William T. Harbaugh et al., Neural Responses to Taxation and Voluntary Giving Reveal Motives for Charitable Donations, 316 Sci. 1622 (2007); Jorge Moll et al., Human Fronto-mesolimbic Networks Guide Decisions About Charitable Donation, 103 Proc. Nat'l Acad. Sci. 15623 (2006).

(5) Numerous authors have challenged either the deduction itself or specific elements of it. See Alice Gresham Bullock, Taxes, Social Policy and Philanthropy: The Untapped Potential of Middle- and Low-Income Generosity, 6 Cornell J.L. & Pub. Pol'y 325, 330 (1997); Mark G. Kelman, Personal Deductions Revisited: Why They Fit Poorly in an "Ideal" Income Tax and Why They Fit Worse in a Far from Ideal World, 31 Stan. L. Rev. 831, 844-45 (1979); Nicholas A. Mirkay, Is it "Charitable" to Discriminate?: The Necessary Transformation of Section 501(c)(3) into the Gold Standard for Charities, 45 Wis. L. Rev. 46, 46-17 (2007); Daniel J. Mitchell, Should We End the Tax Deduction for Charitable Contributions?, Wall St. J. (Dec. 16, 2012, 4:08 PM), articles/SB 10001424127887324469304578143351470610998?autologin=y.

(6) "[The] deduction is in danger of being altered or even eliminated." Robert J. Shiller, Please Don't Mess with the Charitable Deduction, N.Y. Times, Dec. 15, 2012, at BU7. In addition, current Congressional proposals call for imposing limits, restrictions, and floors on the amount of giving that qualifies for the deduction. See Majority Tax Staff of H. Comm, on Ways & Means, 113th Cong., Tax Reform Act of 2014 19-21 (Discussion Draft 2014); H. Budget Comm., 113th Cong., The Path to Prosperity: A Responsible, Balanced Budget 19-20 (Comm. Print 2013).

(7) "Homo economicus" generally refers to a central economic concept and characterization of human activity conceived of as rational, utility-maximizing, and materially self-interested. The original term is variously attributed to Pareto's Manuale di Economia Politica (1906) or Pantaleoni's Principii di Economia Pura (1889), but emerged most prominently from John Stuart Mill's view of individuals seeking to "obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained...." John Stuart Mill, On the Definition of Political Economy; and on the Method of Investigation Proper to It, in Essays on Some Unsettled Questions of Political Economy 120, 144 (3d ed. London, Longmans, Green, and Co. 1877); see Matteo Pantaleoni, Principii di Economia Pura (T. Boston Bruce trans., London, MacMillan & Co. 1898) (1889); Vilfredo Pareto, Manuale di Economia Politica (Milano Societa Editrice Libraria 1906). The general set of assumptions connected with the concept of "homo economicus" is important to economic models of behavior, leading some to suggest that there is "no single concept more significant to the economic way of thinking than homo economicus. " See Edward J. O'Boyle, Requiem for Homo Economicus, 10 J. Markets & Morality 321, 333 (2007). Nonetheless, critics dispute the accuracy and viability of the characterization and related assumptions. See Ernst Fehr & Herbert Gintis, Human Motivation and Social Cooperation: Experimental and Analytical Foundations, 33 Ann. Rev. Soc. 43, 44. 46 (2007) (holding that the "Homo Economicus approach is ... erroneous," and that experiments and theories based on the assumption of homo economicus have "failed to produce plausible analytical models of social cooperation" and altruism).

(8) Some of these benefits accrue to donors while others accrue to beneficiaries and third parties. Nonetheless, all of the benefits outlined here positively impact society and social welfare directly or indirectly, whether as economic gains, measurable social improvements, or reduced costs society would otherwise bear.

(9) War Revenue Act of 1917, eh. 63, [section] 1201(2), 40 Stat. 300, 330 (1917) (codified as amended at I.R.C. [section] 170(c)(2)); David E. Pozen, Remapping the Charitable Deduction, 39 Conn. L. Rev. 531, 537 (2006) (discussing 55 Cong. Rec. 6728 (1917) (statement of Sen. Hollis)).

(10) See I.R.C. [section] 170; Pozen, supra note 9. Congress enacted an estate tax deduction for charitable giving in 1918 and a gift tax deduction in 1924. Id. at 537-38.

(11) War Revenue Act of 1917, ch. 63, [section] 1201(2), 40 Stat. 300, 330 (1917) (codified as amended at I.R.C. [section] 170(c)(2)).

(12) See Boris I. Bittker & George K. Rahdert, The Exemption of Nonprofit Organizations from Federal Income Taxation, 85 Yale L.J. 299, 302 (1976); Barbara K. Bucholtz, Reflections on the Role of Nonprofit Associations in a Representative Democracy, 1 Cornell J.L. & Pub. Pol'y 555 (1998) (arguing that without more comprehensive guidance from Congress regarding special tax treatment for charity, courts were forced to piece together explanations). Congress appears to have been acting under the assumption that to tax charitable organizations or donations to them was simply inappropriate and immoral. See James J. Fishman & Stephen Schwarz, Taxation of Nonprofit Organizations: Cases and Materials 68 (Foundation Press 2003). When the question was raised, supporters suggested that the deduction served to promote the general welfare and that without these donations government would have to provide the public resources anyway. See Bruce R. Hopkins, The Law of Tax-Exempt Organizations 15 (10th ed. 2011) (citing H. Rep. No. 1860, 75th Cong., 3d Sess. 19(1939)).

(13) John D. Colombo & Mark A. Hall, The Charitable Tax Exemption 33 (Westview Press 1995).

(14) The Statute lists qualifying activities as the "relief of ... poor people ... [and] maintenance of sick and maimed soldiers." Statute of Charitable Uses, 1601, 43 Eliz., c. 4 (Eng.); see also George G. Bogert & George T. Bogert, The Law of Trusts and Trustees [section] 321, at 638 (1965).

(15) See Howard S. Miller, The Legal Foundations of American Philanthropy 1776-1844, at 9-20 (1961).

(16) See Ronald Seavoy, The Origins of the American Business Corporation 1784- 1855, at 255 (1982).

(17) See William George Torpey, Judicial Doctrines of Religious Rights in America 171 (The University of North Carolina Press 1948).

(18) See, e.g., Fishman & Schwartz, supra note 12, at 101-15; Marilyn G. Rose, The Internal Revenue Service's "Contribution" to the Health Problems of the Poor, 21 Cath. U. L. Rev. 35,46-51 (1971).

(19) See Income Tax Act of 1934, ch. 277, [section] 23(o)(2); I.R.C. [section] 170(b)(1); H.R. Rep. No. 97-215 (1981), reprinted in 1981 U.S.C.C.A.N. 285, 291-92; Kenneth Liles & Cynthia Blum, Development of the Federal Tax Treatment of Charities: A Prelude to the Tax Reform Act of 1969, 39 Law & Contemp. Probs. 6, 24-27 (1975).

(20) Bob Jones Univ. v. United States, 461 U.S. 574, 588 n.12 (1983); Lars G. Gustafsson, The Definition of "Charitable" far Federal Income Tax Purposes: Defrocking the Old and Suggesting Some New Fundamental Assumptions, 33 Hous. L. Rev. 587, 596, 609-17 (1996).

(21) Bob Jones, 461 U.S. at 586.

(22) Id. at 592.

(23) James J. Freeland et al., Cases and Materials on Fundamentals of Federal Income Taxation 850 (The Foundation Press, Inc. 5th ed. 1985).

(24) 26 C.F.R. [section] 1.170A- 1(c)(5) (2008); Commissioner v. Duberstein, 363 U.S. 278, 285 (1960) (quoting Commissioner v. LoBue, 351 U.S. 243, 246 (1956)).

(25) Hernandez v. Commissioner, 490 U.S. 680, 691 (1989) (quoting United States v. American Bar Endowment, 477 U.S. 105, 118 (1986)).

(26) Trinidad v. Sagrada Orden de Predicadores, 263 U.S. 578, 581 (1924); Bob Jones, 461 U.S. at 590-99.

(27) St. Louis Union Trust Co. v. United States, 374 F.2d 427, 432 (8th Cir. 1967); McGlotten v. Connally, 338 F. Supp. 448, 456 (D.D.C. 1972); Green v. Connally, 330 F. Supp. 1150, 1162 (D.D.C. 1971), aff'd sub nom. Coit v. Green, 404 U.S. 997 (1971).

(28) Various authors have addressed or criticized more than formal details of the deduction, including the deduction itself. See Kelman, supra note 5, at 831; Paul R. McDaniel, Federal Matching Grants for Charitable Contributions: A Substitute for the Income Tax Deduction, 27 Tax L. Rev. 377 (1972); see also Henry C. Simons, Personal Income Taxation 57-58 (The University of Chicago Press 1938). Others have identified foundational challenges without necessarily advocating repeal. See Ellen P. Aprill, Churches, Politics, and the Charitable Contribution Deduction, 42 B.C. L. Rev. 843, 864-67 (2001); Mark P. Gergen, The Case for a Charitable Contributions Deduction, 74 Va. L. Rev. 1393, 1404-05 (1988); Miranda Perry Fleischer, Theorizing the Charitable Tax Subsidies: The Role of Distributive Justice, 87 Wash. U. L. Rev. 505, 529-34 (2010).

(29) See, e.g., Boris I. Bittker, Charitable Contributions: Tax Deductions or Matching Grants? 28 Tax L. Rev. 37 (1972); Saul Levmore, Taxes as Ballots, 65 U. Chi. L. Rev. 387, 417-18 (1998); Pozen, supra note 9, at 590. Some also suggest alternatives to direct federal funding schemes that involve state and municipal-level policies. See Brian Galle, The Role of Charity in a Federal System, 53 Wm. & Mary L. Rev. 777, 783 (2012).

(30) For instance, the generosity of the deduction increases proportionally to the taxpayer's marginal tax rate, thus acting as a form of "upside-down" subsidy. See Bullock, supra note 5, at 330-31. Moreover, some complain of potential indirect religious subsidization that may have Establishment Clause conflicts. See Stanley S. Surrey, Tax Incentives as a Device for Implementing Government Policy: A Comparison with Direct Government Expenditures, 83 Harv. L. Rev. 705, 714 (1970). The present article addresses specific inadequacies in justifications for the deduction, not other important details such as deduction caps, itemizer status, or federal government restrictions on the qualified use of charitable funds per se. See, e.g., Todd Izzo, A Full Spectrum of Light: Rethinking the Charitable Contribution Deduction, 141 U. PA. L. Rev. 2371, 2374 (1993); Mirkay, supra note 5, at 45.

(31) To the extent that justifying the deduction depends on contrasting it with direct government allocations of public goods, the first type of criticism indirectly implicates the second question comparing the deduction with alternative allocation mechanisms.

(32) Unrelated Business Income Tax: Hearings Before the Subcomm. on Oversight of the H. Comm, on Ways and Means, 100th Cong. 11 (1987)) [hereinafter Chapoton Statement] (statement of O. Donaldson Chapoton, Deputy Assistant Secretary for Tax Policy, U.S. Department of the Treasury).

(33) Fishman & Schwarz, supra note 12, at 672 (suggesting that legislators worried about introducing high tax rates on the nation without some exemption for fear that it would lower funds dedicated to charity).

(34) See Fleischer, supra note 28, at 534.

(35) Laura Brown Chisolm & Dennis R. Young, Introduction, 39 Case W. Res. L. Rev. 653, 655 (1988).

(36) See Stanley S. Surrey & Paul R. McDaniel, Tax Expenditures (Harvard University Press 1985); Michael K. Taussig, Economic Aspects of the Personal Income Tax Treatment of Charitable Contributions, 20 Nat'l. Tax J. 1 (1967); William S. Vickrey, One Economist 's View of Philanthropy, in Philanthropy and Public Policy 31, 56 (Frank G. Dickinson ed., National Bureau of Economic Research 1962).

(37) See Leonard E. Burman, Is the Tax Expenditure Concept Still Relevant?, 56 Nat'l. Tax J. 613, 613-16 (2003).

(38) 2 U.S. Department of Treasury, Tax Reform for Fairness, Simplicity, and Economic Growth 128-29 (1984); Leonard E. Burman et ah, How Big are Total Individual Income Tax Expenditures, and Who Benefits from Them?, 98 Am. Econ. Rev. 79 (2008).

(39) See Surrey & McDaniel, supra note 36; Bullock, supra note 5, at 330-31; McDaniel, supra note 28, at 395.

(40) See, e.g., Evelyn Brody, Charities in Tax Reform: Threats to Subsidies Overt and Covert, 66 Tenn. L. Rev. 687 (1999); Mark A. Hall & John D. Colombo, The Donative Theory of the Charitable Tax Exemption, 52 Ohio St. L.J. 1379 (1991); C. Eugene Steuerle & Martin A. Sullivan, Toward More Simple and Effective Giving: Reforming the Tax Rules for Charitable Contributions and Charitable Organizations, 12 Am. J. Tax Pol'y 399 (1995); Burton A. Weisbrod, Toward a Theory of the Voluntary Non-Profit Sector in a Three-Sector Economy, in Altruism, Morality, and Economic Theory 171 (Edmund S. Phelps ed., Russell Sage Foundation 1975).

(41) See Charles T. Clotfelter, Federal Tax Policy and Charitable Giving 31 (The University of Chicago Press 1985); Fishman & Schwarz, supra note 12, at 672-73.

(42) Regan v. Taxation with Representation of Wash., 461 U.S. 540, 544 (1983).

(43) Bob Jones Univ. v. United States, 461 U.S. 574, 591 (1983).

(44) The present treatment analyzes the value of the deduction from within the framework of the dominant, subsidy paradigm. As such, it generally follows the cost-benefit approach related to aggregate generated welfare or well-being, whether said welfare accrues to donors, beneficiaries or third parties. See Fleischer, supra note 28, at 529- 34; Bittker, supra note 29; Johnny Rex Buckles, The Community Income Theory of the Charitable Contributions Deduction, 80 Ind. L.J. 947 (2005), for further discussion of distributive, tax-base, and other nonutilitarian issues.

(45) Peter Dobkin Hall, A Historical Overview of the Private Nonprofit Sector, in The Nonprofit Sector: A Research Handbook 16 (Walter W. Powell ed., 1987).

(46) See Nina J. Crimm, An Explanation of the Federal Income Tax Exemption for Charitable Organizations: A Theory of Risk Compensation, 50 Fla. L. Rev. 419, 422 n.4 (1998). Nonetheless, historical analysis suggests that the basic categories of organizations eligible for deductible donations have changed little. Indeed, "[g]ifts to hospitals, gifts for the relief of the poor, gifts to promote educational institutions, gifts for the construction and maintenance of public works, and gifts for religious purposes all qualified then, as they do now." Richard H. Helmholz, Charity and Religion: Historical Connections in our Law, 9 Conversations on Philanthropy 74,80 (2012).

(47) Congress has increased the annual percentage limit periodically, and today it comprises 50% of an individual's adjusted gross income. See Aprill, supra note 28, at 84850.

(48) Staff of J. Comm, on Taxation, JCX-29-05, Historical Development and Present Law of the Federal Tax Exemption for Charities and Other Tax-Exempt Organizations 18-20 (J. Comm. Print 2005).

(49) The Center on Philanthropy at Indiana University, Giving USA 2012: The Annual Report on Philanthropy for the Year 2011 8 (2012).

(50) The Center on Philanthropy at Indiana University, Giving USA 2007: The Annual Report On Philanthropy For the Year 2006 8 (2007).

(51) Cong. Budget Office, Options for Changing the Tax Treatment of Charitable Giving (2011).

(52) Although this is a significant sum, the amount of income dedicated to charitable giving that is not taxed is only the ninth largest tax deduction "expenditure." Deductions and exclusions for health insurance constituted over $106 billion in revenue loss (2010), while those for Medicare benefits comprised $54.6 billion (2010). See S. Comm, on the Budget, 111th Cong., Tax Expenditures: Compendium of Background Material on Individual Provisions 817,845, 849, 853 (Comm. Print 2010); Cong. Budget Office, supra note 51.

(53) Government intervention in voluntary associations for reasons of financial or political expediency is nothing new. As Pollock and Maitland observed in Fifteenth-Century England, leaders began to encroach on nongovernmental associations not owing to "any juristic necessity, any theory of personality, but [out of] political expedience and financial needs." 1 Frederick Pollock & Frederic William Maitland, The History of English Law Before the Time of Edward I 668-71 (Cambridge University Press 2d ed. 1968) (1895).

(54) Cong. Budget Office, supra note 51, at 3; Jane G. Gravelle & Donald J. Marples, Cong. Research Serv., No. R40518, Charitable Contributions: The Itemized Deduction Cap and Other FY2011 Budget Options (2010).

(55) The Nat'l Comm'n on Fiscal Responsibility and Reform, The White House, The Moment of Truth (2010) 28-35, available at; Deena Ackerman & Gerald Auten, Floors, Ceilings, and Opening the Door for a Non-Itemizer Deduction, 59 Nat'l Tax J. 509 (2006); Martin Feldstein et al., Capping Individual Tax Expenditure Benefits (Nat'l Bureau of Econ. Research, Working Paper No. 16921, 2011), available at http://www.nber.Org/papers/w16921.pdf.

(56) Paul N. Van de Water & Chye-Ching Huang, Ctr. on Budget and Policy Priorities, Obama Proposal to Limit Tax Breaks for High-Income Households Would Reduce Total Charitable Contributions by a Modest 1.6 to 3.0 Percent (2013), available at

(57) President Barack Obama, Remarks on the Federal Budget 3 (Apr. 10, 2013), available at

(58) This opposition remains nearly two-to-one even among those who do not claim the charitable tax deduction (62% to 35%). See Jeffrey M. Jones, Americans Oppose Eliminating Income Tax Deductions, Gallup (Apr. 15, 2011), americans-oppose-eliminating-income-tax-deductions.aspx. The American Taxpayer Relief Act of 2012 (ATRA) was passed by Congress and approved by the President on January 2, 2013. American Taxpayer Relief Act of 2012, Pub. L. No. 112-240, 126 Stat. 2313 (2013).

(59) Under ATRA, a reduction may not exceed 80% of otherwise allowable itemized deductions. See Joseph Rosenberg et al., Urban Inst. Ctr. on Nonprofits and Philanthropy, What Does the Fiscal Cliff Deal Mean for Nonprofits? (2013), available at DealMean-for-Nonprofits.pdf

(60) Said reduction applies to most itemized deductions, not to the charitable tax deduction alone, and is triggered by an increase in adjusted gross income rather than an increase in itemized giving. See id.

(61) David A. Brennen, A Diversity Theory of Charitable Tax Exemption--Beyond Efficiency, Through Critical Race Theory, Toward Diversity, 4 Pittsburgh Tax Rev. 1, 24 (2006).

(62) Lawrence M. Stone, Federal Tax Support of Charities and Other Exempt Organizations: The Need for a National Policy, 1968 S. Cal. Tax Inst. 27, 45 (1968).

(63) Bruce R. Hopkins, The Law of Tax-Exempt Organizations 6-7 (John Wiley & Sons, Inc. 5th ed. 1987).

(64) Albert M. Sacks, The Role of Philanthropy: An Institutional View, 46 Va. L. Rev. 516, 524 (1960).

(65) Hopkins, supra note 63, at 5.

(66) Admittedly, such characterization presumes that tax policymakers' decisions are informed by rational deliberation and empirical analysis. Unfortunately, policymakers, like citizens in general, are susceptible to availability biases, in which they render judgments based more on vivid, easily recalled examples than broader assessments of facts. See Daniel Kahneman, Thinking, Fast and Slow 131--32 (Farrar, Straus and Giroux 2011). In the case of charitable giving, one may associate giving primarily with the acts of Mother Theresa, while another associates it with bribes to secure one's child admission to Harvard. Making judgments based on stirring, unrepresentative examples easily distorts cogent policy, and further demonstrates the importance of informing tax policy with deeper research and analysis. See Len Burman, Repeal the NCAA Ticket Tax Break, Forbes (Oct. 28, 2012), break/; Michael Duffy, Charity Begins at Home, Time, Mar. 9, 1992, at 48; Daniel Golden, Admissions Preferences Given to Alumni Children Draws Fire, Wall St. J., Jan. 15, 2003, at A1; Elizabeth Stoker Bruenig & Matthew Bruenig, The 1 Percent's Ivy League Loophole, Salon (Sept. 9, 2013), http://www. salon. com/2013/09/09/the_l_percents_ivy_ league loophole/; Rick Cohen, Is Tax Incentive for College Football Season Ticket Holders Fair?, NONPROFIT Q. (Oct. 9, 2014), context/21269-is-tax-incentive-for-college-football-season-ticket-holders- fair.html; Pablo Eisenberg, The Death of a Flamboyant Charity Wrongdoer Sends Reminder to Regulators, Chronicle of Philanthropy (Nov. 22, 2011), CharityScoundrel-s-Death/129875/. (67) See Peter Buffett, Op-Ed., The Charitable-Industrial Complex, N.Y. Times, July 27, 2013, at A19.

(68) Galle, supra note 29, at 782.

(69) Henry B. Hansmann, The Rationale for Exempting Nonprofit Organizations from Corporate Income Taxation, 91 Yale L.J. 54, 56-57, 72-74 (1981) [hereinafter Hansmann, Rationale]', Henry B. Hansmann, The Role of Nonprofit Enterprise, 89 Yale L.J. 835, 838-- 39 (1980) [hereinafter Hansmann, Role of Nonprofit],

(70) Statute of Charitable Uses, 1601,43 Eliz., c. 4 (Eng.).

(71) Hansmann, Role of Nonprofit, supra note 69, at 846--47.

(72) Henry B. Hansmann, Reforming Nonprofit Corporation Law, 129 U. Pa. L. Rev. 497, 506(1981).

(73) Id. at 507.

(74) Hansmann, Rationale, supra note 69, at 72-74.

(75) Id at 72-75.

(76) Although Henry Hansmann has generally focused on tax exemption of nonprofits rather than the deduction, numerous scholars have applied his market failure theory to the charitable tax deduction. See Galle, supra note 29, at 782, 786-88; Pozen, supra note 9, at 571 n.183 (holding that "Hansmann and others have since argued that subsidy theories [of the charitable tax deduction] will tend to work best for donative entrepreneurials").

(77) Fleischer, supra note 28, at 519-20 (discussing Hansmann's "seminal" work); Mark A. Hall & John D. Colombo, The Charitable Status of Nonprofit Hospitals: Toward a Donative Theory of Tax Exemption, 66 Wash. L. Rev. 307, 370-71 (1991) (referring to Hansmann's theory as "pioneering").

(78) Galle, supra note 29, at 782-83.

(79) Hansmann, Role of Nonprofit, supra note 69, at 896.

(80) Galle, supra note 29, at 781, 790 (explaining that the third sector/government failure view is the "dominant account''); see also Brennen, supra note 61, at 3 (contending that considerations of preferential tax treatment of charity are "focused almost exclusively on economic efficiency").

(81) See, e.g., Regan v. Taxation with Representation of Wash., 461 U.S. 540, 544 (1983); Brody, supra note 40, at 691 n.5; John D. Colombo, The Marketing of Philanthropy and the Charitable Contributions Deduction: Integrating Theories for the Deduction and Tax Exemption, 36 Wake Forest L. Rev. 657, 661, 682 (2001); Steuerle & Sullivan, supra note 40, at 404.

(82) Definitional, intrinsic or tax-base justifications judge the deduction as necessary because donations fall outside a Haig-Simons conception of income. See William D. Andrews, Personal Deductions in an Ideal Income Tax, 86 Harv. L. Rev. 309 (1972). Donations may also be considered "community income" not meant to be taxed. See Johnny Rex Buckles, The Community Income Theory of the Charitable Contributions Deduction, 80 Ind. L.J. 947 (2005). Similarly, the deduction may constitute equitable compensation of donor welfare losses. See Bittker, supra note 29, at 59-60.

(83) McDaniel, supra note 28, at 379.

(84) Id. at 381.

(85) Clotfelter, supra note 41, at 32-34; Daniel R. Feenberg, Are Tax Price Models Really Identified: The Case of Charitable Giving, 40 Nat'l Tax J. 629 (1987); William C. Randolph, Dynamic Income, Progressive Taxes, and the Timing of Charitable Contributions, 103 J. POL. Econ. 709(1995).

(86) Jane G. Gravelle & Donald J. Marples, Cong. Research Serv., R40518, Charitable Contributions: The Itemized Deduction Cap And Other FY2011 Budget Options (2010); Rosenberg et al., supra note 59.

(87) President Barack Obama, supra note 57.

(88) Staff of J. Comm, on Taxation, JCX-15-11, Background Information on Tax Expenditure Analysis and Historical Survey of Tax Expenditure Estimates 13-15 (J. Comm. Print 2011); Cong. Budget Office, Pub. 4030, Options for Changing the Tax Treatment of Charitable Giving (2011); Van de Water & Huang, supra note 56.

(89) Chapoton Statement, supra note 32, at 11.

(90) Thomas D. Griffith, Theories of Personal Deductions in the Income Tax, 40 Hastings L.J. 343, 345 (1989).

(91) Fleischer, supra note 28, at 514.

(92) Pozen, supra note 9, at 556.

(93) Although treated together here, third sector theory has featured more prominently in the legal literature, while treasury efficiency analyses have generally been more dominant in policy assessments. Moreover the limitations of third sector and treasury efficiency approaches are often, but not always, distinct. See JCX-15-11, supra note 88; Gravelle & Marples, supra note 54; Cong. Budget Office, supra note 51.

(94) The definition of the third, voluntary or nonprofit sector employed here generally refers to the sphere of social activity undertaken by nonprofit and other nongovernmental, nonmarket organizations. Third sector organizations tend to share at least five common characteristics: they generally a) do not distribute profits among owners or managers, b) are private institutions, c) are legally constituted entities, d) are autonomous from both the government and market sectors, and e) finance themselves through voluntary resources. See Lester M. Salamon & Helmut K. Anheier, The Third World's Third Sector in Comparative Perspective 9 (The Johns Hopkins Inst, for Policy Studies, Working Paper No. 24, 1997). Although the term "subsidy theory" is sometimes used to refer to the narrower "third sector theory," the former implies any instrumental justification of the charitable deduction, whereas the latter implies a narrower set of justifications based on some form of market or government failure.

(95) See Gergen, supra note 28, at 1403; Weisbrod, supra note 40, at 188.

(96) See Hall & Colombo, supra note 77, at 391; Weisbrod, supra note 40, at 188.

(97) Weisbrod, supra note 40, at 172-74.

(98) Various economists have differentiated pure public goods that are both nonrivalrous and nonexcludable from common goods, club goods, and private goods. See Suzanne Scotchmer, Local Public Goods and Clubs, in 4 Handbook. of Public Economics 1997, 1998-2000 (A.J. Auerbach & M. Feldstein eds., 2002); Paul A. Samuelson, The Pure Theory of Public Expenditure, 36 Rev. Econ. & Stat. 387 (1954). Much of the economic and tax deduction literature on charity, however, employs a looser definition, and that custom is followed here. See James Andreoni, Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence, 97 J. Pol. Econ. 1447, 1447-48 (1989). As such, the "public," "charitable," or "societal" goods and services discussed here are not always pure public goods, and may include common, club and even some private goods.

(99) Gerald Marwell & Ruth E. Ames, Experiments on the Provision of Public Goods, 84 Am. J. Soc. 1335, 1337-38 (1979).

(100) James M. Buchanan, The Collected Works of James M. Buchanan: The Demand and Supply of Public Goods 88-89 (Liberty Fund, Inc. 1999) (1968).

(101) Mancur Olson, The Logic of Collective Action (Harvard University

Press 1965).

(102) See Crimm, supra note 46, at 440M2; Henry B. Hansmann, Economic Theories of Nonprofit Organization, in The Nonprofit Sector: A Research Handbook 27, 38 (Walter W. Powell ed., 1987); Pozen, supra note 9, at 555 n.117.

(103) Alan Randall, The Problem of Market Failure, 23 Nat. Resources J. 131 (1983).

(104) Weisbrod, supra note 40, at 224.

(105) Id. at 175.

(106) Geoffrey K. Turnbull & Salpie S. Djoundourian, The Median Voter Hypothesis: Evidence from General Purpose Local Governments, 81 Pub. Choice 223 (1994).

(107) Weisbrod, supra note 40, at 175-76.

(108) See Hall & Colombo, supra note 40, at 1385; Weisbrod, supra note 40, at 176-78.

(109) Levmore, supra note 29, at 411-12.

(110) James M. Buchanan & Gordon Tullock, The Collected Works of James M. Buchanan: The Calculus of Consent 49 (Liberty Fund, Inc. 1999) (1962).

(111) John Rawls, A Theory of Justice 268 (1971).

(112) The "donative slack" is generally measured by what donors would be willing to give "in ordinary market transactions." See Hall & Colombo, supra note 40, at 1385.

(113) James M. Buchanan, The Collected Works of James M. Buchanan: The Demand and Supply of Public Goods 49 (Liberty Fund, Inc. 1999) (1968).

(114) Hall & Colombo, supra note 77, at 390.

(115) Hall & Colombo, supra note 40, at 1436-38.

(116) See Galle, supra note 29, at 777.

(117) See Hansmann, supra note 102, at 28-29.

(118) See A. Abigail Payne, Does the Government Crowd-out Private Donations? New Evidence from a Sample of Non-profit Firms, 69 J. Pub. Econ. 323 (1998); Thomas R. Palfrey & Jeffrey E. Prisbrey, Altruism, Reputation and Noise in Linear Public Goods Experiments, 61 J. Pub. Econ. 409 (1996).

(119) Standard neoclassical economic analysis assumes, for instance, that individuals' preferences are self-maximizing; yet this assumption diverges from empirical data indicating that, in economic experiments such as the dictator and other economic games, individuals often transfer resources to others even though they could earn more money by keeping the resources for themselves. See Daniel Kahneman et al., Fairness as a Constraint on Profit Seeking: Entitlements in the Market, 76 Am. Econ. Rev. 728 (1986).

(120) Milton Friedman, The Methodology of Positive Economics, in Essays in Positive Economics 3, 11-12 (Milton Friedman ed., The University of Chicago Press 1953).

(121) See Uskali Maki, Kinds of Assumptions and Their Truth: Shaking an Untwisted F Twist, 53 Kyklos 317, 323-24 (2000).

(122) See Uskali Maki, Contested Modeling: The Case of Economics, in Models, Simulations, and the Reduction of Complexity 87, 101 (Ulrich Gahde et al. eds., 2012).

(123) For instance, "[p]hysicists ... do not argue that we can explain sunset and sundown by assuming that the Sun orbits around the Earth although this incorrect assumption can provide a superficially plausible explanation for these phenomena." Ernst Fehr et al., A Behavioral Account of the Labor Market: The Role of Fairness Concerns, 1 Ann. Rev. Econ. 355, 363 (2009). Neither should tax economists and theorists employ incorrect, albeit superficially plausible, assumptions that are vital to the conclusions of their analysis. See Uskali Maki, Realistic Realism about Unrealistic Models, in The Oxford Handbook of Philosophy of Economics 68, 73 (Harold Kincaid & Don Ross eds., Oxford University Press 2009).

(124) Weisbrod, supra note 40, at 174.

(125) See James Andreoni, Privately Provided Public Goods in a Large Economy: The Limits of Altruism, 35 J. Pub. Econ. 57, 57-58 (1988).

(126) Weisbrod, supra note 40, at 174.

(127) Donald Wittman, Candidate Motivation: A Synthesis of Alternative Theories, 77 Am. Pol. Sci. Rev. 142 (1983); Levmore, supra note 29.

(128) See Alberto Alesina, Credibility and Policy Convergence in a Two-Party System with Rational Voters, 78 Am. Econ. Rev. 796 (1988); Randall L. Calvert, Robustness of the Multidimensional Voting Model: Candidate Motivations, Uncertainty, and Convergence, 29 Am. J. Pol. Sci. 69 (1985).

(129) Samuel Bowles & Herbert Gintis, Social Preferences, Homo Economicus, and Zoon Politikon, in The Oxford Handbook of Contextual Political Analysis 172, 172-73 (Robert E. Goodin & Charles Tilly eds., Oxford University Press 2006).

(130) See Andreoni, supra note 98, at 1447-48; Weisbrod, supra note 40, at 172- 74.

(131) Weisbrod, supra note 40, at 172-173.

(132) Levmore, supra note 29, at 394.

(133) Russell D. Roberts, Government Subsidies to Private Spending on Public Goods, 74 Pub. Choice 133, 134(1992).

(134) Levmore, supra note 29, at 404.

(135) Weisbrod, supra note 40, at 172-74.

(136) See Colin F. Camerer, Behavioral Game Theory: Experiments in Strategic Interaction (Princeton University Press 2003); Ernst Fehr & Simon Gachter, Fairness and Retaliation: The Economics of Reciprocity, 14 J. Econ. Persp. 159 (2000); Joseph Henrich et al., "Economic Man " in Cross-Cultural Perspective: Behavioral Experiments in 15 Small-scale Societies, Behav. & Brain Sci. 795 (2005).

(137) See B. Douglas Bernheim, On the Voluntary and Involuntary Provision of Public Goods, 76 Am. Econ. Rev. 789 (1986); Todd Sandler & John Posnett, The Private Provision of Public Goods: A Perspective on Neutrality, 19 Pub. Fin. Q. 22 (1991).

(138) See, e.g., Levmore, supra note 29, at 394.

(139) The question of crowding out in this context is distinct from the larger debate concerning government expenditures crowding out private donations. For more on that debate, see Payne, supra note 118.

(140) See Russell D. Roberts, A Positive Model of Private Charity and Public Transfers, 92 J. Pol. Econ. 136, 147 (1984); Peter G. Warr, The Private Provision of a Public Good Is Independent of the Distribution of Income, 13 Econ. Letters 207 (1983).

(141) See Jonathan Gruber & Daniel M. Hungerman, Faith-Based Charity and Crowd- Out During the Great Depression, 91 J. Pub. Econ., 1043, 1045 (2007); Bruce Robert Kingma, An Accurate Measurement of the Crowd-out Effect, Income Effect, and Price Effect for Charitable Contributions, 97 J. Pol. Econ. 1197, 1198 (1989); Payne, supra note 118, at 324.

(142) See George A. Akerlof & Robert J. Shiller, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism 20-21 (Princeton University Press 2009); Camerer, supra note 136, at 3; Henrich et al., supra note 136, at 797; Madan M. Pillutla & J. Keith Murnighan, Unfairness, Anger, and Spite: Emotional Rejections of Ultimatum Offers, 68 Org. Behav. & Hum. Decision Processes 208, 223 (1996).

(143) See James Andreoni, Warm-glow Versus Cold-prickle: The Effects of Positive and Negative Framing on Cooperation in Experiments, 110 Q.J. Econ. 1, 2 (1995); David C. Ribar & Mark O. Wilhelm, Altruistic and Joy-of-Giving Motivations in Charitable Behavior, 110 J. Pol. Econ. 425, 428 (2002).

(144) See Brian Duncan, A Theory of Impact Philanthropy, 88 J. PUB. ECON. 2159, 2159-- 60 (2004); Elizabeth W. Dunn et al., Spending Money on Others Promotes Happiness, 319 Sci. 1687, 1687 (2008); William T. Harbaugh, What Do Donations Buy?: A Model of Philanthropy Based on Prestige and Warm Glow, 67.1. Pub. Econ. 269, 283 (1998).

(145) Robert H. Frank, Rethinking Rational Choice, in BEYOND THE MARKETPLACE: Rethinking Economy and Society 53, 54 (Roger Friedland & A. F. Robertson eds., 1990).

(146) Hansmann, Role of Nonprofit, supra note 69, at 847.

(147) See Gary S. Becker, A Theory of Social Interactions, 82 J. Pol. Econ. 1063, 1090 (1974); Roberts, supra note 133, at 134.

(148) Hall & Colombo, supra note 40, at 1392 (asserting that freeriding provides the "most rigorous justification for subsidizing the objects of altruism").

(149) See Frank Van Overwalle & Kris Baetens, Understanding Others' Actions and Goals by Mirror and Mentalizing Systems: A Meta-Analysis, 48 NeuroImage 564, 565 (2009); Matthijs Vink et al., Function of Striatum Beyond Inhibition and Execution of Motor Responses, 25 Hum. Brain Mapping 336 (2005).

(150) Economists, neuroscientists and others have expended significant effort attempting to explain why individuals frequently act in ways beneficial to others but costly to themselves, such as donating time and money, rescuing strangers, voting and sacrificing their lives for others. See Akerlof & Shiller, supra note 142, at 21-25; Camerer, supra note 136, at 3; Gregory Scott Crespi, The Mid-Life Crisis of the Law and Economics Movement: Confronting the Problems of Nonfalsifiability and Normative Bias, 67 Notre Dame L. Rev. 231, 243 (1991); Ernst Fehr & Urs Fischbacher, The Nature of Human Altruism, 425 Nature 785, 785 (2003); Dominique de Quervain et ah, The Neural Basis of Altruistic Punishment, 305 SCI. 1254, 1254 (2004).

(151) See Ernst Fehr & Simon Gachter, Cooperation and Punishment in Public Goods Experiments, 90 Am. Econ. Rev. 980 (2000); Tania Singer et ah, Brain Responses to the Acquired Moral Status of Faces, 41 Neuron 653 (2004).

(152) Camerer, supra note 136; Fehr & Fischbacher, supra note 150; Fehr & Gintis, supra note 7, al 43-64 (explaining that "the notion of Homo Economicus, a creature who is rational and purely self-regarding ... is also erroneous, as the assumption that humans are exclusively self-regarding has been decisively rejected by the evidence").

(153) John W. Mayo & Catherine H. Tinsley, Warm Glow and Charitable Giving: Why the Wealthy Do Not Give More to Charity?, 30 J. ECON. PSYCHOL. 490, 491 (2009). This sentiment is echoed throughout behavioral economics, psychological, and other literature that is critical of selfish assumptions. See Fehr & Gintis, supra note 7, at 43- 46.

(154) Adrian Sargeant & Elaine Jay, Fundraising Management: Analysis, Planning and Practice 100 (Routledge 2004).

(155) Herbert Gintis et al., Explaining Altruistic Behavior in Humans, 24 EVOLUTION & Hum. Behav. 153 (2003); Hall & Colombo, supra note 40, at 1403-04.

(156) "Only when neither [the market nor the government] sector is capable of providing a shared social benefit at the desired level will a substantial number of people resort to philanthropy." Hall & Colombo, supra note 40, at 1386.

(157) Id. at 1384-85.

(158) See Roberts, supra note 133, at 136; David M. Schizer, Subsidizing Charitable Contributions: Incentives, Information, and the Private Pursuit of Public Goals, 62 Tax L. Rev. 221, 237 (2009).

(159) See Michael H. Bimbaum et al., Evidence Against Rank-Dependent Utility Theories: Tests of Cumulative Independence, Interval Independence, Stochastic Dominance, and Transitivity, 77 Org. Behav. & Hum. Decision Processes 44 (1999); Roberts, supra note 140, at 136; Schizer, supra note 158.

(160) James Andreoni, Impure Altruism and Donations to Public Goods: A Theory of Warm-glow Giving, 100 Econ. J. 464, 474 (1990).

(161) See Andreoni, supra note 98, at 1447-58; Sophia R. Wunderink, The Economics of Consumers' Gifts and Legacies to Charitable Organisations, 5 Int'l J. Nonprofit & Voluntary Sector Marketing 268 (2000).

(162) K. Luan Phan et al., Reputation for Reciprocity Engages the Brain Reward Center, 107 Proc. Nat'l Acad. Sci. 13099 (2010).

(163) See Martin Kavaliers et al., Male Risk Taking, Female Odors, and the Role of Estrogen Receptors, 107 Physiology & Behav. 751 (2012); Vera Morhenn et al., Massage Increases Oxytocin and Reduces Adrenocorticotropin Hormone in Humans, 18 Alternative Therapies Health & Med. 11 (2012); Paul J. Zak et al., The Neurobiology of Trust, 1032 Annals N.Y. Acad. Sci. 224 (2004).

(164) See Jorge A. Barraza et al., Oxytocin Infusion Increases Charitable Donations Regardless of Monetary Resources, 60 Hormones & Behav. 148 (2011); Peter A. Bos et al., Testosterone Decreases Trust in Socially Naive Humans, 107 Proc. Nat'l Acad. Sci. 9991 (2010).

(165) See, e.g., Clotfelter, supra note 41; Gerald E. Auten et al., The Effects of Tax Reform on Charitable Contributions, 45 Nat'l Tax J. 267 (1992); Jon M. Bakija et al., Charitable Bequests and Taxes on Inheritances and Estates: Aggregate Evidence from Across States and Time', 93 Am. Econ. Rev. 366 (2003); Charles T. Clotfelter, Tax Incentives and Charitable Giving: Evidence from a Panel of Taxpayers, 13 J. Pub. Econ. 319 (1980); Amy E. Dunbar & John Phillips, The Effect of Tax Policy on Charitable Contributions: The Case of Nonitemizing Taxpayers, 19 J. Am. Tax'n Ass'n. 1 (1997).

(166) Steinberg, supra note 1. More specifically, price elasticity is "defined as the percentage change in donations that results from a 1% change in the price of giving." See John Peloza & Piers Steel, The Price Elasticities of Charitable Contributions: A Meta-Analysis, 24 J. Pub. Pol'y & Marketing 260, 261 (2005).

(167) See generally Alan L. Feld et al., Patrons Despite Themselves: Taxpayers and Arts Policy (1983).

(168) Since the deductibility of the contribution alters the tax price of giving for itemizers, an elasticity of giving that exceeds unity signifies approximately that more is contributed than lost in forgone tax revenue. This article follows the standard formula for the coefficient of price elasticity of demand: Ed = (AQ/Q1) / (AP/P1), where 'Ed' is elasticity of demand (for giving), 'Q' is quantity (of giving) demanded, and 'P' is the price of giving. Charitable giving is seen as relatively "elastic" at rates lower than -1, and relatively "inelastic" between -1 and 0. Similarly, the article assumes that the price elasticity of giving must be greater than unity for the deduction to be treasury efficient, i.e., raise more in contributions than it costs in lost revenue. For discrete changes in the tax rate, however, the elasticity at which augmented contributions sufficiently offset revenue losses may be greater (in absolute terms) than -1. See Congressional Budget Office, Effects of Allowing Nonitemizers to Deduct Charitable Contributions, App. B (2002).

(169) See Clotfelter, supra note 41; Ralph Bradley et al., A Robust Estimation of the Effects of Taxation on Charitable Contributions, 23 Contemp. Econ. Pol'y 545, 549-50 (2005).

(170) See Gravelle & M arples, supra note 54; Cong. Budget Office, supra note 51.

(171) See Clotfelter, supra note 41, at 281; Gergen, supra note 28, at 1404; Peter J. Wiedenbeck, Charitable Contributions: A Policy Perspective, 50 Mo. L. Rev. 85, 95-96 (1985).

(172) See Ctr. on Philanthropy at Ind. Univ., How Changes in Tax Rates Might Affect Itemized Charitable Deductions (2009); Dunbar & Phillips, supra note 165, at 5.

(173) See Martin Feldstein & Amy Taylor, The Income Tax and Charitable Contributions, 44 Econometrica 1201 (1976); Randolph, supra note 85.

(174) Despite limitations, treasury efficiency offers a useful empirical means of deducing at least some of the deduction's behavioral influence on donor decision-making relevant to the positive externalities discussed below.

(175) See Arthur C. Brooks, Income Tax Policy and Charitable Giving, 26 J. Pol'y Analysis & Mgmt. 599, 600 (2007).

(176) Sara E. Helms & Jeremy P. Thornton, The Influence of Religiosity on Charitable Behavior: A COPPS Investigation, 41 J. Socio-Econ. 373, 373-74 (2012); Robert J. Yetman & Michelle H. Yetman, How Does the Incentive Effect of the Charitable Deduction Vary Across Charities?, 88 ACCT. Rev. 1069, 1072 (2013).

(177) See Arthur C. Brooks, The Great Recession, Tax Policy, and the Future of Charity in America (AEI Econ. Pol'y Studies, Working Paper No. 2013-09, 2013).

(178) For instance, like third sector theory, treasury efficiency estimates presume that donations conform to rational choice assumptions such as marginal utility, utility maximization, and outcome-regarding preferences. As such, various deficiencies associated with third sector assumptions apply to treasury efficiency as well. See Steinberg, supra note 1, at 68 (indicating that the "view underlying [treasury efficiency] analysis is that donations ... are no different from other 'purchases' by consumers.") See also Gergen, supra note 28, at 1401 n.27.

(179) See infra Appendix A for a sample of varying price elasticities.

(180) See infra Appendix A.

(181) To illustrate, cross-sectional analyses vary income along a given nonlinear tax price schedule, but face problems when confronted with simultaneous variations of income and price of giving. See Feldstein & Taylor, supra note 173. In addition, they do not separate transitory changes in prices caused by fluctuations in income and the permanent changes in prices. See Jon Bakija & Bradley T. Heim, How Does Charitable Giving Respond to Incentives and Income? New Estimates from Panel Data, 64 Nat'l. Tax J. (2011). Finally, regression techniques are generally only able to distinguish independent influences of price and income if there is independent variation within the sample. See Steinberg, supra note 1; see also Clotfelter, supra note 41; Charles T. Clotfelter & C. Eugene Steuerle, Charitable Contributions, in How Taxes Affect Economic Behavior (Henry J. Aaron & Joseph A. Pechman eds., 1981); Feldstein & Taylor, supra note 173.

(182) See Bakija & Heim, supra note 181, at 368-69; Brooks, supra note 175; Rachel Croson & Melanie Beth Marks, Step Returns in Threshold Public Goods: A Meta- and Experimental Analysis, 2 Experimental Econ. 239 (2000).

(183) Various estimates of price elasticity of giving range from -7.07 to +.12. Infra Appendix A.

(184) The Congressional Budget Office, for instance, has employed a specific price elasticity of giving to quantify the exact financial figures that will result from eliminating or altering the tax deduction. Such figures are often then transmitted to the public and lawmakers. Cong. Budget Office, supra note 51; The Comm, for a Responsible Fed. Budget, The Tax-Break Down: Charitable Deduction (2013).

(185) Griffith, supra note 90, at 345.

(186) Chapoton Statement, supra note 32.

(187) Hansmann, Role of Nonprofit Enterprise, supra note 69, at 844 (1980); David M. Schizer, supra note 158, at 229-31.

(188) Meta-analyses indicate that the weighted mean of the price elasticity of charitable giving is -1.44. By contrast, when outliers greater than three standard deviations from the mean are eliminated, the weighted mean falls to approximately -1, where a 1% increase in the charitable tax deduction provides an increase in donations of approximately 1%. See John Peloza & Piers Steel, The Price Elasticities of Charitable Contributions: A Meta-Analysis, 24 J. Pub. Pol'y & Marketing 260, 264-65 (2005); see also infra App. A.

(189) See infra App. A.

(190) Gergen, supra note 28.

(191) Although a case can be made for a prominent role for philanthropy vis-a- vis government in allocating public goods, this does not imply, without more, that philanthropy can or should replace government provision entirely or even principally. Donors may not always be willing to supply resources that society deems imperative. Moreover, as donor preferences evolve over time, groups may be left vulnerable without some form of government guarantee of resources. A complementary relationship that captures the societal benefits associated with nongovernmental provision in some cases, which also ensures steady government provision of vital resources in others appears a more flexible, optimal solution than provision that relies exclusively on either the government or nonprofit sector.

(192) See Catherine C. Eckel & Philip J. Grossman, Rebate versus Matching: Does How We Subsidize Charitable Contributions Matter?, 87 J. Pub. Econ. 681,695-99 (2003).

(193) See Dilip Soman, The Illusion of Delayed Incentives: Evaluating Future Effort-Money Transactions, 35 J. Marketing Res. 427, 427-28 (1998).

(194) Empirical evidence suggests that for most rebate incentives generally, not just tax rebates, up to 40% of those qualifying for rebate fail to redeem. See Jon D. Hanson & Douglas A. Kysar, Taking Behavioralism Seriously: Some Evidence of Market Manipulation, 112 Harv. L. Rev. 1420, 1450 (1999); Tim Silk & Chris Janiszewski, Managing Mail-In Rebate Promotions: An Empirical Analysis of Purchase and Redemption 4-5 (Sauder School of Business, University of British Columbia, Working Paper, 2006), available at

(195) See Yuxin Chen et al., Price Discrimination After the Purchase: Rebates as State-Dependent Discounts, 51 Mgmt. SCI. 1131 (2005); William M. Bulkeley, Rebates' Secret Appeal to Manufacturers: Few Consumers Actually Redeem Them, Wall St. J., February 10, 1998, at Bl.

(196) In 2008, 39 million taxpayers itemized charitable deductions totaling $173 billion, approximately $50 billion less than the $229 billion that charitable organizations received. Justin Bryan, Internal Revenue Service, Individual Income Tax Returns 2008, 9-10 (2010); Giving USA, The Annual Report on Philanthropy for 2008 Presentation, slide 3 (2009) (Charitable giving estimated to be $307.65 billion in 2008). The mathematical difference suggests that at least some of the $50 billion difference was due to standard deductions or other unclaimed contributions. See Lilian V. Faulhaber, The Hidden Limits of the Charitable Deduction: An Introduction to Hypersalience, 92 BOS. U. L. Rev. 1307, 1322-23 (2012).

(197) Faulhaber, supra note 196, at 1309, 1320.

(198) Marc Bilodeau & Richard Steinberg, Donative Nonprofit Organizations, in 2 Handbook of the Economics of Giving, Altruism and Reciprocity, 1272, 1308-10 (Serge-Christophe Kolm & Jean Mercier Ythier eds., 2006).

(199) James Andreoni, Philanthropy, in 2 Handbook of the Economics of Giving, Altruism, and Reciprocity, 1201, 1245 (Serge-Christophe Kolm & Jean Mercier Ythier eds., 2006).

(200) See A. Chamberlin, Tax Foundation, What Does America Think About Taxes? The 2007 Annual Survey Of U.S. Attitudes On Taxes And Wealth, Special Report No. 154 3-5 (2007).

(201) See Tara Larson Brown et al., Giving to Government: Voluntary Taxation in the Lab, 95 J. Pub. Econ. 1190 (2011).

(202) See id.

(203) See Harbaugh et al., supra note 4.

(204) See Christoph Hauert et al., Via Freedom to Coercion: The Emergency of Costly Punishment, 316 SCI. 1905 (2007).

(205) See Guillermo Abramson & Marcelo Kuperman, Social Games in a Social Network, 63 Physical Rev. & Stat. Nonlinear Soft Matter Physics 030901, 030901 (2001); Martin A. Nowak & Robert M. May, Evolutionary Games and Spatial Chaos, 359 Nature 826, 826-29(1992).

(206) See Hauert, supra, note 204.

(207) While a few scholars have identified some cost associated with allowing individuals to donate to causes or organizations with which other citizens disagree, i.e., Planned Parenthood, or synagogues or churches that do not support same-sex marriage, these considerations do not appear to entirely undermine the potential benefits of autonomous decision-making. See Mirkay, supra note 5, at 45.

(208) Bob Jones Univ. v. United States, 461 U.S. 574, 574 (1983); see Edward A. Zelinsky, Are Tax "Benefits" Constitutionally Equivalent to Direct Expenditures?, 112 Harv. L. Rev. 379, 380-81 (1998).

(209) See generally Roy F. Baumeister & Mark R. Leary, The Need to Belong: Desire for Interpersonal Attachments as a Fundamental Human Motivation, 117 Psychol. Bull. 497 (1995); Cindy Hazan & Phillip R. Shaver, Attachment as an Organizational Framework for Research on Close Relationships, 5 Psychol. Inquiry 1 (1994).

(210) See Chamberlin, supra note 200; see generally Dennis C. Mueller, Public Choice III (2003); Harbaugh et al., supra note 4.

(211) Some might claim that compulsory tax transfers are an equally robust means of advancing one's values, but survey and experimental evidence disputes this. See Roger Bennett, Factors Underlying the Inclination to Donate to Particular Types of Charity, 8 Int'l J. Nonprofit & Voluntary Sector Marketing 12, 19, 26-27 (2003); Harbaugh et al., supra note 4.

(212) See Duncan, supra note 144; John W. Sweeney, Jr., An Experimental Investigation of the Free-rider Problem, 2 Soc. SCI. Res. 277 (1973).

(213) See Thomas R. Palfrey & Jeffrey E. Prisbrey, Anomalous Behavior in Public Goods Experiments: How Much and Why?, 87 Am. Econ. Rev. 829 (1997); Ribar & Wilhelm, supra note 143.

(214) See Adrian Fumham & Eddie Procter, Sphere-Specific Just World Beliefs and Attitudes to AIDS, 45 Hum. Rel. 265 (1992); David J. Harper et al.. Lay Causal Perceptions of Third World Poverty and the Just World Theory, 18 Soc. Behav. & Personality 235, 237 (1990); see also Adrian Fumham & Edward Proctor, Belief in a Just World: Review and Critique of the Individual Difference Literature, 28 Brit. J. Soc. Psychol. 365 (1989); Duncan, supra note 144. But see Hans W. Bierhoff et al., Evidence for the Altruistic Personality from Data on Accident Research, 59 J. Personality 263 (1991); Melvin J. Lemer & Dale T. Miller, Just World Research and the Attribution Process: Looking Back and Ahead, 85 Psychol. Bull. 1030 (1978).

(215) See Rene Bekkers & Theo Schuyt, And Who is Your Neighbor? Explaining Denominational Differences in Charitable Giving and Volunteering in the Netherlands, 50 Rev. Religious Res. 74 (2008); John C. Keyt et al., Comparing Donor Segments to a Cause-Based Charity: The Case of the American Lung Association, 10 J. Nonprofit & Pub. Sector Marketing 117 (2002); Sara J. Todd & Rob W. Lawson, Towards a Better Understanding of the Financial Donor: An Examination of Donor Behavior in Terms of Value Structure and Demographics, 4 Int'l. J. Nonprofit & Voluntary Sector Marketing 235 (1999).

(216) See Duncan, supra note 144; Anil Mathur, Older Adults ' Motivations for Gift Giving to Charitable Organizations: An Exchange Theory Perspective, 13 PSYCHOL. & MARKETING 107 (1996).

(217) See generally George A. Akerlof & Rachel E. Kranton, Identity Economics (2010).

(218) See generally Rene Bekkers, Participation in Voluntary Associations: Relations with Resources, Personality, and Political Values, 26 Pol. Psychol. 439 (2005); Dominic S. Fareri, et al., Social Network Modulation of Reward-Related Signals, 32 J. Neurosci. 9045 (2012).

(219) See Baumeister & Leary, supra note 209.

(220) See Abramson & Kuperman, supra note 205; Martin A. Nowak et al., Evolutionary Dynamics in Structured Populations, 365 Phil. Trans. R. Soc. B. 19, 25-28 (2010); David G. Rand et al., Positive Interactions Promote Public Cooperation, 325 Sci. 1272 (2009).

(221) See Muhammad Yunus, Banker to the Poor: Micro-Lending and the battle against WORLD POVERTY (1999); Elinor Ostrom & Roy Gardner, Coping with Asymmetries in the Commons: Self-Governing Irrigation Systems Can Work, 7 J. Econ. Persp. 93 (1993); Michael Woolcock, Social Capital and Economic Development: Toward a Theoretical Synthesis and Policy Framework, 27 Theory & Soc'y 151 (1998). Some have even suggested that these dynamics can explain evolutionary adaptation. See generally Paul H. Rubin, Darwinian Politics: The Evolutionary Origin Of Freedom (2002).

(222) See, e.g., Woolcock, supra note 221. See also Timothy Besley & Stephen Coate, Group Lending, Repayment Incentives and Social Collateral, 46 J. Dev. Econ. 1 (1995).

(223) See Schizer, supra note 158, at 229-31; see also Nick C. Jackson & R. Mark Mathews, Using Public Feedback to Increase Contributions to a Multipurpose Senior Center, 28 J. Applied Behav. Analysis 449 (1995) (discussing how cost-efficient public feedback mechanisms may increase donation rates); Norbert L. Kerr, Illusions of Efficacy: The Effects of Group Size on Perceived Efficacy in Social Dilemmas, 25 J. EXPERIMENTAL Soc. Psychol. 287 (1989).

(224) See Andrea Buraschi & Francesca Cornelli, Donations (Center for Economic and Policy Research, Discussion Paper No. 3488, 2002); Levmore, supra note 29, at 411-12; Todd & Lawson, supra note 215.

(225) See Katrin Fehl et al., Co-evolution of Behavior and Social Network Structure Promotes Human Cooperation, 14 Ecology Letters 546 (2011); James H. Fowler et al., Cooperative Behavior Cascades In Human Social Networks, 107 Proc. Nat'l. Acad. Sci. 5334 (2010); Arne Traulsen et al., Human Strategy Updating in Evolutionary Games, 107 Proc. Nat'l. Acad. Sci. 2962 (2010).

(226) See Theodore Bergstrom et al., On the Private Provision of Public Goods, 29 J. Pub. Econ. 25 (1986); Benedikt Herrmann et al., Antisocial Punishment Across Societies, 319 SCI. 1362 (2008); Francisco C. Santos et al., Cooperation Prevails When Individuals Adjust Their Social Ties, 2 PLOS Computational Biology 1284 (2006); Brian Skyrms & Robin Pemantle, A Dynamic Model of Social Network Formation, 97 Proc. Nat'l. Acad. Sci. 9340 (2000).

(227) See Alesina, supra note 128, at 796-97; cf. Calvert, supra note 128; Levmore, supra note 29, at 387; Wittman, supra note 127.

(228) See Elizabeth Hoffman et al., Social Distance and Other-Regarding Behavior in Dictator Games, 86 Am. Econ. Rev. 653 (1996); Shakti Lamba & Ruth Mace, People Recognise When They are Really Anonymous in an Economic Game, 31 EVOLUTION & Hum. Behav. 271 (2010); Mari Rege & Kjetil Telle, The Impact of Social Approval and Framing on Cooperation in Public Good Situations, 88 J. Pub. Econ. 1625 (2004).

(229) See Joel Brockner et al., Organizational Fundraising: Further Evidence on the Effect of Legitimizing Small Donations, 11 J. Consumer Res. 611 (1984).

(230) Debra Grace & Deborah Griffin, Exploring Conspicuousness in the Context of Donation Behavior, 11 Int'l. J. Nonprofit & Voluntary Sector Marketing 147, 147- 48, 151-52 (2006).

(231) See J. Merrill Carlsmith & Alan E. Gross, Some Effects of Guilt on Compliance, 11 J. Personality & Soc. Psychol. 232 (1969); Robert A. Schwartz, Personal Philanthropic Contributions, 78 J. Pol. Econ. 1264 (1970).

(232) See Francisco Alpizar, Anonymity, reciprocity, and conformity: Evidence from Voluntary contributions to a national Park in Costa Rica, 92 J. Pub. Econ. 1047, 1048 (2008).

(233) See Bodo B. Schlegelmilch et al., Characteristics Affecting Charitable Donations: Empirical Evidence From Britain, 3 J. Marketing Prac.: Applied Marketing Sci. 14 (1997); see generally Jane A. Piliavin & Peter L. Callero, Giving Blood: The Development of an Altruistic Identity (1991).

(234) See Keise Izuma et al., Processing of the Incentive for Social Approval in the Ventral Striatum During Charitable Donation, 22 J. Cognitive Neurosci. 621 (2009).

(235) See Dan Ariely et al., Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially, 99 Am. Econ. Rev. 544, 544-46, 554 (2009).

(236) See Joseph Bankman, Tax Enforcement: Tax Shelters, the Cash Economy, and Compliance Costs, 31 Ohio N.U. L. Rev. 1, 9 (2005); Dan M. Kahan, The Logic of Reciprocity: Trust, Collective Action, and Law, 102 Mich. L. Rev. 71, 80-85 (2003).

(237) "Use doth breed a habit." William Shakespeare, The Two Gentlemen of Verona act 4, sc. 2.

(238) See generally Albert Bandura & Richard H. Walters, Social Learning and Personality Development (1963); Epictetus, The Works of Epictetus, Book 2, [section] xviii (W.A. Oldfather trans., 1925) (c. 135 B.C.) (indicating that "[e]very habit and faculty is strengthened by the corresponding actions.... If you wish to be a good reader, read ..."). See also Alexis de Tocqueville, Democracy in America: And Two Essays on America 661 (Gerald E. Bevan trans., Penguin ed. 2003) (1840) (holding that as individuals undertake common efforts, they develop a willingness to help each other voluntarily).

(239) See Lasana T. Harris & Susan T. Fiske, Neural Regions that Underlie Reinforcement Learning are also Active for Social Expectancy Violations, 5 Soc. NEUROSCI. 76, 88 (2010); Teena Willoughby et al., A Longitudinal Study of the Association Between Violent Video Game Play and Aggression Among Adolescents, 48 Dev. Psychol. 1044 (2011); see generally Craig A. Anderson et al., Violent Video Game Effects on children and Adolescents (2007).

(240) Nancy Eisenberg & Richard A. Fabes, Prosocial Development, in 3 Handbook Of Child Psychology 674 (Nancy Eisenberg et al. eds., 2006).

(241) See Jeffrey A. McLellan & James Youniss, Two Systems of Youth Service: Determinants of Voluntary and Required Youth Community Service, 32 J. Youth & Adolescence 47 (2003); Miranda Yates & James Youniss, Community Service and Political Identity Development in Adolescence, 43 J. Soc. Issues 495 (1998).

(242) See M. Kyle Matsuba & Lawrence J. Walker, Young Adult Moral Exemplars: The Making of Self Through Stories, 15 J. Res. on Adolescence 275 (2005).

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(250) See Harbaugh, supra note 4.

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(252) Andreas Bartels & Semir Zeki, The Neural Basis of Romantic Love, 11 Neuroreport 3829 (2000).

(253) Id.

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(255) Harbaugh, supra note 4.

(256) Id.; see also Brian Knutson et al., Dissociation of Reward Anticipation and Outcome with Event-Related fMRI, 12 Neuroreport 3683 (2001); P. Read Montague & Gregory S. Berns, Neural Economics and the Biological Substrates of Valuation, 36 Neuron 265 (2002).

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(259) See Katarina Kuss et al., A Reward Prediction Error for Charitable Donations Reveals Outcome Orientation of Donators, 8 Soc. Cognitive Affect Neurosci. 216 (2011).

(260) Id. at 219-220.

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(262) See Eva H. Telzer, Gaining While Giving: An JMR1 Study of the Rewards of Family Assistance Among White and Latino Youth, 5 Soc. Neurosci. 508 (2010).

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(265) See Moll et al., supra note 4.

(266) See Palfrey & Prisbrey, supra note 118.

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(270) Katherine P. Rankin et al., Structural Anatomy of Empathy in Neurodegenerative Disease, 129 Brain 2945 (2011).

(271) Tristen K. Inagaki & Naomi 1. Eisenberger, Neural Correlates of Giving Support to a Loved One, 74 Psychosomatic Med. 3 (2012).

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(275) Christian Gaser & Gottfried Schlaug, Brain Structures Differ Between Musicians and Non-Musicians, 23 J. Neurosci. 9240 (2003).

(276) Draganski et al., supra note 273.

(277) Antoine Lutz et al., Regulation of the Neural Circuitry of Emotion by Compassion Meditation: Effects of Meditative Expertise, 3 PloS One el 897 (2008).

(278) Singer et al., supra note 151, at 466-69.

(279) Jorge A. Barraza & Paul J. Zak, Empathy Towards Strangers Triggers Oxytocin Release and Subsequent Generosity, 1167 Ann. N.Y. Acad. Sci. 182, 188 (2009).

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(286) See generally Sutton & Barto, supra note 257; Everitt & Robbins, supra note 257.

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(290) Colombo, supra note 81, at 681. See also Daniel Kahneman & Jack L. Knetsch, Valuing Public Goods: the Purchase of Moral Satisfaction, 22 J. Env. Econ. & Mgmt. 57 (1992).

(291) Amartya Sen, Goals, Commitment, and Identity, 1 J. L. Econ. & Org. 341, 346-49 (2002).

(292) Robert H. Frank, Microeconomics and Behavior XXIII (1994); see also Fehr & Gintis, supra note 7, at 44 (explaining that while "economic methods such as optimization under constraints are strictly neutral with regard to the nature of people's preferences [...] in the past economists assumed that preferences are purely selfish in almost all applications.").

(293) See Andreoni, supra note 143; B. Douglas Bernheim & Antonio Rangel, Behavioral Public Economics: Welfare and Policy Analysis with Nonstandard Decision-makers, in Behavioral Economics and Its Applications 1, 57-58 (Peter Diamond & Hannu Vartiainen eds., 2005); Peter Diamond, Optimal Tax Treatment of Private Contributions for Public Goods with and Without Warm Glow Preferences, 90 J. Pub. Econ. 897 (2006).

(294) See Andreoni, supra note 143; Kahneman & Knetsch, supra note 290.

(295) See Tracy L. Bale et al., CN'S Region-Specific Oxytocin Receptor Expression: Importance in Regulation of Anxiety and Sex Behavior, 21 J. Neurosci. 2546 (2001); Thomas R. Insel, A Neurobiological Basis of Social Attachment, 154 Am. J. Psychiatry 726 (1997); Eric B. Keverne & James P. Curley, Vasopressin, Oxytocin and Social Behavior, 14 Current Op. Neurobiol. Ill (2004).

(296) See Donatella Marazziti et al., A Relationship Between Oxytocin and Anxiety of Romantic Partner, 2 Clinical Practice Epidemiol. Mental Health 28 (2006).

(297) See C. Sue Carter, Neuroendocrine Perspectives on Social Attachment and Love, 23 Psychoneuroendocrinology 779 (1998); Thomas R. Insel & Larry J. Young, The Neurobiology of Attachment, 2 Nature Rev. Neurosci. 129 (2001).

(298) See generally C. Sue Carter et al., Attachment and Bonding: A New Synthesis (2006); Paul J. Zak, The Neuroscience of Trust, 37 People & Strategy 14 (2014).

(299) Paul J. Zak et al., Oxytocin Increases Generosity in Humans, 2 PLoS ONE el 128 (2007).

(300) See Gregor Domes et al., Oxytocin Improves "Mind-reading" in Humans, 61 Biol. Psychiatry, 731 (2007); Rene Hurlemann et al., Oxytocin Enhances Amygdala- Dependent, Socially Reinforced Learning and Emotional Empathy in Humans, 30 J. Neurosci. 4999 (2010); Michael Kosfeld et al., Oxytocin Increases Trust in Humans, 435 Nature 673 (2005).

(301) See Barraza & Zak, supra note 279.

(302) See Vera B. Morhenn et al., Monetary Sacrifice Among Strangers is Mediated by Endogenous Oxytocin Release After Physical Contact; 29 Evol. & Hum. Behav. 375 (2008); Paul J. Zak et al., Oxytocin is Associated with Human Trustworthiness, 48 Hormones & Behav. 522, (2005).

(303) See Zak et al., supra note 163; Zak et al., supra note 302.

(304) Said possibilities should not be construed as guarantees of prosocial cooperation and trust. Contextual dynamics and inter-individual differences may alter oxytocin's role in social behavior. Some researchers, for instance, have found that in some circumstances oxytocin may promote cohesion of an exclusive, ingroup/outgroup character. See CH DeClerk, C Boone, T Kiyonari, Oxytocin and Cooperation under Conditions of Uncertainty: the Modulating Role of Incentives and Social Information, 57 Hormones & Behav. 368 (2010); Marinus H. Van Ijzendoorn, Marian J. Bakermans-Kranenburg, A Sniff of Trust: Meta-Analysis of the Effects of Intranasal Oxytocin Administration on Face Recognition, Trust to In-group, and Trust to Out-group, 37 Psychoneuroendocrinology 438 (2012).

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(307) See Clemens Kirschbaum & Dirk H. Hellhammer, Salivary Cortisol in Psychoneuroendocrine Research: Recent Developments and Applications, 19 Psychoneuroendocrinology 313 (1994).

(308) See, e.g., Stephen Post & Jill Neimark, Why good things happen to good people (2007); S.L. Brown et al., Providing Social Support May be More Beneficial Than Receiving it: Results from a Prospective Study of Mortality, 14 Psychol. Sci. 320 (2003); William M. Brown et al., Altruism Relates to Health in an Ethnically Diverse Sample of Older Adults, 60B J. Gerontology 143 (2005).

(309) Dunn et al., supra note 144.

(310) See Brown et al., supra note 308.

(311) Although the neuroscientific research discussed here employs sound, rigorous experiments and methods, issues of experimental design, replicability, spatial resolution and task specificity merit further attention. See Arne May & Christian Gaser, Response to Thomas and Baker: The Structural Adaptation of the Brain to Training, 16 Trends Cogn. Sci. 97 (2012); Cibu Thomas & Chris 1. Baker, Remodeling Human Cortex Through Training: Comment on May, 16 TRENDS COGN. SCI. 96 (2012).

(312) The present case is no anomaly. Since the pioneering work of Coase and others, the use of externality analsis in law has been extensive. See, e.g., Ronald Coase, The Problem of Social Cost, 3 J.L. & Econ. 1 (1960); Richard Posner, Economic Analysis of Law (1998); Ian Ayres & Eric Talley, Solomonic Bargaining: Dividing a Legal Entitlement to Facilitate Coasean Trade, 104 Yale L. J. 1027 (1995); Guido Calabresi, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev., 1089 (1972).

(313) See generally David Friedman, Hidden Order: the Economics of Everyday Life (1996).

(314) Some legal scholars have applied externality analysis to the charitable deduction, although not always unproblematically. One author has decried the "negative externalities" of the deduction that the "treasury needs to tax other taxpayers at a higher effective rate to recoup these revenues" spent on the deduction, and that the deduction makes the tax system "more complicated and opaque." Ilan Benshalom, The Dual Subsidy Theory of Charitable Deductions, 84 Ind. L. J. 1047, 1071-74 (2009). However, the first "externality" is already counted as a direct cost in the subsidy view of the deduction. Also, given that the charitable tax deduction section is a few pages, while the current suite of Federal tax materials comprises more than 74,000 pages, it is unlikely that the deduction is a negative externality adding significant complexity and opaqueness. See, id. at 1071-74; see also Shannon W. McCormack, Taking the Good with the Bad: Recognizing the Negative Externalities Created by Charities and their Implications for the Charitable Deduction, 52 Ariz. L. Rev. 977, 1010-11 (2010).

(315) See infra Figure 2(b).

(316) One of the present aims is to identify a broader set of benefits against which the costs of forgone tax revenue should be evaluated. Said forgone tax revenue includes itemized, not standard deductions, and thus the current treatment applies primarily to the former. All the same, nothing in the data suggests that said externalities could not arise from increased giving due to heightened salience, slippage or a charitable deduction available to both itemizers and nonitemizers.

(317) See Organization for Economic Co-operation and Development, Human Capital Investment: An International Comparison 9 (1998).

(318) See James Coleman, Social Capital in the Creation of Human Capital, 94 Am. J. Soc. 95 (1988); Giuseppe Folloni & Giorgio Vittadini, Human Capital Measurement: A Survey, 24 J. Econ. Surveys 248 (2010); Evgueni Vinogradov & Lars Kolvereid, Cultural Background, Human Capital, and Self-Employment Rates among Immigrants in Norway, 19 Entrepreneurship & Regional Dev. 359 (2007).

(319) See Eric M. Uslaner, Volunteering and Social Capital: How Trust and Religion Shape Civic Participation in the United States, in Social Capital And Participation In Everyday Life 104 (Eric M. Uslaner ed., 2001).

(320) See Paul S. Adler & Seok-Woo Kwon, Social Capital: Prospects for a New Concept, 27 Acad. Mgmt. Rev. L. 17 (2002); Jonathan Gruber, Pay or Pray? The Impact of Charitable Subsidies on Religious Attendance, 88 J. Pub. Econ. 2635 (2004); Porta Rafael et al., Trust in Large Organizations, 87 Am. Econ. Rev. 333 (1997); see generally Diego Gambetta, Trust: Making And Breaking Cooperative Relations (1988).

(321) See M.B. Neace, Entrepreneurs in Emerging Economies: Creating Trust, Social Capital and Civil Society, 65 Ann. Am. Acad. Pol. & Soc. Sci. 148 (1999); Chiara Tufarelli & Elena Fagotto, Operationalizing the Social Capital Hypothesis for Development Finance, 2 Econ. Analysis 223 (1999); see generally Paul Collier & Jan W. Gunning, The Microeconomics of African Growth (1999); Gary S. Becker et al., Human Capital: A Theoretical and Empirical Analysis with Special Reference To Education (1994).

(322) Of these, some have made questionable claims that "warm glow" and the public character of public goods constitute positive externalities. See Andrews, supra note 82, at 358; Hall & Colombo, supra note 40, at 1393, n.33; Louis Kaplow, Tax Policy and Gifts, 88 Am. Econ. Rev. 283, 284 (1998); Schizer, supra note 158, at 225-26. But see Peter Diamond, Optimal Tax Treatment of Private Contributions for Public Goods with and Without Warm Glow Preferences, 90 J. PUB. Econ. 897, 917 (2006).

(323) Salvador Barrios & Eric Strobl, Foreign Direct Investment and Productivity Spillovers: Evidence from the Spanish Experience, 138 Rev. World Econ. 459 (2002); Alexander Klemm & Stefan Van Parys, Empirical Evidence on the Effects of Tax Incentives, 19 Int'l. Tax & Pub. Finance 393 (2012); Xiaoying Li & Xiaming Liu, Foreign Direct Investment and Economic Growth: an Increasingly Endogenous Relationship, 33 WORLD Dev. 393 (2005).

(324) Denise DiPasquale & Edward Glaeser, Incentive and Social Capital: Are Homeowners Better Citizens?, 45 J. Urban Econ. 354 (1999); Edward L. Glaeser & Bruce Sacerdote, Why is There More Crime in Cities? 107 J. Pol. Econ. 225 (1999); William Rohe & Leslie Stewart, Home Ownership and Neighborhood Stability, 1 Housing Pol'y Debate 37 (1996).

(325) Kenneth Gillingham & James Sweeney, Market Failure and the Structure of Externalities, in Harnessing Renewable Energy in Electric Power Systems: Theory, Practice, Policy 69 (Boaz Moselle et al. eds., 2010).

(326) Some economists have measured and found robust indications of specific positive externalities of the deduction. See Eleanor Brown & Hamilton Lankford, Gifts of Money and Gifts of Time: Estimating the Effects of Tax Prices and Available Time, Al J. Pub. Econ. 321 (1992) (finding that cash donations are complements to volunteer time and that the reduced tax price of giving is a significant explanatory variable for household volunteer time); Baris K. Yoruk, The Impact of Charitable Subsidies on Religious Giving and Attendance: Evidence from Panel Data, 95 Rev. Econ. & Stats. 1708 (2013) (confirming that religious giving and participation are complements and that a 1% increase in the amount of religious contributions is associated with a .4% increase in religious attendance and associated improvements in well-being). But see Gruber, supra note 320.

(327) I am grateful to Brigham Frandsen for this observation.

(328) See Robert D. Putnam, Bowling Alone: America's Declining Social Capital, 6 J. Democracy 65 (1995).

(329) See Pierre Bourdieu, The Forms Of Capital, in Handbook of Theory and Research for the Sociology of Education 241, 249 (John G. Richardson ed., 1986).

(330) See Nan Lin, Social Networks and Status Attainment, 25 Ann. Rev. Sociol. 467 (1999); Barry Wellman & Kenneth Frank, Network Capital in a Multi-Level World: Getting Support from Personal Communities, in Social Capital: Theory And Research 233 (Nan Lin et al. eds., 2001).

(331) Peter Frumkin, Strategic Giving: The Art And Science Of Philanthropy 375 (2006); see also Eleanor Brown & James Ferris, Social Capital and Philanthropy: An Analysis of the Impact of Social Capital on Individual Giving and Volunteering, 36 Nonprofit & Voluntary Sector Q. 85 (2007).

(332) See Pamala Wiepking & Ineke Maas, Resources that Make you Generous: Effects of Social and Human Resources on Charitable Giving, 87 Soc. Forces 1973 (2009).

(333) Id.

(334) See Doug McAdam, Political Process And The Development Of Black Insurgency 1930-70(1982).

(335) See Arthur C. Brooks, Does Social Capital Make You Generous?, 86 Soc. SCI. Q. 1 (2005); Paul G. Schervish & John H. Havens, Social Participation and Charitable Giving: A Multivariate Analysis, 8 VOLUNTAS 235 (1997); Lili Wang & Elizabeth Graddy, Social Capital, Volunteering, and Charitable Giving, 19 VOLUNTAS 23 (2008).

(336) See Megan Alessandrini et al., Building Social Capital Through Blood Donation: The Social Futures Project, 2 ISBT Science Series 46 (2007); Marco Carradore et al., Social Capital Generated Thanks to the Practice of Blood Donation, Bessy Foundation (2012); Mark Granovetter, The Strength Of Weak Ties, 78 Am. J. Sociol. 1360 (1973).

(337) See Brooks, supra note 335; Schervish & Havens, supra note 335.

(338) See generally Ronald Inglehart, Modernization and Postmodernization: Cultural, Economic, and Political Change in 43 Societies (1997).

(339) See James Booth & Patricia Bayer Richard, Civil Society and Political Context in Central America, in Beyond Tocqueville: Civil Society And Social Capital In Comparative Perspective, 42 Am. Behav. Sci. 33 (1998).

(340) See Eric M. Uslaner, The Moral Foundations Of Trust 197 (2002); Robert Wuthnow, Mobilizing Civic Engagement: The Changing Impact of Religious Involvement, in Civic Engagement in American Democracy (Morris Fiorina & Theda Skocpol eds., 1999).

(341) Stephen Knack & Philip Keefer, Does Social Capital Have an Economic Payoff? A Cross-Country Investigation, 112 Q. J. Econ. 1251 (1997).

(342) Rafael La Porta et al, The Quality Of Government, 15 J. L. Econ. & Org. 222 (1998).

(343) Uslaner, supra note 319.

(344) See Russell Hardin, Conceptions and Explanations of Trust, in Trust in Society 3-39 (Karen Cook ed., 2001).

(345) See generally Anthony Barnes Atkinson & Joseph E. Stiglitz, Lectures in Public Economics (1980); Robert Putnam et al., Making Democracy Work: Civic Traditions in Modern Italy (1993); Inglehart, supra note 338; La Porta et al., supra note 342.

(346) See Alessandra Cassar & Bruce Wydick, Does Social Capital Matter? Evidence from a Five-Country Group Lending Experiment, 62 Oxford Econ. Papers 715 (2010); Fred E. Markowitz, et al., Extending Social Disorganization Theory: Modeling the Relationships Between Cohesion, Disorder, and Fear, 39 Criminology 293 (2001).

(347) See Barraza et al., supra note 165; Paul J. Zak et al., The Neurobiology of Trust, Ann. N.Y. Acad. Sci. 1032, 1032 (2005).

(348) See Kevin Stanton Barrett et al., Further Evidence on the Dynamic Impact of Taxes on Charitable Giving, 50 Nat'l. Tax J. 321 (1997); Daniel Hart & Suzanne Fegley, Prosocial Behavior and Caring in Adolescence: Relations to Self-Understanding and Social Judgment, 66 Child Dev. 1346 (1995); Paul A.M. Van Lange et al., Development of Prosocial, Individualistic, and Competitive Orientations: Theory and Preliminary Evidence, 73 J. Personality & Soc. Psychol. 733 (1997).

(349) See Van Lange et al., supra note 348.

(350) See Naomi E. Feldman, Time is Money: Choosing Between Charitable Activities, 1 Am. Econ. J. Econ. Pol'y. 103 (2010); Paul L. Menchik & Burton Allen Weisbrod, Volunteer Labor Supply, 32 J. PUB. Econ. 19 (1987).

(351) The U.S. tax code does not offer a tax deduction for volunteering ostensibly because time spent volunteering is not imputed to a volunteer's income, and thus not taxed.

(352) See Brown & Lankford, supra note 326; Feldman, supra note 350.

(353) See Hart & Fegley, supra note 348; Sabrina M. Oesterle et al, Volunteerism During the Transition to Adulthood: A Life Course Perspective, 82 Soc. Forces 1123 (2004); S. Mark Pancer & Michael W. Pratt, Social and Family Determinants of Community Service Involvement in Canadian Youth, in Roots Of Civic Identity; International Perspectives On Community Service And Activism In Youth 32 (James Youniss & Miranda Yates eds., 1999).

(354) Jane Allyn Piliavin et al., Addicted to Altruism? Opponent-Process Theory and Habitual Blood Donation, 43 J. Personality & Soc. Psychol. 1200 (1982).

(355) Eamonn Ferguson et al., Exploring the Pattern of Blood Donor Beliefs in First-Time, Novice, and Experienced Donors: Differentiating Reluctant Altruism, Pure Altruism, Impure Altruism, and Warm Glow, 52 Transfusion 343, 353 (2012).

(356) Helen Y. Weng et al., Compassion Training Alters Altruism and Neural Responses to Suffering, 24 Psychol. Sci. 1171 (2013).

(357) Susanne Leiberg et al., Short-Term Compassion Training Increases Prosocial Behavior in a Newly Developed Prosocial Game, 6 PloS One el 7798 (2013) (indicating that changes in prosocial behavior resulted from "changes in participants' way of feeling and thinking about other people to a more positive ... benevolent" way. Id. at 6.).

(358) Olga M. Klimecki et al., Functional Neural Plasticity and Associated Changes in Positive Affect after Compassion Training, 23 Cerebral Cortex 1552 (2012); Leiberg et al., supra note 357; Weng et al., supra note 356.

(359) See Van Dijk et al., supra note 246; Fahrenfort et al., supra note 280; Singer, supra note 254.

(360) See John D. Colombo, The Role Of Access In Charitable Tax Exemption, 82 Wash. U. L. Q. 343, 343-45 (2004).

(361) James Youniss & Miranda Yates, A Development Perspective on Community Service in Adolescence, 5 Soc. Dev. 85 (1996).

(362) See generally Nancy Eisenberg & Paul H. Mussen, The Roots Of Prosocial Behavior In Children (1989); A. Barne Nsamenang, Human Development In Cultural Context: A Third-World Perspective (1992).

(363) See Peter Kollock, Transforming Social Dilemmas: Group Identity and Cooperation, in Modeling Rational and Moral Agents 186 (Peter Danielson ed., 1998); Brent Simpson & Robb Wilier, Altruism and Indirect Reciprocity: The Interaction of Person and Situation in Prosocial Behavior, 71 Soc. PSYCHOL. Q. 37 (2008).

(364) See Michael Hanks, Youth, Voluntary Associations and Political Socialization, 60 Soc. Forces 211 (1981).

(365) See Bonne L. Barber et al., Whatever Happened to the Jock, the Brain, and the Princess? Young Adult Pathways Linked to Adolescent Activity Involvement and Social Identity, 16 J. Adolescent Res. 429 (2001); James Younniss et al., The Role of Community Service in Identity Development: Normative, Unconventional and Deviant Orientations, 12 J. Adolescent Res. 245 (1997).

(366) See Paul D. Hastings et al., The Development of Concern for Others in Children with Behavior Problems, 36 Dev. Psychol. 531 (2000); Richard E. Tremblay et al., A Prosocial Scale for the Preschool Behaviour Questionnaire: Concurrent and Predictive Correlates, 15 Int'l J. Behav. Dev. 227 (1992).

(367) See Leonard D. Eron & L. Rowell Huesmann, The Relation of Prosocial Behavior to the Development of Aggression and Psychopathology, 10 Aggressive Behav. 201 (1984); Jaana Haapasalo et al., Relative Advantage of Person and Variable-Based Approaches for Predicting Problem Behaviors from Kindergarten Assessments, 16 J. Quant. Criminol. 145 (2000).

(368) See Joann M. Hanson, Volunteerism Among First Offenders: Community Service as Adult Development, 14 J. Voluntary Action Res. 142 (1985); Ronit Nirel et al., The Effectiveness of Service Work: An Analysis of Recidivism, 13 J. Quant. Criminol. 73 (1997); Mark C. Young et al., Long-Term Recidivism Among Federal Inmates Trained as Volunteer Prison Ministers, 22 J. Offender Rehab. 97 (1995).

(369) See U.S. Department of Justice, Federal Bureau of Investigation, Crime in the United States: Uniform Crime Reports (2007); David A. Anderson, The Cost of Crime, 7 Found. & Trends Microecon. 209 (2011); Mark A. Cohen et al., Willingness-To-Pay For Crime Control Programs, 42 Criminology 89 (2004). Similarly health, productivity, and crime costs attributable to illicit drug use are estimated at around $200 billion. See U.S. Department of Justice, National Drug Intelligence Center, The Economic Impact of Illicit Drug Use on American Society (2008).

(370) See Barraza & Zak, supra note 279; Zak et al., supra note 163.

(371) See Mark Ottoni Wilhelm & Rene Bekkers, Helping Behavior, Dispositional Empathic Concern, and the Principle of Care, 73 Soc. Psychol. Q. 11 (2010).

(372) See David R. Cox, Regression Models and Life Tables, J. Royal St at. Soc'y 187 (1972); Nirel et al., supra note 368.

(373) See James A. Andreoni & John H. Miller, Rational Cooperation in the Finitely Repeated Prisoner's Dilemma: Experimental Evidence, 103 Econ. J. Royal Econ. Soc'y. 570 (1993); Russell Cooper et al., Cooperation Without Reputation: Experimental Evidence From Prisoner's Dilemma Games, 12 Games & Econ. Behav. 187(1996).

(374) See Yoella Bereby-Meyer & Alvin E. Roth, The Fragility of Cooperation: Learning in Noisy Games (2002); Fehr & Fischbacher, supra note 150; Drew Fudenberg & Eric Maskin, The Folk Theorem in Repeated Games with Discounting or with Incomplete Information, 54 ECONOMETRICA 533 (1986).

(375) See Masaki Aoyagi & Guillaume R. Frechette, Collusion as Public Monitoring Becomes Noisy: Experimental Evidence, 144 J. ECON. Theory 1135 (2009); Fehr & Fischbacher, supra note 150.

(376) Nicholas A. Christakis & James H. Fowler, Connected: The Surprising Power of Our Social Networks and How they Shape Our Lives 296 (2009).

(377) Donations can also be subject to milestone payments or parceling. A distinct but related issue involves potential costs of litigation involving donor standing rights. See Reid Kress Weisbord & Peter DeScioli, The Effects of Donor Standing on Philanthropy: Insights from the Psychology of Gift-Giving, 45 Gonz. L. Rev. 225 (2010).

(378) See Schizer, supra note 158, at 262.

(379) See Feenberg, supra note 85; Martin Feldstein, The Income Tax and Charitable Contributions: Part I--Aggregate and Distributional Effects, 28 Nat'l. Tax J. 81 (1975); Lawrence Lindsey, Estimating the Behavioral Responses of Taxpayers to Changes in Tax Rates, 33 J. PUB. Econ. 173 (1987); Randolph, supra note 85.

(380) See Christakis & Fowler, supra note 376; Katherine G. Carman, Social Influences and the Private Provision of Public Goods: Evidence from Charitable Contributions in the Workplace, (Stanford Institute for Economic Policy Research, Discussion Paper No. 02-13, 2004); Joan E. Grusec, The Socialization of Altruism, in PROSOCIAL Behavior 9 (Margaret S. Clark ed., 1991); Michael A. Rees et al., A Nonsimultaneous, Extended, Altruist-Donor Chain, 360 New Eng. J. Med. 1096 (2009).

(381) Christakis & Fowler, supra note 376.

(382) See Rachel Croson et al., Keeping up With the Joneses: The Relationship of Perceived Descriptive Social Norms, Social Information, and Charitable Giving, 19 Nonprofit Mgmt. & Leadership 467 (2009).

(383) See Jen Shang & Rachel Croson, A Field Experiment in Charitable Contribution: The Impact of Social Information on the Voluntary Provision of Public Goods, 119 Econ. J. 1422 (2009).

(384) See Lisa F. Berkman & Ichiro Kawachi, Social Epidemiology (2000); Antoni Calvo-Armengol & Matthew O. Jackson, Like Father, Like Son: Social Network Externalities and Parent-Child Correlation in Behavior, 1 Am. Econ. J.: Microecon. 124 (2009); Sandro Galea et al., The Epidemiology of Post-Traumatic Stress Disorder After Disasters, 27 Epidemiol. Rev. 78 (2005).

(385) Carman, supra note 380.

(386) Id

(387) See Robert J. Barro, Are Government Bonds Net Wealth?, 82 J. POL. ECON. 1095 (1974).

(388) See Virginia A. Hodgkinson & Murray S. Weitzman, Giving and Volunteering in the United States: Findings from a National Survey 87-88 (1996); Barrett et al., supra note 348.

(389) See Grusec, supra note 380; Mark O. Wilhelm et al., The Intergenerational Transmission of Generosity, 92 J. Pub. Econ. 2146 (2008).

(390) See Partha Deb et al., Giving to Family Versus Giving to the Community Within and Across Generations, 23 J. Popul. Econ. 1091 (2010); Wilhelm et al., supra note 389.

(391) See Barro, supra note 387.

(392) See Rees et al., supra note 380; Carman, supra note 380.

(393) See Alex Harris & Carl E. Thoresen, Volunteering is Associated with Delayed Mortality in Older People: Analysis of the Longitudinal Study of Aging, 10 J. Health Psychol. 739 (2005); Phyllis D. Moen et al., Social Integration and Longevity: An Event History Analysis of Women's Roles and Resilience, 54 Am. Soc. Rev. 635 (1989); Doug C. Oman et al., Volunteerism and Mortality Among the Community-Dwelling Elderly, 4 J. Health Psychol. 301 (1999).

(394) See Peggy A. Thoits & Lyndi N. Hewitt, Volunteer Work and Well-Being, 42 J. Health Soc. Behav. 115 (2001).

(395) See Harris & Thoresen, supra note 393; Moen, supra note 393.

(396) See Section 1V.B.2; see also Dunn et al., supra note 144 at 1687-88; Kirschbaum & Hellhammer, supra note 307 at 313-33.

(397) See David C. McClelland & Carol Kirshnit, The Effect of Motivational Arousal Through Films on Salivary Immunoglobulin A, 2 Psychol. & Health 31 (1988).

(398) See Karen M. Grewen et al., Effects of Partner Support on Resting Oxytocin, Cortisol, Norepinephrine and Blood Pressure Before and After Warm Partner Contact, 67 Psychosom. Med. 531 (2005); Kathleen C. Light et al., More Frequent Partner Hugs and Higher Oxytocin Levels are Linked to Lower Blood Pressure and Heart Rate in Premenopausal Women, 69 Biol. Psychol. 1, 521 (2005).

(399) See Alok D. Bhargava et al. Modeling the Effects of Health on Economic Growth, 20 J. Health Econ. 423, 423M0 (2001); David E. Bloom et al., The Effect of Health on Economic Growth: A Production Function Approach, 32 World Dev. 1 (2004).

(400) See John Strauss & Duncan Thomas, Health, Nutrition, and Economic Development, 36 J. Econ. Lit., 766 (1998).

(401) See David E. Bloom & David Canning, The Health and Wealth of Nations, 287 Sci. 1207, 1207-09 (2000); Michael Grossman, On the Concept of Health Capital and the Demand for Health, 80 J. Pol. Econ. 223 (1972); Jennifer M. Stewart, The Impact of Health Status on the Duration of Unemployment Spells and the Implications for Studies of the Impact of Unemployment on Health Status, 20 J. Health Econ. 781 (2001).

(402) See Edmundo Murrugarra & Martin Valdivia, The Returns to Health for Peruvian Urban Adults by Gender, Age, and Across the Wage Distribution, in Wealth from Health: Linking Social Investments to Earnings in Latin America 151 (William D. Savedoff & T. Paul Schultz eds., 2000).

(403) Anne Case & Francis Wilson, Health and Wellbeing in South Africa: Evidence from The Langeberg Survey 1 (2001) (Princeton University, Research Program in Development Studies mimeograph).

(404) See Alok D. Bhargava, Nutritional Status and the Allocation of Time in Rwandese Households, 77 J. Econometrics 277 (1997); Samir S. Basta et al., Iron Deficiency Anemia and the Productivity of Adult Males in Indonesia, 32 Am. J. CLINICAL Nutrition 916 (1979); Strauss & Thomas, supra note 400.

(405) See Ellen L. Idler & Yael Benjamini, Self-Rated Health and Mortality: A Review of Twenty-Seven Community Studies, 38 J. Health & Soc. Behavior 21 (1997).

(406) See Edward Miguel & Michael Kremer, Worms: Identifying Impacts on Education and Health in the Presence of Treatment Externalities, 72 Econometrica 159 (2004).

(407) Baris K. Yoruk, Does Giving to Charity Lead to Better Health? Evidence from Tax Subsidies for Charitable Giving, 45 J. Econ. Psychol. 71, 73-74 (2014).

(408) Id.

(409) Id.

(410) Id. at 82.

(411) See Gergen, supra note 28, at 1402.

(412) See Richard M. Titmuss, The Gift Relationship (1970); Alfie Kohn, Punished by Rewards: The Trouble with Gold Stars, Incentive Plans, A's, Praise, and Other Bribes (1999).

(413) See Gergen, supra note 28, at 1395.

(414) See Kohn, supra note 412, at 20-21; Judith C. Mower & David Wilemon, Rewarding Technical Teamwork, Research-Technology Management, 24 (1989).

(415) See K. Angeleque Akin-Litle et al., Extrinsic Reinforcement in the Classroom: Bribery or Best Practice, 33 SCHOOL PSYCHOL. Rev. 344 (2004); Joshua Angrist & Victor Lavy, The Effects of High Stakes High School Achievement Awards: Evidence from a Randomized Trial, 99 Am. Econ. Rev., 1384, (2009); Robert Eisenberger et al., Effects of Reward on Intrinsic Motivation--Negative, Neutral, and Positive: Comment on Deci, Koestner, and Ryan (1999), 125 Psychol. Bull. 677 (1999);

(416) Titmuss, supra note 412.

(417) See Bruno S. Frey & Felix Oberholzer-Gee, The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out, 87 Am. Econ. Rev. 746, 746 (1997); Uri Gneezy & Aldo Rustichini, A Fine is a Price, 29(1) J. Legal Stud. 1 (2000).

(418) James Heyman & Dan Ariely, Effort for Payment: A Tale of Two Markets, 15 Psychol. Sci. 787, 789 (2004).

(419) Roland Benabou & Jean Tirole, Incentives and Prosocial Behavior, 96(5) Am. Econ. Rev. 1652, 1654 (2006).

(420) See L. Goette & Alois Stutzer, Blood Donations and Incentives: Evidence from a Field Experiment (Inst, for the Study of Labor, Working Paper No. 3580, 2008); Nicola Lacetera & M. Macis, Time for Blood: the Effect of a Naturally-Ocurring Incentive for Altruistic Behavior (University of Toronto, Working Paper, 2010); Nicola Lacetera et al., Will There be Blood? Incentives and Displacement Effects in Pro-social Behavior, 4 Am. Econ. J. Econ. Pol'y. 186 (2012); Edward P. Lazear, Performance Pay and Productivity, 90 Am. Econ. Rev. 1346 (2000); Nina Mazar & Dan Ariely, Dishonesty in Everyday Life and its Policy Implications, 25 J. Pub. Pol'y & Marketing 117 (2006).

(421) See Susan M. Havercamp & Steven Reiss, A Comprehensive Assessment of Human Strivings: Test-Retest Reliability and Validity of the Reiss Profile, 8 J. Personality Assessment 123 (2003); Steven Reiss & Leonard W. Sushinsky, The Competing Response Hypothesis of Decreased Play Effects: A Reply to Lepper and Greene, 33 J. Personality & Soc. Psychol. 233 (1976).

(422) See Soman, supra note 193.

(423) See Goette & Stutzer, supra note 420; Nicola Lacetera & Mario Macis, Do All Material Incentives for Pro-social Activities Backfire? The Response to Cash and Non-cash Incentives for Blood Donations, 31 J. ECON. PSYCHOL. 738 (2010); Mazar & Ariely, supra note 420.

(424) Benabou & Tirole, supra note 419.

(425) See Gerald Auten & David Joulfaian, Charitable Contributions and Intergenerational Transfers, 59 J. Pub. Econ. 55 (1996); Bakija & Heim, supra note 165; Arthur C. Brooks, supra note 175; Vincent Chua & Ming Wong, Tax Incentives, Individual Characteristics and Charitable Giving in Singapore, 26 Int'l. J. Soc. ECON. 1492 (1999); Rachel Croson & Melanie Beth Marks, Step Returns in Threshold Public Goods: A Meta-and Experimental Analysis, 2 Experimental Econ. 239 (2000).

(426) See Wendy S. Grolnick et ah, Internalization within the Family: The Self- Determination Perspective, in Parenting and Children's Internalization of Values: A Handbook of Contemporary Theory, 135 (Joan E. Grusec & Leon Kuczynski eds., 1997); Richard M. Ryan, Psychological Needs and the Facilitation of Integrative Processes, 63 J. Personality 397 (1995).

(427) See James P. Connell & James G. Wellborn, Competence, Autonomy and Relatedness: A Motivational Analysis of Self-System Process, in The Minnesota Symposium On Child Psychology, vol. 22 (Megan R. Gunnar & L.A. Sroute eds., 1990); Marianne Miserandino, Children who do Well in School: Individual Differences in Perceived Competence and Autonomy in Above-Average Children, 88 J. Edu. Psychol. 213, 213- 14 (1996).

(428) See Edward Deci et al., Facilitating Internalization: The Self- Determination Theory Perspective, 62 J. Personality 119 (1994); Richard M. Ryan et al., Representations of Relationships to Teachers, Parents, and Friends as Predictors of Academic Motivation and Self-Esteem, 14 J. Early Adolescence 226 (1994).

(429) Currently at 39.6% or less.

(430) See generally Alberto Alesina & Enrico Spolaore, The Size of Nations (2003).

(431) David Roodman & Scott Standley, Tax Policies to Promote Private Charitable Giving in DAC Countries 25-26 (Center for Global Development, Working Paper No. 82, 2006).

(432) See Jonas Edlund & Rune Aberg, Social Norms and Tax Compliance, 9 Swedish Econ. Pol'y Rev. 201 (2002).

(433) See Alberto Alesina et al., Why Doesn't the United States Have a European- Style Welfare State? (Brookings Institute, Working Paper No. 2, 2001).

(434) See id. at 30.

(435) In Sweden, for example, the median wage earner pays an estimated 63% of earned wages in total taxes, while the visible tax rate on nominal income is only 32%; the government obtains the remaining revenue through VAT and payroll taxes. See Jonas Agell, Why Sweden's Welfare State Needed Reform, 106 Econ. J. 1760 (1996). Furthermore, only a quarter of citizens could identify when asked that the second-largest source of government revenue is, in fact, a payroll tax. See Tino Sanandaji & Bjorn Wallace, Fiscal Illusion and Fiscal Obfuscation: Tax Perception in Sweden, 16 Indep. Rev. 237, 243 (2011). Instead, it is viewed as a fee, the burden of which lands on the employer rather than on the employee. Id.

(436) As with any behavioral scientific research, caution is necessary when drawing conclusions regarding fairness, trust, charitable behavior, or altruistic preferences on the basis of small, narrow samples. See Henrich et al., supra note 136, at 797-98 (demonstrating that broad claims about human behavior in psychology and elsewhere are often drawn from skewed, Western, wealthy, democratic populations not reflective of human beings generally).

(437) Rene Bekkers & Pamala Wiepking, A Literature Review of Empirical Studies of Philanthropy, 40 Nonprofit & Voluntary Sector Q. 924 (2011).

(438) Id.

(439) The laboratory conditions mirrored state tax schemes imposed in Germany, Sweden, and Finland for religious and other obligations. See Tom McKenzie, Tax or Beg? Mandatory Payments to Charity and their Effects on Donor Behavior (July 23, 2008) (unpublished manuscript) (on file with Cass Business School).

(440) See Iris Bohnet & Bruno S. Frey, The Sound of Silence in Prisoner's Dilemma and Dictator Games, 38 J. Econ. Behav. & Org. 43 (1999).

(441) Rand et ah, supra note 220.

(442) Barraza et ah, supra note 164; Harbaugh et ah, supra note 4; Moll et ah, supra note 4; Zak et ah, supra note 298.

(443) David G. Rand et ah, Dynamic Social Networks Promote Cooperation in Experiments with Humans, 108 Proc. Nat'l. Acad. Sci. 191, 191-93 (2011).

(444) In some respects, Scandinavian countries are indeed outliers in ways not entirely explicable by structural or macro-level variables. Trust, social capital, and preferences for social welfare are somewhat higher, and tax evasion lower, than regressions of the data would predict. See Henrik Jacobsen Kleven, How can Scandinavians tax so much?, 28 J. Econ. Perspectives 77,88-89 (2014).

(445) Adapted from John Peloza & Piers Steel, The Price Elasticities of Charitable Contributions: A Meta-Analysis, 24 J. Pub. Pol'y & Marketing 260, 264-65 (2005).
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Title Annotation:IV. Neuroscience, Psychology, and Structural Advantages of the Deduction A. Structural Differences in Allocating Funds Through the Deduction 3. Identity Salience and Persistence through Conclusion, with footnotes, p. 395-432
Author:Keller, Ryan S.
Publication:Virginia Tax Review
Date:Jan 1, 2015
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