As Posner's data indicate, the world AIDS problem is now largely concentrated in Sub-Saharan Africa. Even there, the incidence varies a lot, with approximately 10 percent of the sub-Saharan population infected with the HIV virus, and with some countries like South Africa having incidences of over 20 percent.
AIDS is a major problem for Africa not only because it has killed many millions of men, women, and children there, but also because it has further disorganized their economies, and pushed them further behind more rapidly growing parts of the world. A high incidence of AIDS produces a sluggish population and cuts work effort. A study by Jane Forston of Princeton University shows that young persons in areas with high HIV incidence invest less in their schooling than do those in comparable areas but with lower rates of HIV infections
Several studies have shown that sexual behavior in Africa did not change much after this virus was discovered, whereas it did change significantly in the United States after this discovery. The incidence of new cases of HIV infection began to decline in the United States as American populations at especially high risk, such as gay men, began to change their behavior: toward greater use of condoms, lower promiscuity--many bathhouses that catered to gays were forced to close by drop in business--and other changes. After the antiretroviral drugs were discovered, some of the behavior returned to what it had been.
Why didn't risky sexual behavior decline much in Africa, especially since antiretroviral drugs are much less common there? A study in progress by Emily Oster of the University of Chicago shows the importance of two "economic" factors. One is the lower income of Africans, which means that the gain to them in terms of lost future income from taking actions to reduce their exposure to the AIDS virus is smaller than it would be in a richer country like the United States. The second is that the much greater prospect in Africa of death at younger ages from other diseases, such as malaria, reduced the gain to them from lowering the risk of contracting the AIDS virus.
These factors are very important but perhaps not the whole story. Posner mentions several other candidates for the low response in Africa. Although undoubtedly some Africans are ignorant about what causes AIDS, this is probably no longer of crucial importance. For the rate of HIV infections is apparently not much lower among relatively well-educated Africans than among those with very little schooling, even after controlling for income and some other variables. Women are much more likely to become infected with the AIDS virus from heterosexual sex than are men, and women are less likely to infect others. The low status of women in many African countries may well explain their relatively high rates of AIDS infections there, but it does not help much in understanding the very high rates among men.
I share Posner's skepticism about the effectiveness of government aid from Western countries to fight AIDS in Africa. I am less convinced than he is that there is little value from the activities of private foundations and other private groups from the West that operate in Africa to try to reduce the incidence of the AIDS virus. These groups compete among themselves, and have been responsible I believe for some of the few bright spots in the African AIDS situation. They have had more flexibility than governments in setting up useful clinics that offer practical information and advise about this scourge. They have helped spread knowledge--such as the importance of circumcision in reducing vulnerability to AIDS--sometimes in opposition to the official policy of certain African nations.
I cannot claim, however, that I have seen any evidence evaluating the effectiveness of the large spending on AIDS in Africa by big foundations like the Gates foundation. I also do not know the answer to the more important question: how effective have these AIDS expenditures been relative to spending by these and other foundations on diseases elsewhere, or on anything else? Some might argue that the tax-exempt status that the U.S. grants its private foundations (see our discussion last week) should not apply to monies spent by foundations in Africa and other countries outside the United States. But that would imply that they should also not be allowed to support with tax-free dollars grants given to groups operating abroad, or to studies of urban activities in say India. These are types of activities supported by many American foundations. My own guess is that spending by American foundations to reduce the incidence of AIDS in Africa is at least as valuable to the interests of this country as much of what else these foundations spend their resources on.
Posner concludes that not much can be done to combat AIDS in Africa until African nations achieve better economic growth, more extensive education, improve the position of women, etc. These factors may be important, but Africa has made great strides in reducing deaths from other diseases during the decades since 1960. A reasonable expectation is that they will also do much better at combating deaths from AIDS, partly because the cost of the antiretroviral drugs will come down. I believe they will do better also because some African countries are beginning to adopt more sensible economic policies, and this has been reflected in good growth rates during the past few years.
There were many interesting comments, as usual. Several remind that the Gates Foundation gives extensively to education as well as to health needs of people in poor countries. Here too there is a public relations aspect--and more when the gifts to education are for computer software--and that does raise the question why the taxpayer should be chipping in by virtue of the favored tax treatment of charity. (One comment calls me a skeptic of the free market for questioning charitable foundations. A tax exemption for charity-cum-PR is not an obvious example of the operation of a free market. Another thinks I'm a Scrooge for questioning the altruistic motives of billionaires! So Gates and Buffett have succeeded in seducing liberalis, or at least one liberal.)
I am accused of heartlessness in failing to express enthusiasm for donations intended to improve health in the Third World. The questions I raise about such donations are twofold, apart from the tax-break issue just mentioned. The first is whether wealthy individuals should be permitted to have as it were their own foreign policy. The second is whether direct expenditures on health are efficient means of improving the lot of Third World peoples. We know that health is far more a function of education and income than of medical treatment, and I would therefore give priority to efforts to increase education and income in these countries, recognizing too that their poverty is in major part a result of a lack of a good legal and political infrastructure. If these problems aren't fixed, health expenditures aren't likely to do much long-term good, especially if they result in a population increase in nations already severely overpopulated.
It strikes me as also quite possible that Gates and Buffett and the other multibillionaires would do more good for the world simply by ijnvesting their accumulated personal wealth in commercial enterprises, increasing the worldwide pool of capital, resulting in lower interest rates and more investment, including investment in new drugs!
I would finally like to acknowledge belatedly the very interesting article by David Pozen forthcoming in the Yale Law Journal, entitled "Tax Expenditures as Foreign Aid"--my point exactly, but he made it first, though I was not aware of his paper when I wrote my original post.
Regarding drunk driving, I thank Professor James Leitzel for referring me to a report which finds that only 2 percent of drunk drivers are arrested. www.aaafoundation.org/pdf/DrunkDriving-SeekingAdditionalSolutions.pdf. (He also cites an earlier article which finds that only one-half of one percent are arrested. http://vicesquad.blogspot.com/2007_01_01_vicesquad_archive.htm#1167718722584.) This reinforces my suggestion that ex ante regulation probably has little deterrent effect, and that it might be more efficient to rely on ex post regulation--severe punishment for a drunk driver who actually injures someone other than himself and (possibly) his adult passengers.
The United States gives more generous tax deductions when individuals set up charitable trusts than do many other countries in Europe, Latin America, and elsewhere. This, along with the long-noticed generosity of Americans, helps explain why private donations are far more important to American universities, even public universities, hospitals, religious organizations, museums, symphonies, and other American cultural and health activities than they are elsewhere. For example, American individual giving as a percentage of gross domestic product has been about 2%, while charitable giving is under 1% of GDP in the United Kingdom.
The main case for giving tax breaks to individuals who set up foundations, and for exempting from most taxes the incomes that foundations earn, is to encourage decentralized private support of universities, health care, and many other activities, as opposed to relying only on centralized government support of these activities. Universities and other recipients in turn have to compete against each other for funds from the many foundations. I believe that such competition and decentralization of support encourages a more efficient use of resources by recipients, and makes it easier to finance unpopular art, music, or other activities that have difficulty getting support when governments are the dominant source of support.
The Bill and Melinda Gates Foundation is by far the largest private foundation in the world, especially with its gift from Warren Buffet of stock in Berkshire Hathaway. That gift will be spread out over time, and is worth in present value between $20 and $25 billion. Since the Gates foundation had assets prior to this gift of close to $30 billion, the total assets now amount to more than $50 billion. The 20 largest American foundations have combined assets of well over $150 billion, with the Gates foundation having about one-third of this total. All twenty had assets over $1billion, including more than $15 billion for the Hughes Medical Institute, over $11 billion each for the Lilly endowment and Ford Foundation, and in excess of $5 billion for the Packard and Hewitt foundations. The Buffet gift will create an outlier in the Gates foundation, but basically foundation assets overall are not highly concentrated in the United States.
American foundations do many things, and have very different orientations that range from pretty far right to pretty far left. Perhaps there is an overall tendency for larger foundations to be set up by businessmen with relatively conservative views, although neither the Gates nor Buffet foundations fall into that category. There is surely a tendency for foundations to become more liberal over time. Examples of foundations that started out conservative and became much more liberal with time include the Ford, Pew, and Packard Foundations--the Packard Foundation shifted rapidly after the death of its conservative founder David Packard. I do not know of any large foundations that moved from being very liberal to becoming conservative.
The two main reasons for this shift in philosophy are 1) that the children of successful conservative self-made businessmen tend to be more liberal than their parents. There are several reasons for this, but one is simply "regression to the mean": conservative parents have less conservative children, although one might expect this to produce some foundations that go from liberal to conservative. 2) Over time foundations come under the management of professional foundation personnel instead of the founders and people they trust. Professional managers tend to be highly educated and liberal, just like the majority of journalists at major newspapers. In order to combat this shift and other shifts over time in the focus of giving, some foundations are set up with sunset provisions which require that they give away all their assets within a given time period.
The largest foundation that I know of which succeeded in doing this was the Olin foundation under the guidance of the late William Simon. The Olin had a few goals, such as encouraging centers for the study of law and economics, and generally succeeded very well in achieving these goals. Bill Gates recently announced that his endowment would be spent within 50 years of the death of the last of its three trustees. Perhaps all foundations with tax benefits should be required to spend all their assets within 30 years or so of their creation--50 years seems too long to me.
How well have foundations done in disbursing their wealth? As I mentioned earlier, private foundations are under pressure to do better by the competition among them to support different causes. On the whole, they seem to do a pretty good job, although I may be biased since many private foundations have over the years supported my research. However, I do believe that foundations are much too prone to spend their resources on the latest popular causes and fads.
The Gates foundation deserves special mention because it is so big, and has the active management of Bill and Melinda Gates. Its emphasis on diseases of the third world seems like a good one since pharmaceutical companies are not likely on their own to invest in research on these diseases because poor countries are unable to pay much for new drugs. Hence, companies shy away from working on diseases prevalent in poor countries because they anticipate they will have to highly subsidize any drugs that they develop. Similarly, governments of rich countries generally spend their medical research support on diseases that strike their populations, which are increasingly associated with old age, while poor countries need help in fighting diseases like malaria, tuberculosis, and AIDS that strike young persons. But it is still too early to tell whether the Gates foundation will be effective. I do not believe it will be easy for a foundation that is giving away each year more money than many governments do to be highly efficient and nimble.
Much is being made of the business-like approach to giving by some new foundations, including the Gates foundation. Maybe it will be better than the old approaches, but given the sharp division of labor in advanced societies, it is not surprising that successful businessmen are usually much better at making their money than spending their money on charities. Still, I do believe that the new approach can help if it does not frown on cooperation with commercial enterprises that are looking to make profits, sometimes while trying to do "good." A significant development is that Sergey Brin and Larry Page, the immensely wealthy founders of Google, decided not to take a non-profit status for their new charitable arm Google.org in order to be able to support commercial ventures that have a social purpose.