Conversations On Philanthropy
Emerging Questions on Liberality and Social Thought

"Das Steven Grosby Problem"

Gordon Lloyd

—Gordon Lloyd

Scholars, particularly German ones, have written about an ages-old puzzle they call “Das Adam Smith Problem,” namely, how could the same person over several decades write The Wealth of Nations and The Theory of Moral Sentiments and revise them here and there, yet never reconcile “the contradiction”? Today, scholars no longer wrestle with how the same person could provide a strong case for self-interested action in one book and make an equally compelling case for other-regarding conduct in another book. Instead, we have a new Das Adam Smith Problem: how does the reconciliation take place? That debate continues, with obvious consequences for the future study of philanthropy.

It seems to me that Steven Grosby would welcome an equivalent Das Friedrich Hayek Problem in either an old form or a new one. Das Problem, or “complication,” for Grosby, however, is that there is no old or new problem of reconciliation to work with. Grosby shows, with great respect for the Austrian tradition, that while there are books on self-interest, there is no “other book” dealing with moral sentiments, even from Hayek himself. Grosby does his best to help by showing that Hayek might have “been aware” of the need for a book “that accounts for instances of disinterested or ‘selfless’ action.”

In the end, however, what we have from Hayek and other Austrian-based rational-choice economists, according to Grosby—and I agree totally with his analysis—is the “extended order of the market” explanation. This Gesellschaft (“the competitive cooperation of the extended order of the market) reduces helping others to a matter of helping oneself, and helping oneself in this “hermetically sealed” fashion fails to acknowledge “a more expansive conception of the mind that recognizes its imaginative capacities.” This more open-minded approach recognizes the phenomenon of “regret,” and it remembers that “human action is influenced by ideas—ideas (note well) that may be in tension with one another.” This expanded approach recognizes that human conduct involves benefiting others at some cost to oneself.

But, alas, Grosby tells us, the only other-regarding alternative to the narrow model of self-interest that “the analytical tradition” has generated to Gesellschaft is Gemeinschaft (attachment to a small group). This alternative falls short of explaining the role of “disinterested action” and sympathy toward others beyond the small group of family and friends. It fails to address helping (1) a larger group of people with whom one has some affinity, and (2) complete and utter strangers with whom one has no connection whatsoever.

I sympathize with Professor Grosby. If only we had the tension between self-interest and disinterested interest in Hayekian and Austrian reality—that is, if this tension actually existed in the actual, published work of Hayek and the Austrians—then we could talk about Das Friedrich Hayek Problem and address the need for reconciliation.

To Grosby’s credit, he knows that common sense tells us that human reality—that is, actual human action in the world—exhibits generous human conduct without compulsion. However, he wants to show that such conduct is explainable and defensible without undermining the work of Hayek and the school of rational choice. But here is the rub, in two parts: one, he wants “an additional, different explanation” to the Austrian-based rational choice model to explain other-regarding conduct, and two, this further explanation must not “invalidate an economic or rational choice theory of action.” I shall include these elements in exploring Das Steven Grosby Problem.


Reconciliation of Das Steven Grosby Problem 

Is there a way out of this dilemma? Yes, and the answer lies in pursuing the second of the two examples of generous conduct Grosby leaves us with. Both invite us to seek reconciliation between self-interest and disinterested interest.

One example is what I shall call “the complete stranger” test. Grosby leaves open the possibility that the true test of “the imaginative capacity of the mind to transcend interest of the self” is the capacity of humans to show “limitless sympathy” and make gifts to complete strangers. In my opinion, this pushes the solution to the problem of self-interest and disinterested interest away from a reconciliation of the two approaches. I think that the “complete stranger” test is actually a capitulation of self-interest to disinterested interest. Doesn’t this test require that unless I demonstrate that an act is knowingly done toward an unknown person totally separated fromGemeinschaft, it does not pass the reconciliation test?

The second example involves a prudent expansion of the meaning of Gemeinschaft from a smallish band, where sympathy between individuals is shaped by attachment to the neighborhood, to a larger country, where the sense of self has been expanded along with the expansion of the orbit of living. Thus we can envision an expansion of the mind to help the stranger not qua stranger, but the stranger who is a fellow member of “my” country.

This raises the question of the relationship of generosity and philanthropy to patriotism and citizenship. If philanthropy involves, as Grosby has clearly argued, (1) “a perceived deficiency of a state of affairs of others,” (2) “an image of some ideal or an understanding of what is right,” and (3) generous conduct “for the benefit of others to whom one understands oneself as being in some way related,” then philanthropy is not merely an exercise in analytical philosophy but also an activity of political prudence in the founding of institutions. Put differently, is there Das American Founders Problem?


Philanthropy as “the Deliberate Sense of the Community”

In Federalist 10, Madison (42-48, 268-272, 327-328) informs us that “the latent causes of faction are thus sown in the nature of man.” Furthermore, “the most common and durable source of factions,” is the quarrel over the variety and “unequal distribution of property.” The solution does not lie in eliminating the cause of faction, because that is improbable and unwise, but in controlling its effects. This is best done by “expanding the sphere” within which factions operate. This expansion of the sphere of the competitive market makes it more difficult to discover and act upon the inclination to engage in factious conduct. Philanthropy is unlikely to occur where a Hobbesian war of all against all takes place.

Madison’s “extension of the orbit” of the political market sounds very close to Hayek’s “extend the order of the (economic) market” approach and Smith’s Wealth of Nations argument that a nation’s well-being depends on the wealth of the nation, which depends on the productivity of labor, which depends on the division of labor, which depends on “the extent of the (economic)  market.” For Madison, the control of faction depends on the division of interests, which depends on the extent of the orbit within which political activity operates. But the three ideas are compatible: the competition between self-interested individuals and groups in a society should produce an outcome consistent with liberty and order. Yet there is no philanthropy taking place.

There is another important observation in Madison’s Federalist 51. “If all men were angels, no government would be necessary.” Accordingly, the very existence of government itself is “a reflection on human nature.” Thus “the great difficulty of founding” is to create institutional structures that encourage (1) individuals to govern themselves responsibly instead of engaging in shortsighted and intemperate conduct and (2) the central government to control itself and not pass laws that endanger liberty and justice. To this end Madison encourages extended competition between the separate branches of government, where the “ambition” of Congress combats the “ambition” of the President.

But does Madison mean that (1) no men are angels? (2) few men are angels? or (3) most men are angels? Having both liberty and philanthropy in a democratic republic is impossible ifMadison intends the first supposition, because there is no “sympathy” or angelic inclinations toward others, and liberty is replaced by coercion. Likewise, philanthropy is unnecessary if he means for us to accept the third supposition, because there is such a natural outpouring of sympathetic feelings for the well-being of others that we don’t even need to talk about the problem of philanthropy.

Thus we are left with the second supposition, that few men are angels but there are a sufficient number of angels, or philanthropists, to warrant the possibility that a sufficient amount of angelic, or patriotic, conduct exists. More importantly, such behavior must be sustained and fostered by sufficiently angelic, or sympathetic, individuals. The reason some sort of minimum angelic conduct—or philanthropy—is needed is that in a democratic republic the opinion of the people prevails, and their opinion is a reflection of their character. Hence we need a few philanthropists who understand the problem and grasp the opportunity to engage, for example, in civic education.

If we combine the two essays, we get the following: if all men were angels, no government would be needed, no factions would exist, and perfect harmony would prevail. And no philanthropy would be either possible or needed. But we know better than to buy into this utopian narrative. The very possibility of philanthropy in a democratic republic requires the control of faction, the defense of liberty, and the control of government, as a necessary condition.

And that is where Federalist 63 enters. What if the extension of the orbit (Federalist 10) and the separation of powers (Federalist 51) are insufficient to control “the violence of faction” and secure “the permanent and aggregate interests” of the community? We need an institution that has the capacity to generate “the deliberate sense of the community.” And that institution, the Senate, encourages “the enlargement of the mind.” Here is the sufficient condition for reconciliation.

Senators serve for an “extended term” of six years, are older than House members, and have “extensive power” to check and balance the temporary delusions and intemperate inclinations of the people and their representatives. The Senate is designed to discourage the worst features of self-interested behavior—doing deliberate harm to others and the community—and also, more importantly, to encourage an interest in disinterestedness. The goal is to produce an outcome that the next generation, indeed the generations of “remote futurity,” will look back on and give thanks for and be inspired to do the right thing, in order to, following the language of the Preamble to the Constitution, “secure the blessings of liberty to ourselves and our posterity.”

I don’t mean to suggest that these three essays are all one needs to read in The Federalist, nor that The Federalist alone provides all one needs to know about the American Founding. But what I do mean is that these essays contain “the opportunity” and “the responsibility” facing philanthropy in a democratic republic. The philanthropic opportunity is the establishment of an infrastructure of giving: one has the liberty to give or not give, without the presence of coercion. The philanthropic responsibility is to exercise the freedom to give in a manner that increases the well-being of posterity.

The lesson from the American Founding is that individuals may be born free, but they are not born totally decent, self-restrained, and other-regarding, never mind born with an instinctive propensity to be generous and philanthropic. But disinterested conduct can be—nay, must be—taught and reinforced by an enlargement of the orbit of living and an enlargement of the mind, the necessary conditions for philanthropy.  As Madison indicates in Federalist 55: “As there is a degree of depravity in mankind…so there are other qualities in human nature, which justify a certain portion of trust and confidence” (2001, 291).  Both democratic republicanism and philanthropic activity require that these sentiments be sufficiently nurtured. There is no Das Founders Problem.



Grosby, Steven. 2009. “Philanthropy and Human Action.”  Conversations on Philanthropy VI: 1-14. ©DonorsTrust.

Madison, James. 2001 [1787-1788]. The Federalist. George  W. Carey, ed.  Indianapolis: Liberty Fund.

Back to Volume VI