Perhaps the many failed philanthropies were not meant to be permanent?
First, they almost certainly were. Most philanthropies were clan or religious-based. Things like temples and monasteries are meant to be eternal as possible. What Buddhist monastery or Catholic cathedral was ever set up with the idea that it’d wind up everything in a century or two? What dedication of a golden tripod to the Oracle at Delphi was done with the idea that they’d be done with the whole silly paganism thing in half a millennium? What clan compound was created by a patriarch not hoping to be commemorated and his grave honored for generations without end? Donations were inalienable, and often made with stipulations like a mass being said for the donators’ soul once a year forever or the Second Coming, whichever happened first. How many funny traditions or legal requirements at Oxford or Cambridge, which survive due to a very unusual degree of institutional & property right continuity in England, came with expiration dates or entailments which expired? (None come to mind.) The Islamic world went so far as to legally remove any option of being temporary! To the extent that philanthropies are not encumbered today, it’s not for any lack of desire by philanthropists (as charities constantly complain & dream of ‘unrestricted’ funds), but legal systems refusing to enforce them via the dead hand doctrine, disruption of property rights, and creative destruction. My https://www.gwern.net/The-Narrowing-Circle is relevant, as is Fukuyama’s The Origins of Political Order, which makes clear what a completely absurd thing that is to suggest of places like Rome or China.
Second, even if they were not, most of them do not expire due to reaching scheduled expiration dates, showing that existing structures are inadequate even to the task of lasting just a little while. Trammel seems to believe there is some sort of silver bullet institutional structure that might allow a charity to accumulate wealth for centuries or millennia if only the founders purchased the 1000-year charity plan instead of cheaping out by buying the limited-warranty 100-year charity plan. But there isn’t.
His second point is, I’m not sure how to summarize it:
Second, it is misleading to cite the large numbers of failed philanthropic institutions (such as Islamic waqfs) which were intended to be permanent, since their closures were not independent. For illustration, if a wave of expropriation (say, through a regional conquest) is a Poisson process withλ= 0.005, then the probability of a thousand-year waqf is 0.7%. Splitting a billion-dollar waqf into a billion one-dollar waqfs, and observing that none survive the millennium, will give the impression that “the long-term waqf survival rate is less than one in one billion”.
I can’t see how this point is relevant. Aside from his hypothetical not being the case (the organizational death statistics are certainly not based on any kind of fission like that), if a billion waqfs all manage to fail, that is a valid observation about the durability of waqfs. If they were split apart, then they all had separate managers/staff, separate tasks, separate endowments etc. There will be some correlation, and this will affect, say, confidence intervals—but the percentage is what it is.
His third point argues that the risk needs to grow with size for perpetuities to be bad ideas.
This doesn’t seem right either. I gave many reasons quite aside from that against perpetuities, and his arguments against the very plausible increasing of risk aren’t great either (pogroms vs the expropriation of the Church? but how can that be comparable when by definition the net worth of the poor is near-zero?).
A handful of relatively recent attempts explicitly to found long-term trusts have met with with partial success (Benjamin Franklin) or comical failure (James Holdeen). Unfortunately, there have not been enough of these cases to draw any compelling conclusions.
I’d say there’s more than enough when you don’t handwave away millennia of examples.
Incidentally, I ran into another failure of long-term trusts recently: Wellington R. Burt’s estate trustees managed to, over almost a century of investment in the USA during possibly the greatest sustained total economic growth in all of human history, with only minor disbursements and some minor legal defeats, no scandals or expropriation or anything, nevertheless realize a real total return of around −75% (turning the then-inflation-adjusted equivalent of ~$400m into ~$100m).
I think you might be misunderstanding my points here. In particular, regarding point 2, I’m not suggesting that the waqfs split, or that anything at all like that might have happened. The “split waqfs” point is just meant to illustrate the fact that, when waqf failures are correlated for whatever reason, arbitrarily many closures with zero long-term survivors can be compatible with a relatively low annual hazard rate. The failure of a billion waqfs would be a valid observation, but it would be an observation compatible with the belief that the probability that a new waqf survives a millennium is non-negligible.
In any event—I should probably have reached out to you sooner, sorry about that! Now unfortunately I’ll be too busy to discuss this more until June, but let me know if you’re interested in going over all three points (and anything else regarding the value of long-term philanthropic investment) once summer comes. I would sincerely like to understand the source of our disagreements on this.
In the meantime, thanks for the Wellington R. Burt example, I’ll check it out!
Philip Trammel has criticized my comment here: https://philiptrammell.com/static/discounting_for_patient_philanthropists.pdf#page=33 He makes 3 points:
Perhaps the many failed philanthropies were not meant to be permanent?
First, they almost certainly were. Most philanthropies were clan or religious-based. Things like temples and monasteries are meant to be eternal as possible. What Buddhist monastery or Catholic cathedral was ever set up with the idea that it’d wind up everything in a century or two? What dedication of a golden tripod to the Oracle at Delphi was done with the idea that they’d be done with the whole silly paganism thing in half a millennium? What clan compound was created by a patriarch not hoping to be commemorated and his grave honored for generations without end? Donations were inalienable, and often made with stipulations like a mass being said for the donators’ soul once a year forever or the Second Coming, whichever happened first. How many funny traditions or legal requirements at Oxford or Cambridge, which survive due to a very unusual degree of institutional & property right continuity in England, came with expiration dates or entailments which expired? (None come to mind.) The Islamic world went so far as to legally remove any option of being temporary! To the extent that philanthropies are not encumbered today, it’s not for any lack of desire by philanthropists (as charities constantly complain & dream of ‘unrestricted’ funds), but legal systems refusing to enforce them via the dead hand doctrine, disruption of property rights, and creative destruction. My https://www.gwern.net/The-Narrowing-Circle is relevant, as is Fukuyama’s The Origins of Political Order, which makes clear what a completely absurd thing that is to suggest of places like Rome or China.
Second, even if they were not, most of them do not expire due to reaching scheduled expiration dates, showing that existing structures are inadequate even to the task of lasting just a little while. Trammel seems to believe there is some sort of silver bullet institutional structure that might allow a charity to accumulate wealth for centuries or millennia if only the founders purchased the 1000-year charity plan instead of cheaping out by buying the limited-warranty 100-year charity plan. But there isn’t.
His second point is, I’m not sure how to summarize it:
I can’t see how this point is relevant. Aside from his hypothetical not being the case (the organizational death statistics are certainly not based on any kind of fission like that), if a billion waqfs all manage to fail, that is a valid observation about the durability of waqfs. If they were split apart, then they all had separate managers/staff, separate tasks, separate endowments etc. There will be some correlation, and this will affect, say, confidence intervals—but the percentage is what it is.
His third point argues that the risk needs to grow with size for perpetuities to be bad ideas.
This doesn’t seem right either. I gave many reasons quite aside from that against perpetuities, and his arguments against the very plausible increasing of risk aren’t great either (pogroms vs the expropriation of the Church? but how can that be comparable when by definition the net worth of the poor is near-zero?).
I’d say there’s more than enough when you don’t handwave away millennia of examples.
Incidentally, I ran into another failure of long-term trusts recently: Wellington R. Burt’s estate trustees managed to, over almost a century of investment in the USA during possibly the greatest sustained total economic growth in all of human history, with only minor disbursements and some minor legal defeats, no scandals or expropriation or anything, nevertheless realize a real total return of around −75% (turning the then-inflation-adjusted equivalent of ~$400m into ~$100m).
Hi gwern, thanks for the reply.
I think you might be misunderstanding my points here. In particular, regarding point 2, I’m not suggesting that the waqfs split, or that anything at all like that might have happened. The “split waqfs” point is just meant to illustrate the fact that, when waqf failures are correlated for whatever reason, arbitrarily many closures with zero long-term survivors can be compatible with a relatively low annual hazard rate. The failure of a billion waqfs would be a valid observation, but it would be an observation compatible with the belief that the probability that a new waqf survives a millennium is non-negligible.
In any event—I should probably have reached out to you sooner, sorry about that! Now unfortunately I’ll be too busy to discuss this more until June, but let me know if you’re interested in going over all three points (and anything else regarding the value of long-term philanthropic investment) once summer comes. I would sincerely like to understand the source of our disagreements on this.
In the meantime, thanks for the Wellington R. Burt example, I’ll check it out!