Long Arm of the Law

One of the most notable achievements of conservative philanthropy was helping to create the intellectual climate in which Thatcherism and Reaganism flourished. As we report in the book, this was in large part due to the industrialist John Olin, whose story is told in the book “A Gift of Freedom“, as well as to the philanthropy of Sir Anthony Fisher, a British chicken farmer. On the advice of the libertarian economist Friedrich Hayek, Fisher seed-funded the Institute of Economic Affairs in the UK, and co-funded the Manhattan Institute, which played a huge intellectual role in the revival of New York in the early 1990s. Many left-leaning philanthropists today find inspiration in how these right-wing donors dominated the battle of ideas for well over 20 years, and they are trying to repeat this success from the other end of politics.

One of the notable creations of this conservative philanthropy is the academic discipline of “law and economics“, which applies market-oriented economics to the consideration of legal issues. This discipline has produced two nobel prize-winning economists, Ronald Coase and Gary Becker, as well as one of America’s leading judges, Richard Posner. Posner and Becker now write a consistently interesting blog.

Today, arguably the leader of conservative philanthropy is Carl Schramm, who runs the Kauffman Foundation in Kansas City. Schramm has turned the foundation into the leading source of private funds for studying entrepreneurship. Matthew described him as the “evangelist of entrepreneurship” in an article in The Economist. Now, according to a blog by Fortune magazine, he is combining his interest in entrepreneurship with the conservative support of law and economics.

The Kauffman Foundation will soon announce an initial $10m grant to reinvigorate law and economics by injecting some entrepreneurial spirit. The “Law, Innovation and Growth” initiative will try to promote “dynamic efficiency” in law and economics, as well as its traditional focus on “static efficiency”. In other words, it will not just focus on how best to distribute wealth, but also on how to encourage wealth creation.

The Kauffman money will fill a gap left by the closure of the Olin Foundation in 2005. Olin decided that he wanted to create a foundation with a limited life, not one that lived forever. The goal of this was to ensure that his money did not fall into the hands of philanthrocrats who might use it to pursue their own agenda, rather than his. This model appeals to many of today’s philanthrocapitalists.

Whilst some might regard Schramm as a philanthrocrat who is using the money differently to how the late Ewing Marion Kauffman intended, he is also demonstrating that creating a time limited foundation need not mean that projects inevitably die with the foundation that funded them. If they are effective projects, such as developing law and economics, other philanthropists may take them over.