Creative Capitalism: A Conversation

In case you haven’t been to the site.

Creative Capitalism: A Conversation is a web experiment designed to produce a book — a collection of essays and commentary on capitalism, philanthropy and global development — to be edited by us and published by Simon and Schuster in the fall of 2008. The book takes as its starting point a speech Bill Gates delivered this January at the World Economic Forum in Davos. In it, he said that many of the world’s problems are too big for philanthropy–even on the scale of the Gates Foundation. And he said that the free-market capitalist system itself would have to solve them.

This is the public blog of a private website where a group of invited economists have spent the past couple of weeks criticizing and debating those claims. Over the next couple of months we’ll be posting much of that material here, in the hopes of eliciting public commentary.

Ester Duflo:

Bill Gates’ speech at Davos calls for a greater involvement of capitalists in the fight against poverty, and is rightly concerned about the need to create a structure that can give would-be creative capitalists the proper incentives to apply their energies to the fight. The main driving force he identifies, and many of the subsequent posts discuss, is public recognition. Consumers, employees, and shareholders may all derive utility from the warm glow of being associated with a company that does good things for the world, and they may therefore be willing to pay for it in the form of slightly higher prices, lower wages, and lower dividends.

And in many cases no sacrifice is required. Firms spend large amounts of money to sponsor things like car races so as to gain brand recognition, presumably because it makes economic sense. One might imagine that being associated with a sufficiently sexy philanthropic cause could be a just as effective way to advertise. I once heard the CEO of TNT, a Dutch transport and logistics company, make this argument very cogently. He explained why he had decided to stop sponsoring Formula One rallies and instead spend the money helping the World Food Program. His argument was that helping the WFP transport food in TNT trucks would do more to build his brand as one capable of rising to the most complex challenges than would a banner on a racing track. This example also underscores another important point, implicit in Gates’s speech and explicit in Abhijit Banerjee’s post: One reason we want to lure the successful entrepreneurs to the development business is that they will bring their business acumen, technical expertise, and creativity to the problem at hand, all of which are badly needed.

For these two reasons, I largely share the optimism evident in Bill Gates’ speech.