Rational philanthropy and cultural capital

This paper develops a theory of rational philanthropy in forming "cultural capital" and aesthetic preferences. The study maintains that changes in capital market opportunities provide investment motives for private and public giving. These implications are examined in a Vector Autoregressive (VAR) model of funding in the arts and humanities in the United States for the period 1966 to 1997. The results suggest private philanthropy increased in response to both lower real returns on capital market assets and cuts in public funding. On the other hand, public funding for the endowments is not explained by any of the variables in the model, including its past history. © 2000 Kluwer Academic Publishers.