Zoltan Acs draws on American history and international comparisons to argue that philanthropic giving is an essential and overlooked component in the institutional structure of entrepreneurial capitalism. In this book, Acs does not set out to conduct original historical research or contribute to the growing economic literature on individual altruism. Instead, he uses what is known about the history of American philanthropy and economic development to reframe our understanding of the purpose of philanthropy and to argue that philanthropic institutions are necessary for a society propelled by technological innovation and entrepreneurial ferment to thrive in the long run. Within the community of economic historians, Acs's book is likely to be of greatest interest to scholars who study the links between institutions and technological progress.

In Acs's telling, the capitalist system allows entrepreneurs to exploit existing opportunities by creating innovations that improve human welfare (chapter 2), and to use their innovations to build businesses that make them wealthy (chapter 3). These innovations improve everyone's standard of living, but may concentrate wealth in the hands of a few successful businessmen (chapter 4). Absent some means of recirculating this wealth and renewing the stock of potential innovations, over time the upper class becomes dominated by inheritors rather than entrepreneurs.

Something must keep wealth from becoming consolidated in too few hands and the opportunities for innovation from dwindling. Economic historians would normally look to the institutions of government, which can be set up to be robust and democratic, or elitist and extractive. While acknowledging that government is important, Acs argues that philanthropists have better incentives than the state to continually keep the system in a dynamic equilibrium with forward-looking investment in research and education (chapters 5 and 6). When the very rich use their wealth to endow schools, universities, and research institutes, they directly reduce their own wealth, and create a supply of fresh opportunity for the next generation of successful entrepreneurs: educational philanthropy increases the poor's ability to become innovators, while basic research provides the raw material for successful business application and development.

This perspective is informed by a recent debate in the popular media about the significance and good faith behind a pledge signed by several billionaires committing to giving away half their wealth. Skepticism about the social value and true purposes of philanthropy is an American tradition on both the political left and the right. For example, Progressives blocked the Rockefeller Foundation from obtaining a federal charter because they feared it would serve the interests of the rich; the Tax Reform Act of 1969 imposed a variety of taxes and regulations on foundations and charities because small businesses accused nonprofits of engaging in tax-free competition. One of the key contributions of Acs's book is a model that defends philanthropy without requiring that these criticisms be false. Philanthropic organizations can serve the interests of society and the wealthy, if they do so by creating opportunity for anyone to become rich. And if philanthropy exists to foster creative destruction, then it's not obvious that we should restrict the activities of tax-exempt organizations.

Furthermore, Acs argues that just as philanthropy renews entrepreneurship, entrepreneurial success begets a culture of philanthropy. He cites the much higher rate of philanthropic giving among the self-made rich than the inherited rich as well as historical sources, like Andrew Carnegie's essays, that argue that philanthropy is a social duty of the entrepreneur. Acs observes that there is something about successful entrepreneurship that causes, or is correlated with, a belief in “paying it forward.” This is the last piece in his system: capitalism creates opportunity; opportunity makes entrepreneurs wealthy; wealthy entrepreneurs engage in philanthropy; and philanthropy regenerates the potential of capitalism.

While this story is interesting, the gifts by the wealthy to research and education Acs focuses on are only a small share of American philanthropic behavior, and he does not demonstrate conclusively that the rich give differently than the non-rich, or that gifts of the rich to other philanthropic ends matter, too. A large share of American charitable contributions go to other nonprofit sectors: according to Giving USA, the largest, religion, received 32 percent of all gifts in 2011; the third-largest, human services, received 12 percent; arts and culture, 4 percent. Though philanthropy in these sectors doubtless enhances human welfare and social cohesion, a direct link to new business formation isn't as obvious for religion as it is for education and research. Furthermore, philanthropic giving is not predominantly a rich person's activity. In tax year 2010, the most recent year available, American households with incomes greater than $500,000 (roughly the top 1 percent) deducted $51 billion in new charitable contributions from their tax returns—a huge sum, but just about 28 percent of the $179 billion deducted on all returns, or just under a quarter of Giving USA's estimated $211. As Acs notes, the United States gives a greater share of GDP to charities than any other country; it does so not only because of the generosity of the rich, but also because of giving from the rest of the wealth distribution.

Acs concludes with policy prescriptions. He argues that the United States should reinstate a substantial tax on large estates to give the wealthy an incentive to plan for their deaths and, if they choose, establish charitable foundations. And he argues that developing economies should try to replicate not only American systems of property rights and production technologies, but also philanthropic institutions and cultural norms (chapter 7 and epilogue). It's not clear that doing so is feasible—replicating institutions and social norms is hard—but Acs has made a compelling argument that if it could be done, then the world would greatly benefit.