John Paulson’s contribution of 400 million dollars to the Harvard Engineering Department has been greeted with a chorus of criticism, mostly from the left. The complaint is that he should have given the money to the poor instead. Malcolm Gladwell’s tweet is representative: “It came down to helping the poor or giving the world’s richest university $400 mil it doesn’t need. Wise choice John!”
If I had 400 million to contribute, I might well have directed elsewhere myself. But Paulson’s contribution is a sensible idea. The anger from the left reflects its inability to understand that in the long run technology allied to markets is likely to help the poor more than direct aid.
Engineering departments are the locus of modern alchemy where basic science is turned into the technology that produces gold in the modern world. Cellphones have proved transformative, and they are an example of a technology generated by thousands of discrete engineering ideas. To be sure, cellphones initially were the playthings of the well-off, but they have rapidly diffused down the income chain as engineers find cheaper ways of producing them. And their effects in the developing world have been dramatic. For instance, fishermen now know what the prices of fish is in various places and direct their catch to where they will receive the highest return. Desalination methods can help poor farmers turn a barren field into a far more fertile one.
Harvard and a few other elite institutions have the brightest engineering professors and students. (I would not say the same about all other units of the university whose hiring decisions are distorted by politics and political correctness). These people are best poised to accelerate technological transformations. In doing so, they will bring new tools for self-improvement to the poor faster than they would otherwise appear. Such tools can lead to dramatic growth in income and self-sufficiency through the dynamism of the market.
Paulson’s contribution is a bet by a member of the richest one percent that the giving money to the brightest one percent will improve the lives of the poor more than direct aid. It is a bet that the history of science and the markets in the West suggest is as good as any Paulson has made in his brilliant hedge fund career.