The Greater Good: How Philanthropy Drives the American Economy and Can Save Capitalism, by Claire Gaudiani. Times Books, 273 pages, $25.

For Claire Gaudiani, the former president of Connecticut College, philanthropy isn't just aboutputtingyour nameonahospital wing or posing for a photographer from the Sunday"Styles"section. Rather, whether you pony up $1,000 to hear Bob Dylan mumble at a rain-soaked benefit, or throw a few coins into a Salvation Army kettle on Fifth Avenue, you're engaging in an act of "citizen generosity" and furthering the development of capitalism, American style. On these shores, charity has, "for almost two hundreds years, created a social environment where capitalism could flourish without destroying democracy."

In this brief, straightforward and readable book-which winds up as a plea for Americans to dig deeper into their pockets-Ms. Gaudiani argues that charity has been, and is, a wealth-producing activity. "Most people think that Americans are generous because we are rich. The truth is that we are rich, in significant part, because we are generous."

This isn't Suze Orman–style pop psychology, a pious reminder that what goes around comes around. Instead, Ms. Gaudiani makes essentially a historical argument, and repeatedly mines the seam of American exceptionalism. Economic, cultural and social systems have developed differently in the New World. From the time Harvard College was founded in the 1630's-using private funds-charity has been a sort of third force, negotiating and mediating between the always-powerful markets and the ever-growing government. And American philanthropy has always had an entrepreneurial character. Europeans may give-to the extent they give-out of noblesse oblige. We do it for more hard-headed reasons. "We use it to address societal problems. When something is wrong, we don't wait for the government to fix it." And we give more than our socialist-leaning allies across the Atlantic. In the U.S., where 89 percent of Americans made voluntary contributions in 2001 and more citizens give than vote, we collectively give about 2 percent of our gross domestic product to charity; the parsimonious Brits give just 0.7 percent of their G.D.P.

Much of the book is devoted to the way investments in human capital (education), infrastructure (museums, hospitals, universities) and ideas (scientific research) have helped fuel our economy's remarkable long-term growth. Many of today's value-adding economic sectors essentially started out as charities and continue to be sustained by philanthropy. "Fifty-one percent of all hospital beds are funded by citizen generosity," she writes. "Forty-nine percent of all two- and four-year institutions of higher learning are not-for-profit." Citizen contributions fund more than 20 percent of all higher-education students, virtually all orchestras and most social-service organizations.

Hospitals, universities, and YMCA's don't just create anchors for communities and jobs, they build social networks and "real assets in the very areas of our society that economists associate with accelerating economic growth." And in wide-ranging, fluent chapters, Ms. Gaudiani-under whose tenure Connecticut College became an active participant in New London's economic revival-adduces plenty of evidence. The establishment of non-elitist 19th-century universities like Cornell and Johns Hopkins, the Settlement House movement of the Progressive era, the endowment by the "robber barons" and other magnates of hospitals and museums. Andrew Carnegie funded 2,509 free public libraries, and Julius Rosenwald seeded black communities with YMCA's. In Chicago today, "the city's nine philanthropically supported museums bring more revenue to the city than all of its major sports franchises (all businesses) together! And the generosity that funds these facilities raises the value of property in the surrounding communities." Look at what Lincoln Center has done for the West Side of Manhattan.

Less convincing are Ms. Gaudiani's descriptions of how generosity has helped to midwife major commercial advances. "Rocketry, commercial aviation, stock market portfolio analysis, and radar are just a few of the important ideas that have flourished because innovative donors supported innovative thinkers and built prosperity," she writes. Maybe so, but most of the commercial big bangs of the 19th century-the internal-combustion engine, the electrical revolution, the assembly line-were created by profit-seeking entrepreneurs. More recently, major advances (from nuclear discoveries to the Internet) have been funded more by state bodies than by private individuals. What happened at Los Alamos has mattered a lot more than what happened at Tuxedo Park.

Indeed, the expansion of government throughout the 20th century looms over the whole book. Over time, the government has stepped in after individuals or institutions provided the seed capital. And as was the case in Los Alamos, the government has a far greater ability to make a difference. The G.I. Bill-an example of government generosity-provided not only tuition support, but government-supported loans that allowed people to buy houses without a down payment. It was perhaps the major contributor to the post–World War II economic boom.

And that's why philanthropy is at a crossroads. On the one hand, the "human services model, which for one hundred years has fostered upward mobility and was initially supported by citizen generosity, is now primarily government funded." We've got Medicaid instead of charity hospitals. But on the other hand, private generosity-which, historically, has worked effectively to distribute income and to serve as a sort of "governor" on the winner-takes-all motor of capitalism-hasn't kept pace with growing income inequality. "Personal generosity has ranged from 1.9 percent of personal income in 1970, to a thirty-year low of 1.5 percent in 1995, and back up to 1.8 percent in 2000." What's more, recent changes in the tax code and in government policy may make upward mobility-which lies at the heart of our democratic experiment-more difficult.

All of which means people have to give more, if the American dream is to be vivified for generations current and future. "The U.S. aversion to the kind of high tax rate that is easily tolerated in Europe demands a higher commitment from all citizens to make philanthropic investments in human, physical and intellectual capital, all for the greater good."

Ms. Gaudiani argues that we have to move away from paternalism to inspire givers to make "meaningful partnership between the wealthy and others in our local communities." There are plenty of precedents here, from Americorps to Chicago's Shorebank. Philanthropy should focus not simply on meeting needs, but on providing "wealth-building opportunities for the poor in their communities." Home ownership could be increased through the establishment of "community home-ownership trust funds," for example. And she thinks we can use the tax code to encourage such efforts by, for example, letting non-itemizers claim deductions.

This approach would perhaps have sounded like genius a few years ago, when the markets ruled supreme, venture philanthropy was ascendant, and everyone had his or her own personal business plan. But today, the marriage between capitalism and charity seems more problematic than synergistic. Whether it's Tyco improperly using company funds to make donations for the greater glory of Dennis Kozlowski, Citigroup's Grubman-motivated donations to the 92nd Street Y, or American Express' transparent efforts to tie the use of its product to charitable giving (the "Charge Against Hunger"), philanthropy, it seems, could use some insulation from the overweening private sector.

Ms. Gaudiani proposes a revolution, but only in gentle terms. And while she's masterly on the way philanthropy works, she doesn't delve too much into why it works. I would bet that the key to getting people to give more is understanding why they give what they give. And Ms. Gaudiani isn't particularly curious about the psychology of philanthropy. It's widely believed, for example, that a Protestant bourgeoisie's need for control in a rapidly changing society provided the energy behind the Settlement House movement. Others give so as to expiate the sin of making money through underhanded means-think John D. Rockefeller or Michael Milken. And others give conspicuously as a form of ego-boosting and status-seeking (see under Weill, Sanford, and Perelman, Ronald).

"We have to become at least twice as generous as we ever have been as a nation if we hope to conquer the problems that we face today," Ms. Gaudiani writes. Good luck. Our President whispers about compassionate conservatism out of one side of his mouth and screams "It's your money!" out of the other. And, too frequently, consumer spending-not philanthropy-is conflated with patriotism and service to one's fellow man. The message from on high is that if you really want to help someone less fortunate and, at the same time, add value to the economy, go to Saks.

Daniel Gross, who writes the "Moneybox" column for Slate, is co-author (with Davis Dyer) of The Generations of Corning: The Life and Times of a Global Corporation (Oxford University Press) .

Patricia Beard kicks off her book with a string of superlatives. James Hazen Hyde, the son of Equitable Life Assurance Society founder Henry, was "the handsomest man in any room, the most dramatically dressed, and, at nearly six foot four, usually the tallest." The lavish ball he threw in Manhattan in January 1905 helped touch off a "business brawl that entangled the most famous railroad entrepreneurs, industrialists, and financiers of the era." But these claims, like the ball Ms. Beard describes in rich detail, are a bit too extravagant.

At the turn of the 19th century, insurance was the largest single sector of the financial-services industry. In 1900, "half of all American savings were held in life insurance or annuities." The Equitable Life Assurance Society, with its 300,000 U.S. customers and its 77 foreign offices, along with rivals New York Life and Mutual Life, comprised the three "racers." The Equitable's board-which controlled a vast investment pool-included such Gilded Age worthies as Henry Clay Frick, bankers Jacob Schiff and August Belmont, and railroad magnates Edward H. Harriman, James J. Hill and Alfred Vanderbilt.

Like other turn-of-the-century financiers, Henry Hyde, the self-made force of nature who created the Equitable, routinely mixed business and personal funds, putting personal employees on the payroll, and creating off-the-books slush funds to make loans and settle litigation. (Dennis Kozlowski, with his Tyco-bought $15,000 umbrella stand, wasn't such a financial innovator after all.)

Hyde groomed his coddled second son, James-his first son, Henry Jr., died at the age of 8-to assume his rightful place. Although he showed no visible capacity for finance-or for work in general-James was elected a director of Equitable in his sophomore year at Harvard.

Henry Sr. died in 1899, leaving James, who graduated from Harvard in 1898, as the controlling shareholder. "Henry's death had transformed James from a boy just out of Harvard, whose chief distinction was his rich father, to one of the most interesting young men in New York." (It's a common mistake to conflate wealth-especially inherited wealth-with "interesting." See under: W magazine or Bright Young Things .)

James Hyde spent his time "coaching," swanning around Paris (he was a huge Francophile) and turning the Oaks, his 400-acre compound in Islip, Long Island, into a recreation center. In 1901, he and Alfred Vanderbilt raced by horse-drawn coach from New York to Philadelphia and back, setting a record by covering 224 miles in less than 20 hours.

James drew a salary from the company, as well as fees "as a director of forty six companies, including thirteen railroads, fourteen banks, and four trusts." In 1902, he formed a syndicate, James Hazen Hyde and Associates, "which acted as a middleman between Wall Street firms with issues to sell, and the Equitable, as buyer." Such conflicts of interest were wide-open and not questioned.

But trouble was brewing in the highly competitive business. The racers routinely poached each others' agents. Rudderless after the elder Hyde's death, the Equitable fell from first place to third in 1903. Equitable president James Alexander, and Gage Tarbell, the Gatsbyesque second vice president, hatched a plan to ease James out by granting exclusive voting control to company policy-holders. But when they presented their scheme to young Hyde in early 1905, he demurred.

On January 31, 1905, amid the brewing coup, James Hyde held a costume ball for 600 at Sherry's Hotel. "James decided to decorate the hotel to evoke the gardens Le Notre designed for Louis XIV at Versailles," Ms. Beard writes. Whitney Warren (the Robert Isabell of his day) was hired to execute the plan. The entertainment: performances by the Metropolitan Opera's orchestra and ballet corps. Hyde also commissioned playwright Dario Niccodemi to compose a one-act play for Réjane, the French comic actress. The ball ended at 7 a.m., "after a second and then a third supper had been served." There was nothing particularly scandalous about it-at least not immediately.

Après le ball, le déluge . Ms. Beard launches into a detailed play-by-play of the boardroom battle for control of the Equitable. Hyde enlisted a dream team of lawyers-including future Secretary of State Elihu Root-and investors such as E.H. Harriman to fend off his grasping subordinates. But the railroad baron was more interested in the Equitable's pool of capital than he was in young James' need for a surrogate father.

Hyde's opponents used the heir's extreme consumption as a weapon. "Public coaches, special trains, elaborate banquets, costly and ostentatious entertainments, accompanied, as they are, by continuous notoriety of a flippant, trivial, cheap description, are not only damaging to the influence of Mr. Hyde as an officer of the Society but are directly hurtful to the Society," charged James Alexander. Rumors began to circulate that the party cost $100,000 and that the Equitable had paid for it.

That these charges were false hardly mattered. (Hyde's wealth ultimately came from the Equitable, one way or another.) As the ways in which insiders milked the policy-holders for profits were revealed, Ms. Beard notes, the question of control over the Equitable was "rapidly overshadowed by a growing understanding of the connections between Wall Street and the insurer."

The New York State Legislature-as feckless and susceptible to naked lobbying back then as it is now-launched investigations. Amid the turmoil, Henry Clay Frick stepped in as a lead director. The report he issued in May 1905 is noteworthy for its contemporary resonance: "There is found throughout its official personnel a sort of moral obliqueness-a condition where personal gain seems to be at times the paramount idea."

The fallout was swift. Hyde resigned and sold his shares to Thomas Fortune Ryan (one of the few Irish-Catholic robber barons). The New York State Legislature convened a committee in June 1905, headed by future Supreme Court Justice Charles Evans Hughes; the result was tightened regulations and curtailed careers-but no jail sentences. "As for the financiers and railroad men involved in the scandal," Ms. Beard writes, "all of them went on to become richer and more powerful."

That's just one reason why the dénouement of this affair is less than satisfying. "The Hyde Ball came to be seen as the apotheosis of an era, as well as the centerpiece in the story of a young man's rise and fall," Ms. Beard writes. But Hyde was born at the top. And the fall-a cushy self-imposed exile in Paris-was simply a realization of Hyde's ambition. He left New York in December 1905, bought a fabulous house in Versailles and got married-several times. He didn't return to New York until 1941, having fled Nazi-occupied Paris for Manhattan's Savoy Plaza Hotel. He died in July 1959.

So why does the story matter? "One reason that we can prosecute the corporate cheater now," according to Ms. Beard, "is that they were exposed at the time of the Equitable crisis." Actually, we can thank the Securities and Exchange Commission and the 1929 market crash for that. The "Great Wall Street Scandal of 1905" did occur at a time of great ferment, but we don't get much of that context here. The ball and the ensuing brawl may have garnered lots of contemporary press coverage-Ms. Beard cites 115 front-page articles in The New York Times . But money, status and celebrity come and go very quickly in New York. Just ask Sam Waksal. Not every episode, sadly, makes for compelling history.

And yet this patient, occasionally elegant book is not without its charms. Ms. Beard provides fine period detail on everything from how undertakers worked to the origins of the law that banned the public wearing of masks. But it's as if the author had inherited the artwork and furnishings from a great prewar six on Park Avenue-and with these, tried to fill a townhouse on East 64th Street. The pedigree is there and it's nice to look at, but the good stuff is spread rather thin.

Daniel Gross, who writes the "Moneybox" column for Slate, is co-author (with Davis Dyer) of The Generations of Corning: The Life and Times of a Global Corporation (Oxford University Press) .

In one of his notebooks, Henry Ford once wrote, "I'm going to see that no man comes to know me." In this dreadnought of a book (764 pages, and that's without the endnotes!) the prolific historian Douglas Brinkley helps us to know Ford intimately. Understanding him, however, is another matter.

So much has been written about Ford that Mr. Brinkley and his associate writer, the historian Julie Fenster, were forced to spend lots of space simply parsing through the stories, myths and legends that have grown up around the man. And so we get detailed, measured and well-written treatments of Ford's youth-he was born two years before the end of the Civil War and died two years after World War II ended; of his entrée into the world of machines as a young mechanical engineer at a Detroit electrical company; of his efforts to build a car; of his marriage to the saintly Clara Jane Bryant Ford; of the development of the Model T and the impressive River Rouge plant; and of his strange, late-in-life yearning for the pastoral idyll of his farm youth-which he had hastened to escape.

While there's little hint of revisionism in all this, the authors do restore early Ford executive James Couzens to his rightful place of honor. Couzens, who left Ford in 1915 and later became the mayor of Detroit, put in place the infrastructure that enabled the Model T to grow quickly into the first true global car. A financial whiz, he demanded partial payment in advance from dealers, thus guaranteeing liquidity. The "$5 Day"-the revolutionary 1914 move aimed at holding down the immense turnover induced by the mind-numbing tedium of the assembly line-was also Couzens' idea. (Ford, both a stubborn idealist and the ultimate pragmatist, later called it "the greatest cost-cutting move I ever made.")

Ultimately, however, Ford's greatest achievement-the Model T-was his alone. "I will build a motorcar for the great multitude," he proclaimed. In 1908, when the Model T debuted at $850, it was the first step in transforming the car from a plaything of the rich to an entitlement. Obsessed with making the Model T cheaper and more widely available, Ford relentlessly pursued manufacturing efficiencies, ever more intricate assembly lines and vertical integration as means of controlling costs. And here the unlettered rustic emerges as Thoroughly Modern Henry. What distinguished Ford, Mr. Brinkley shrewdly notes, "was the creation of an atmosphere in which improvement was the real product; a better, cheaper Model T followed naturally." In 16 years, he would build 10 million Model T's. By 1925, the cost of a Model T would amount to just one-eighth the average annual income in the U.S. And by 1926, the U.S. had one motor vehicle for every six citizens, compared with 49 for Britain and 1,935 for Germany. (Some illustrative charts and graphs would have been helpful here.) "Ford Motor Company's production nearly doubled every year for a decade after 1913, while the price of a Model T dropped by two thirds," Mr. Brinkley writes.

The fact that this is stated so matter-of-factly is one of my few beefs. One wonders what someone with the gaudy narrative talents of Robert A. Caro, or Ron Chernow, would have made of this stunning industrial feat-one far more impressive than Intel's practice of Moore's Law. The growth, and the way the Model T transformed the nation, begs for some rhapsody.

Ford's brilliance seemed, however, to have calcified sometime in the second decade of the 20th century. He held on too long to the Model T, forced out strong executives and tortured his unfortunate son, Edsel, the company's longtime president, who died in 1943 at the age of 49 without ever having exerted significant authority at the company that was his birthright. In 1927, Alfred P. Sloan's customer-friendly General Motors surpassed Ford as the leading U.S. carmaker-a lead G.M. has yet to relinquish.

Mr. Brinkley effectively makes the case that we're still living in Ford's world. "I invented the modern age," he once said. But his industrial legacy is frequently overlooked, in part because his clangorous social views still resonate. In this age of the Dixie Chicks and freedom fries, the early parts of Wheels make a great case study on the market impact of dissent. In the 1910's, Ford's stance on everything from geopolitics to labor relations was far outside the mainstream. Opposed to World War I, he chartered the Peace Ship with the (Jewish) Hungarian pacifist Rosika Schwimmer. He bought the Dearborn Independent and used it to spread venomous anti-Semitism, a record that has embarrassed the Fords lo unto the third generation. But none of his (still inexplicable) shenanigans affected sales measurably. Public opinion largely rejected Ford's social views but embraced his products with stunning affection. In 1927, when the Model A was introduced, it was estimated that some 25 percent of the U.S. population made a point of seeing the new vehicle in its first week on the market.

Ford wasn't sufficiently with it to torment Henry Ford II, the high-living Yale graduate who became president in 1945 at the age of 28 and ushered the company into the modern managerial age. And for a long stretch, Wheels turns into a more conventional story-the battle with Japanese imports, Lee Iacocca and the introduction of the Mustang, the exploding Pintos of the 1970's, the quality crisis of the 1980's, and the advent of the Taurus in the 1980's and S.U.V.'s in the 1990's.

The narrative pistons misfire toward the end, however, when Mr. Brinkley strains to link the current C.E.O., William Clay Ford Jr., to the original. In 1998, the 41-year-old great-grandson of Henry-whose primary occupation was running the perennially underachieving Detroit Lions-was named chairman of the board, and Lebanese-born Jacques Nasser became president and C.E.O. Under Nasser and Ford, the company misallocated capital badly. It diversified into unrelated fields, bought Volvo and Land Rover, and then moved the luxury division to California in a fruitless effort to improve design and market share. In 2001, Ford lost $5.5 billion and Mr. Nasser was fired. "[Nasser] let the core business of automaking drift," Mr. Brinkley writes. "The mess left behind was for Bill Jr. to clean up."

Bill Ford, however, gets off way too easily. (Mr. Nasser was conspicuously not interviewed in this book, and might have a somewhat different story to tell.) Mr. Ford's quick abandonment of a gaudy promise to increase fuel efficiency is excused, and Mr. Brinkley glosses over the fishy episode in which Mr. Ford received thousands of shares of Goldman Sachs' I.P.O. The fawning treatment of this underqualified scion reminds me a little of the way The Weekly Standard treats the underqualified scion who now runs the country-explaining away every screw-up and inflating the completion of routine tasks into towering achievements

Douglas Brinkley promises a warts-and-all account, even though his book was "authorized." (Ford archivists provided significant support, and while the book was not formally commissioned by the company, it's likely that the prospect of Ford buying oodles of books figured into Viking's planning.) But Wheels for the World is more like a case of eczema, in which skin blemishes are evident in the patient's infancy and youth and then evaporate when he matures.

Daniel Gross, who writes the "Moneybox" column for Slate , is co-author (with Davis Dyer) of The Generations of Corning: The Life and Times of a Global Corporation (Oxford University Press).