Instead of seeing exchange as one event of give and take, see it as two distinct events: A gives B something. B gives A something. Two people are separately giving to each other. The reason for it is all in your head. Forget the reason. Just look at what’s happening. Two people are freely giving to each other, connecting, and benefiting.
We look at the event too much as a give and take, and that is what trips us up into thinking one is taking advantage of the other, or there is a more powerful and less powerful party to the transaction. But if we just observe what’s happening, we can get rid of all that. One person gives. The other person gives. The result is peace.
The only difference between charitable giving and a market exchange is that in an exchange, there are two givers, and they each have a reason for giving. In a charitable donation, there is only one giver, and only he has a reason for giving. The other party is passive.
The reason for a market exchange is a shared interest between the two. It’s what connects them. This puts market exchanges above simple charitable giving on a moral sphere, because the market connects humanity, while giving does not necessarily do so. It can, but giving does not have to connect giver and receiver. An exchange necessarily does. The market necessarily does. It requires reciprocation. Charitable giving does not.
Then why is charitable giving a mitzva? The only reason I can think of is a גזירת הכתוב. Which means there is no rational reason, which makes sense considering there is a Rabbinic limit to charitable giving at 20%. Any more and giving is considered a sin.
Rav Sa’adaya Gaon, at the beginning of אמונות ודעות, the Book of Beliefs and Opinions, pretty much the first complete work dedicated to Jewish philosophy ever written circa 800 CE – Sa’adya observes that if everyone stole from everyone else, there would be no productivity and all of humanity would starve.
That extends to charitable giving. The more people that give without reciprocity, the less production you have. The market requires production from both sides of the exchange in every exchange. Otherwise the exchange is not made. The more charity you have in the world, the less wealth, because charity does not require both parties to produce. It is unilateral. At a certain saturation point then, charitable giving harms humanity. Rabbinically, that point is 20%.
Visually too, indirect exchange through a monetary medium necessarily connects humanity, not just via the two making the exchange itself, but due to the nature of the monetary medium it forces the receiver of money to exchange with yet another person in the future.
If you see the specific good in the exchange as the point of a cone, and then the money as the funnel, the funnel of the cone sits over the seller of the good, who is the receiver of money. The point of the cone sits over the buyer. The buyer gives money to the seller. The cone opens up to a third person, because the money received must then be exchanged with another person. Otherwise the money is worthless. The buyer is in effect pointing the seller in the direction of someone else – anyone else really, urging him to further exchange and add wealth to humanity using the money he has just given the seller.
A quote from Chef, starring Jon Favreau, demonstrates this. The chef is talking to his son, who tried to lazily give a burnt sandwich to a customer:
“I may not be the best husband in the world and I’m sorry if I wasn’t the best father. But I’m good at this, and I want to share this with you. I want to teach you what I learned. I get to touch people’s lives with what I do. And it keeps me going and I love it. And I think if you give it a shot you might love it too. Now, should we have served that sandwich?”
The Jewish Libertarian 
Enjoyed the article. It is true that charity is destructive on many levels. I usually put it in terms of psychic damage, but you are right that charity is destructive of wealth within a community. The more charity, the more destructive. It would benefit society to limit charity so as to avoid the wasting of hard earned wealth by all parties. Ayn Rand would approve of your thinking.
When I was being brought up in the Catholic Church, I remember a question about the role of the receiver of charity. I recall that the priest said the person on the receiving end of charity must not refuse it in order that the giver can complete his good deed. In other words, the receiver of charity is being charitable to the giver by taking what he doesn’t really need. It seemed absurd to me at the time, and still does today.
It’s interesting that the Torah commands 10% charity but does not say who it must be given to, and the Rabbis limit it to 20% and no more. The interesting part is that the source for the 20% limit is Joseph’s 20% income tax instituted on Egypt. The limit to charity in Judaism comes from a tax, there’s some meaning there.
It is possible that a community where everyone voluntarily gives 10% to charity would be better off than one that does not, for psychic reasons. Obviously Austrian economics says nothing about such value statements, but I still think some level of charity is good for human beings to engage in.
For the record, the Torah doesn’t command 10% charity. אלו דברים שאין להם שיעור. Even the 10% is from the rabbis. And I agree that giving is a good thing, when it’s done for the right reasons and in the right way.
I don’t recall tzedaka being in אלו דברים. Peah, bikkurim, re’iyah, gmilut chasadim and talmud torah. Did I miss something? I hope not. I say it every morning.
There are plenty of primary sources for 10%. The first one we read last week. I’m not speaking halachically. I’m speaking scripturally.
I once debated with Rabbi Bar Hayim about whether tzedaka was about the giver or about the recipient. My argument was that the only place the recipient enters into it is that there are certain criteria which determine whether a particular recipient receiving a particular thing counts towards the obligation of tzedaka. To use the common example, providing a carriage and a horseman for a person who used to be rich and has fallen on hard times counts, but providing that for someone who never had it does not.
My point, like yours, was that it’s not the need of the recipient that requires us to give; it’s God’s command. Perhaps to remind us that all of our ownership is only within His more global ownership of everything. The right of the Creator.
The case I used to try and prove my point was that if you’re alone on a desert island, or otherwise in a place where there are no legitimate recipients, you still have to give, even if it means putting it aside for a time that there *are* recipients. If it was about the recipient’s needs, we wouldn’t have to do that.
I agree with you. Tzedaka is about the giver. Not the recipient.
As you know (but maybe not all readers know), we learn from Parashath Terumah that everything belongs to HaShem, ie. Before we can donate to the Mishkan/Miqdash, we must first take possession of it. וְיִקְחוּ-לִי תְּרוּמָה