I
want a hairbrush, so I walk into a store with $5 in my pocket. You, the clerk, have a hairbrush marked $5 sitting on display. I value the hairbrush at $6 -- that is, I would rather have the hairbrush than the $5 in my pocket. You value the hairbrush at $4 -- you would rather have my $5 than the hairbrush. Before I buy the brush, we have $9 of value between the two of us; I have my $5, and you have a brush you value at $4. After I buy the brush, we have a combined value of $11; I have a brush I value at $6, and you have $5. Our transaction has created $2 of value.
This is a basic premise of simple economics. Asymmetical valuing of goods / services / money leads to increased overall value when these things are freely traded.
Now, let's consider a case in which I am very poor -- the $5 in my pocket is all I have to my name. I still want the hairbrush, but it is no longer worth $6 to me. Rather, let's say I value it at $2; if I could buy it for $1, I would, but no more. You, the shop clerk, notice my bedraggled appearance and my longing stare at the hairbrush, which you value at $4. In an act of generosity, you give me the hairbrush for free. Beforehand, we had a combined $9 of value between us, as in the first example. However, after you give me the brush we have only $7 of value between us -- I have my $5 and a brush I value at $2; while you have nothing. $2 of value has been lost.
This is the paradox of charitable giving -- it actually degrades the overall amount of value that exists in the system formed by the giver and the receiver. The hairbrush in this case is moving from someone who values it more to someone who values it less, monetarily speaking, which is a sort of breakdown of normal economical laws.
It is thus extremely important that charitable giving be provided with the end of the receiver's eventual economic independence, when they can go back to buying and selling on "equal footing". Charitable giving to the needy is extremely important, but if done carelessly can lead to destructive cycles, in which, in the long term, no one benefits.