This article addresses the issue of whether the traditional values of charity and philanthropy are ethically recommended, and how they may be reconciled with the sometimes contradictory profit maximization value of the capitalist ‘free market’.1 That is, what place does charity have in the context of the free market where profit maximization is the ruling value? In answering this question, the article contrasts the effects of ‘no mercy’ with that of ‘mercy’ behaviour on overall utility maximization, and argues that what (...) may be best ultimately from an economic efficiency point of view (no charity) may not in fact maximize overall net utility when defined qualitatively to include social capital such as psychological states and other quality of life indicators. The ethical imperative of love for one's fellow humans is also considered in the debate between the two approaches. To address this point, I introduce the concept of ‘loving altruism’, and in this context make the case for charitable acts of mercy that may nonetheless result in a loss of economic utility in a larger sense. The article concludes that there is a valid place for both charity and philanthropy at either the individual or corporate level, and that the efficiency loss may or may not be outweighed by the gains in overall life quality. The ultimate net outcome would be determined by the specifics of each particular case after an explicit consideration of the need for altruism. The article ends by suggesting an application of Aristotle's ‘Golden Mean’ in determining the optimal level of charity. (shrink)