What is Pity for?

Pity is a rather confusing emotion. On the one hand it seems good - but it can surely have bad results. I would venture as far as to say that most problems of the welfare state and socialism are created by people feeling pity for others. Herbert Spencer, in his essay "The Coming Slavery", put it this way:

"The kinship of pity to love is shown among other ways in this, that it idealizes its object. Sympathy with one in suffering suppresses, for the time being, remembrance of his transgressions. The feeling which vents itself in “poor fellow!” on seeing one in agony, excludes the thought of “bad fellow,” which might at another time arise. Naturally, then, if the wretched are unknown or but vaguely known, all the demerits they may have are ignored; and thus it happens that when the miseries of the poor are dilated upon, they are thought of as the miseries of the deserving poor, instead of being thought of as the miseries of the undeserving poor, which in large measure they should be. Those whose hardships are set forth in pamphlets and proclaimed in sermons and speeches which echo throughout society, are assumed to be all worthy souls, grievously wronged; and none of them are thought of as bearing the penalties of their misdeeds."

But I would argue that pity is a good emotion. The problem is, as Spencer suggests, the misdirection of it. What the problem has always been is the lack of reasonability the average person displays. This blog is all about just that - reason. We libertarians have been, along with conservatives, often labeled as callous. Supposedly because we don't favor government welfare, we don't favor charity. We don't like "helping people". This is absolutely absurd. As studies have shown, conservatives give multiple times the amount of money (on average) to charity as compared to social-democrats and other leftists.
The emotion we call pity is an instinctual "red light" that may show us something bad is happening. If I see an old woman begging for change on the street, the "light" comes on - I pity her. The problem is not charity itself (fueled by pity!), but the way the charity is administered. Government welfare is a gigantic loss of money, time, and effort. Statistics show that for every dollar destined for welfare the poor recipients only receive 25 cents! That is a tragic result! Common rhetoric of the leftists and statists is "we need to eliminate government waste" or "there is no use in cutting programs, we just need to streamline them and fix them". This is not the case. Government welfare programs end up being welfare for the government employees (who in most cases are half-wits who would not be able to get a decent job in a free economy).
Furthermore I would like to say that these people (pro-government statists) do not actually feel real pity. Pity is a feeling that inspires you to help, not defer the responsibility to other people (through coercive government means). The statists say that private charity is discriminatory and small. I say that their charity is just a dirty callous machine. It is emotionless and truly an evil Behemoth. It breeds poverty instead of eliminating it. It is un-Darwinist, unnatural, and cold. It is devoid of all pity instead of being filled with it.

Under regular circumstances people can apply charity where it is necessary - where pity really directs them. Such a process of helping the deserving poor rather than the welfare addicts is Darwinistic, moral, and does not require government coercion. What did Gandalf say when Frodo suggested it was a pity Bilbo had not killed the poor creature, Gollum? Did the evil little wretch deserve death?
"Deserves it! I daresay he does. Many that live deserve death. And some that die deserve life. Can you give it to them? Then do not be too eager to deal out death in judgement. For even the very wise cannot see all ends. I have not much hope that Gollum can be cured before he dies, but there is a chance of it. And he is bound up with the fate of the Ring. My heart tells me that he has some part to play yet, for good or ill, before the end; and when that comes, the pity of Bilbo may rule the fate of many - yours not least."
Professor Tolkien was a very wise man.