Justin Stephens for New York Times

They helped reinvigorate investigative reporting. They jumpstarted large-scale investigations into human rights abuses. Now two of UC Berkeley’s biggest donors hope to overturn the way politicians think about wealth, poverty, and economic inequality.

Herb and Marion Sandler, the former owners of World Savings Bank, which they sold for more than $2 billion in 2006, will donate $1 million a year over the next few years to create the Center for Economic Growth at UC Berkeley.

The center, which will be headed by the 37-year old economic wunderkind, Emmanuel Saez, will study the links between inequality and economic growth. By examining the impact of unequal income distribution in the United States, the center aims to influence the debates in Washington D.C. on tax policy.

“We will try to develop a tighter link between academia and broader public policy making,” said Saez. People are worried that inequality is increasing but they are not focusing on policy measures that speak to the problem.”

The center will partner with the Center for American Progress, a progressive think tank also funded by the Sandlers. The Sandlers intend to set up similar progressive economic think tanks at other universities as well, said Saez.

UC Chancellor Robert Birgeneau announced the formation of the Center for Economic Growth at an annual awards ceremony for the University of California Berkeley Foundation. The Sandlers received the Chancellor’s Citation, which is given to those whose “achievements have made a difference on a global scale.”

The Sandlers may best be known for starting ProPublica, a nonprofit investigative organization based in Washington D.C.  ProPublica, to which the Sandlers donate $10 million a year, won a 2010 Pulitzer Prize for its joint reporting with the New York Times Magazine on Hurricane Katrina. Paul Steiger, the head of ProPublica, came to Berkeley from Washington for the May 13 dinner.

The Sandlers have also funded numerous programs at UC Berkeley. They donate generously to an investigative reporting program and annual conference at Berkeley’s journalism school.

In 1994, the Sandlers donated the funds to start Berkeley’s Center for Human Rights, which applies “innovative technologies and scientific methods to investigate human rights,” according to its website. The center has investigated human rights in numerous countries, including the United States, Iraq, Rwanda, Uganda, Burma, and the former Yugoslavia.

The Center for Economic Growth will officially open July 1, said Saez. It doesn’t even have its own website yet, and the university has not made a formal statement about its creation.

UC Berkeley professor Emmanuel Saez

Snagging Saez will ensure that the center immediately assumes a high profile. Saez, who is French, won John Bates Clark medal in 2009, awarded by the American Economic Association to the nation’s most promising economist under 40. The Clark is often considered an indicator of the Nobel Prize, as 12 of the 30 Clark winners have gone on to win the Nobel Prize for Economics, including the New York Times’ Paul Krugman.

For decades the Sandlers were lauded for their management of the World Savings Bank, which was started as Golden West Financial in 1963. When the subprime mortgage meltdown hit in 2008, the mortgage lender was criticized for its lending practices. The New York Times, Time magazine, and CBS’ 60 minutes suggested that the Sandlers’ bank encouraged people to take out loans they could not afford. Saturday Night Live performed a skit on October 4 that accused the Sandlers of corruption and suggested they “should be shot.” SNL’s producer Lorne Michaels eventually apologized for using such inflammatory language.

The Sandlers have vigorously defended their management of World Savings and even set up their own website to demonstrate that the institution had been very careful about who they loaned money to and the terms under which the money was lent. In a 2009 letter to the New York Times, Herb Sandler wrote “World Savings had a well-deserved and unquestioned reputation, earned over 43 years, for integrity and for being the best run, most risk-averse and best performing publicly traded thrift.”

The Columbia Journalism Review recently examined the critical articles and concluded that the Sandlers and World Savings had been unfairly grouped with other institutions that had made bad loans, including Countrywide Savings.

Frances Dinkelspiel, Berkeleyside and CItyside co-founder, is a journalist and author. Her first book, Towers of Gold: How One Jewish Immigrant Named Isaias Hellman Created California, published in November...