Giving this Black Friday

My Twitter timeline sounded like one long anti Black Friday diatribe today. I would certainly never think of venturing out on Black Friday to an actual store to find the angry mobs. The best deals can almost all be found online anyway.

If the sheer consumerism of it has still got you down, though, an antidote is to use this day to contribute to a charity. I've written before about GiveWell, a site that analyzes charities for how much actual good they do with each dollar you contribute. At the time, its top choice was Against Malaria Foundation, but even GiveWell noted at the time that eventually AMF would run into diminishing returns.

That time has come, at least according to GiveWell. Its new top-ranked charity is the one that was in second place behind AMF before: GiveDirectly. From GiveWell's review:

GiveDirectly ( transfers cash to households in the developing world via the M-PESA mobile phone-based payment service. It targets extremely low-income households and aims to deliver at least 90 cents directly to recipients for every $1.00 in total expenses. (More)

GiveDirectly is a recommended organization because of:

  • Its focus on cash transfers: delivering 90% of all expenses directly to extremely low-income people in the developing world. We feel that this intervention faces an unusually low burden of proof, though donors' intuitive reactions to it may vary widely. The evidence that such transfers increase short-term consumption, especially of food, is very strong, and there is more limited evidence that such transfers may be invested at very high rates of return (e.g. ~20% annually). (More)
  • Its documented success, to date, in reaching its 90% target, and what we perceive as a strong (and evolving) process for ensuring that cash is well-targeted and efficiently delivered. (More)
  • Its strong transparency and commitment to self-evaluation. Among other things, GiveDirectly has two high-quality studies of its impact ongoing, and has taken the unusual step of making the details of these studies public before data is collected. (More)
  • Room for more funding - we believe that GiveDirectly can use substantial additional funding productively, both for its core work of delivering cash and for investigative work on refining its (new and unusual) approach. (More)

What's interesting about GiveDirectly is that it marks a shift in thinking around charitable contributions. Many Americans are conditioned to distrust direct cash transfers, having long been told that doling out cash to the homeless on the streets is tantamount to handing over a bottle of booze or a drug-filled syringe.

The latest research on direct cash transfers, however, is promising. The shift from health interventions to direct cash transfers reminds me of the difference between active and passive investment management. Health interventions would seem to require more overhead whereas cash transfers should, in theory, be lighter weight to administrate.

But more than that, the shift away from a paternalistic model of giving feels like a form of giving predicated on faith in those less fortunate. Rather than prescribe how the recipient receive your contribution, let them choose how best to spend the donation.

Not all are believers, though, so two forms of cash transfer exist: conditional cash transfers (CCTs) and unconditional ones (UCTs).

But it highlights the virtues of no-strings grants (UCTs). They work when lack of money is the main problem. The people who do best are those with the least to start with (in Uganda, that especially means poor women). In such conditions, the schemes provide better returns than job-training programmes that mainstream aid agencies favour. Remarkably, they even do better than secondary education, which pushes up wages in poor countries by 10-15% for each extra year of schooling. This may be because recipients know what they need better than donors do—a core advantage of no-strings schemes. They also outscore conditional transfers, because some families eligible for these fail to meet the conditions through no fault of their own (if they live too far from a school, for instance).

Does this mean that governments are wasting time and money by monitoring and enforcing conditions, when handing over cash would be just as good? Not so fast. Perhaps because cash is all-important to unconditional schemes, they tend to be more generous and expensive than CCTs. The grants of the Kenyan programmes, for example, are the equivalent of two years’ local income. In contrast, the stipend of the world’s biggest conditional scheme, Brazil’s Bolsa Família, is worth 3% of average Brazilian incomes. For $1,000, therefore, you could help one poor Kenyan a lot, or three poor Brazilians a bit—even though Brazil is a far more expensive country. Which is better? The answer depends more on the recipients than on the programmes: whom do you want to help and what problems do they face?

Moreover, CCTs can focus on something which UCTs leave to chance: helping the next generation. Healthier, better educated children earn more throughout their lifetimes, so the requirement to attend school or clinics should cut future poverty. UCTs aim to reduce poverty now. So conditional and unconditional schemes are not always comparable. That said, a lot of effort has gone into making comparisons, and the results are now emerging. CCTs have their drawbacks but—at least where governments are concerned, and if you take a broad definition of poverty reduction to include health and education—they usually do a better job.

If you're not sold on cash transfers, GiveWell's other top-rated charity is of the more familiar health intervention model: Schistosomiasis Control Initiative (SCI), which treats children for parasite infections in sub-Saharan Africa. They're not registered as a charity in the U.S. but you can contribute to them through GiveWell.