Efficient Charity Donation

Scott Alexander reports back from a talk on efficient charity at the Berkeley Faculty Club. A highlight was a section by Robin Hanson of Overcoming Bias fame.

One of his claims that generated the most controversy was that instead of donating money to charity, you should invest the money at compound interest, then donate it to charity later after your investment has paid off – preferably just before you die, since donating money after death is legally complicated. His argument, nice and simple, was that the real rate of return on investment has been higher than the growth rate for 3000 years and this pattern shows no signs of changing. If you donate the money today, your donation grows with the growth rate, but if you invest it, it grows with the interest rate. He gave his classic example of Benjamin Franklin, who put his relatively meager earnings into a trust fund to be paid out two hundred years later; when they did, the money had grown to $7 million. He said that the reason people didn’t do this was that they wanted the social benefits of having given money away, which are unavailable if you wait until just before you die to do so.


Then he started talking about how you should only ever donate to one charity – the most effective. I’d heard this one before and even written essays speaking in favor of it, but it’s always been very hard for me and I’ve always chickened out. What Robin added was, once again, a psychological argument – that the reason this is so hard is that if charity is showing that you care, you want to show that you care about a lot of different things. Only donating to one charity robs you of opportunities to feel good when the many targets of your largesse come up and burdens you with scope insensitivity (my guess is that most people would feel more positive affect about someone who saved a thousand dogs and one cat than someone who saved two thousand dogs. The first person saved two things, the second person only saved one.) In retrospect this is absolutely true and my gibbering recoil at this problem isn’t just Yet Another Cognitive Bias but just good old self-interest.

Just as fascinating was a discussion of reasons Hanson's strategy might not be optimal. For example, this from St. Elie of GiveWell:

He said that the world is getting better so quickly that we are running out of good to be done. After the initial burst of astonishment he explained: in the 1960s, the most cost-effective charity was childhood vaccinations, but now so many people have donated to this cause that 80% of children are vaccinated and the remainder are unreachable for really good reasons (like they’re in violent tribal areas of Afghanistan or something) and not just because no one wants to pay for them. In the 1960s, iodizing salt might have been the highest-utility intervention, but now most of the low-iodine areas have been identified and corrected. While there is still much to be done, we have run out of interventions quite as easy and cost-effective as those. And one day, God willing, we will end malaria and maybe we will never see a charity as effective as the Against Malaria Fund again.

Lots of thought-provoking ideas, highly recommended (h/t to Marginal Revolution).

While it's true that much of charity donation work is self-serving, it feels like a worthwhile indulgence. The anonymous donor is the most noble of donors, but I shudder to think of how much charity funds would shrink if all donations had to be kept anonymous. Your name on a scrolling list on a web page, a plaque on a sidewalk, or in the end credits under Special Thanks is, in the scheme of things, a low price to pay.