You probably suck at giving charitably.

Loren Michael · #1 by **Loren Michael** » Apr 07, 2013 9:16 am

http://slatestarcodex.com/2013/04/05/in ... t-charity/

[Robin Hanson] gave a long list of things that people could do to improve the effectiveness of their charitable donations. Then he declared that since almost no one does any of these, people don’t really care about charity, they’re just trying to look good. Then he told the room – this beautiful room in the Faculty Club, full of sophisticated-looking charity donors who probably thought they were there to get a nice pat on the back – that they probably thought that just because they were attending an efficient charity talk they weren’t like that, but that probabilistically there was excellent evidence that they were.

I have never seen a group of distinguished Berkeley faculty gain so sudden and intuitive an appreciation for the Athenians who decided to put Socrates to death. I spent the whole speech grinning like an idiot and probably scared Robin a little. And okay, some of that was because I woke up really early to get to the airport today and had become dangerously overtired and mentally imbalanced, but the rest of it was just that he sounds exactly like he does on his blog, he’s a great speaker, and it was just really funny in a train-wreck sort of way to watch a whole room of innocent and basically decent people get Hansonned. The man is one of a kind and his complete and obviously deliberate imperviousness to normal social niceties needs to be declared a national treasure.

But he made some genuinely unsettling points.

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.

It goes on, with others talking about it as well, and lots of links at the page.

There are people in the world who could use a helping hand, and there are a variety of ways to help them. Some of them are better, less wasteful, more efficient, than others. I think that chances are, if you're into doing charity, you're probably not doing it as well as you could.

Loren Michael · #2 by **Loren Michael** » Apr 07, 2013 9:27 am

One of those links: Re: People's (in my opinion) fucked-up priorities:

http://lesswrong.com/lw/3gj/efficient_c ... to_others/

Most donors say they want to "help people". If that's true, they should try to distribute their resources to help people as much as possible. Most people don't. In the "Buy A Brushstroke" campaign, eleven thousand British donors gave a total of £550,000 to keep the famous painting "Blue Rigi" in a UK museum. If they had given that £550,000 to buy better sanitation systems in African villages instead, the latest statistics suggest it would have saved the lives of about one thousand two hundred people from disease. Each individual $50 donation could have given a year of normal life back to a Third Worlder afflicted with a disabling condition like blindness or limb deformity..

Most of those 11,000 donors genuinely wanted to help people by preserving access to the original canvas of a beautiful painting. And most of those 11,000 donors, if you asked, would say that a thousand people's lives are more important than a beautiful painting, original or no. But these people didn't have the proper mental habits to realize that was the choice before them, and so a beautiful painting remains in a British museum and somewhere in the Third World a thousand people are dead.

iamthereforeithink · #3 by **iamthereforeithink** » Apr 07, 2013 10:52 am

Loren Michael wrote:

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.[/i]

I would heartily disagree with that. Firstly, interest rates generally tend to track inflation (or be a little bit behind inflation). So merely allowing money to sit and accrue interest creates zilch new value. The only way to use money productively is by creating real value in the real world. The real growth rate of the economy has to be added on top of the (present value of money + interest - inflation). The argument is trivially wrong.

In the particular case of charity, it should be easy to demonstrate the fallacious nature of the argument. Let's say I have $10,000 to give to charity today. This money, if given to charity today, will be used to finance the education of a kid in Africa. Or I could put it in a bank at 4% interest, when average inflation is (conservatively) 3.5% per annum. So the assumption is that the real value of money would be growing at 0.5% per annum, compounded annually (although this highly unlikely to be actually the case). If put in a bank, the value of the money in 2013 dollars would be $11,049 in 20 years and $16,467 in a 100 years.

In the first case, let's say the child whose education was financed becomes a software engineer in 20 years and starts contributing an average of $30,000 in 2013 dollars to the economy. Over the next 50 years, he might have contributed a total of $1,500,000 to the economy. He might have also sent his kids to school, enabling them to contribute more value to the economy in the future. The contribution to the economy would be a LOT higher than $16,467 of real money I would get in the bank. Little or none of this benefit would have come if the child's education had not been financed. Even after a hundred years, the money could only finance the education of 1.5 kids, with the benefits coming much later, and without the compounding effect that would be present if the benefits had started earlier. Even if I took out the inflation effect and assumed that the real value of the money actually grew at interest rate, it would still be a bad deal.

Panderos · #4 by **Panderos** » Apr 07, 2013 12:17 pm

Well I am also somewhat suspicious of the 3000 years economic observation there, but that's not really the point of the speech/article.

My response to the argument there is that sure, people no doubt give money to charity for the same largely selfish ground-ape reasons we do everything. But demonising charity givers, or labelling them selfish, isn't particularly useful - if it sticks it'll probably lead to less charitable giving not more. So unless we have a plan to fund those (genuinely worthwhile) charitable causes, I'm not sure what'll be achieved here.

natselrox · #5 by **natselrox** » Apr 07, 2013 5:48 pm

Interesting. Bookmarked for reading later.

Loren Michael · #6 by **Loren Michael** » Apr 08, 2013 3:58 am

Panderos wrote:Well I am also somewhat suspicious of the 3000 years economic observation there, but that's not really the point of the speech/article.

My response to the argument there is that sure, people no doubt give money to charity for the same largely selfish ground-ape reasons we do everything. But demonising charity givers, or labelling them selfish, isn't particularly useful - if it sticks it'll probably lead to less charitable giving not more. So unless we have a plan to fund those (genuinely worthwhile) charitable causes, I'm not sure what'll be achieved here.

From the link:

Robin’s last point was that the most effective thing to do is to stop beating yourself up and be exactly as irrational as is necessary to convince your mind to go along with the whole “efficient charity thing” instead of freaking out and giving up in disgust.

The argument is that people are being wasteful with their money when they're trying to help.

Something else people do is give canned goods to food drives. That's not such a good idea:

All across America, charitable organizations and the food industry have set up mechanisms through which emergency food providers can get their hands on surplus food for a nominal handling charge. Katherina Rosqueta, executive director of the Center for High Impact Philanthropy at the University of Pennsylvania, explains that food providers can get what they need for “pennies on the dollar.” She estimates that they pay about 10 cents a pound for food that would cost you $2 per pound retail. You’d be doing dramatically more good, in basic dollars and cents terms, by eating that tuna yourself and forking over a check for half the price of a single can of Chicken of the Sea.

Beyond the economies of scale are the overhead costs. Charities are naturally reluctant to turn down donations for fear of alienating supporters or demoralizing well-wishers, but the reality is that dealing with sporadic surges of cans is a logistical headache. A nationwide network of food banks called Feeding America gingerly notes on its website that “a hastily organized local food drive can actually put more strain on your local food bank than you imagine.” Food dropped off by well-meaning citizens needs to be carefully inspected and sorted. A personal check, by contrast, can be used to order what’s needed without placing extra burdens on the staff.

[...]

“For a long time we just basically kept politely quiet about the fact that food drives weren’t as helpful as people assumed,” explains Greg Bloom, a development assistant at Bread for the City in Washington, D.C., “but that changed when we became more diligent about stocking our pantry with healthy foods.”

Bloom explains that they tried providing a specific list of items for people to donate, but even so “we find that almost half of what comes to us in any given food drive just doesn’t meet our nutritional standards.” Under the circumstances, telling people that money is more helpful started looking like a more appealing option. Today, a large share of the remaining canned food donations that Bread for the City receives comes from federal government offices where, somewhat perversely, employees aren’t allowed to stage cash drives (though giving through the Combined Federal Campaign is an option).

Canned shit still helps, marginally, but in the sense of opportunity costs, it's just a huge waste, and waste, I think, is a huge problem. We could be doing so much better, but we don't. What are the ways we can do better?

Blackadder · #7 by **Blackadder** » Apr 08, 2013 7:08 am

In the UK, many charities are crying out for trustees and volunteers. Money helps, of course it does, but donations in the form of human resources are also very welcome. I give some of my time every month as a trustee and financial adviser to a UK charity. To me the cost is minimal, since it is usually time when I would not be working so I am giving up leisure time. To the charity, they are getting professional advice that they would otherwise have to pay for.

I have discovered that charity fund-raising is an art more than a science. Rich donors are often the only thing that saves some charities from going under but in return for giving their money, many such donors want their egos massaged. Do I like it? No. Is it necessary? Yes, if it means parting them from their cash.

Loren Michael · #8 by **Loren Michael** » Apr 08, 2013 9:00 am

Blackadder wrote:In the UK, many charities are crying out for trustees and volunteers. Money helps, of course it does, but donations in the form of human resources are also very welcome. I give some of my time every month as a trustee and financial adviser to a UK charity. To me the cost is minimal, since it is usually time when I would not be working so I am giving up leisure time. To the charity, they are getting professional advice that they would otherwise have to pay for.

I have discovered that charity fund-raising is an art more than a science. Rich donors are often the only thing that saves some charities from going under but in return for giving their money, many such donors want their egos massaged. Do I like it? No. Is it necessary? Yes, if it means parting them from their cash.

Yeah, the biggest thing is just getting the money together. Reminds me of this thing I read:

GiveWell’s charity recommendations – currently Against Malaria Foundation, GiveDirectly and the Schistosomiasis Control Initiative – are generally regarded as the most reliable in their field. I imagine many readers here donate to these charities. This makes it all the more surprising that it should be pretty easy to start a charity more effective than any of them.

All you would need to do is found an organisation that fundraises for whoever GiveWell recommends, and raises more than a dollar with each dollar it receives. Is this hard? Probably not. As a general rule, a dollar spent on fundraising seems to raise at least several dollars. It’s a pretty simple and fast multiplier that obviously beats putting your money in the stock market...

Scot Dutchy · #9 by **Scot Dutchy** » Apr 08, 2013 11:33 am

I never give to charity. In this country we prefer other ways like proper state control. We have a few charities but very strictly government controled.

I would not trust charities as far as I could throw them. They are mostly corrupt. Their CEO's often have massive salaries and bonuses. How much money actually reaches its goal?

Panderos · **#10** by **Panderos** » Apr 08, 2013 11:50 am

Fair enough Loren, I thought his main thesis was the second line of the OP - that people don't really care, as opposed to 'there are more efficient ways we can give to charity', which seems like a much more worthwhile point to make. Perhaps the selfish dig was just a way of motivating people to act.

Loren Michael · **#11** by **Loren Michael** » Apr 08, 2013 12:18 pm

Scot Dutchy wrote:I never give to charity. In this country we prefer other ways like proper state control. We have a few charities but very strictly government controled.

I would not trust charities as far as I could throw them. They are mostly corrupt. Their CEO's often have massive salaries and bonuses. How much money actually reaches its goal?

http://www.givewell.org/charities/top-charities

Scot Dutchy · **#12** by **Scot Dutchy** » Apr 08, 2013 12:57 pm

Loren Michael wrote:
Scot Dutchy wrote:I never give to charity. In this country we prefer other ways like proper state control. We have a few charities but very strictly government controled.

I would not trust charities as far as I could throw them. They are mostly corrupt. Their CEO's often have massive salaries and bonuses. How much money actually reaches its goal?

http://www.givewell.org/charities/top-charities

So?

I dont give to charities.

Here look at the countries giving overseas aid:

http://www.statisticbrain.com/countries-that-give-the-most-in-foreign-aid-statistics/

Percent of GDP Commited to Foreign Aid
Country Percent of GDP to Aid

1 Sweden 0.99 %

2 Norway 0.88 %

3 Denmark 0.82 %

4 Netherlands 0.80 %

5 Belgium 0.50 %

6 United Kingdom 0.48 %

7 Ireland 0.43 %

8 Finland 0.43 %

9 Spain 0.43 %

10 Switzerland 0.42 %

11 Austria 0.42 %

12 Germany 0.38 %

13 France 0.38 %

14 Canada 0.32 %

15 Australia 0.29 %

16 New Zealand 0.27 %

17 Portugal 0.25 %

18 Italy 0.21 %

19 Greece 0.20 %

20 Japan 0.20 %

21 United States 0.19 %

Nice one!

Loren Michael · **#13** by **Loren Michael** » Apr 08, 2013 5:06 pm

Scot Dutchy wrote:Here look at the countries giving overseas aid:

What is that relevant to?

Scot Dutchy · **#14** by **Scot Dutchy** » Apr 08, 2013 6:00 pm

Loren Michael wrote:
Scot Dutchy wrote:Here look at the countries giving overseas aid:

What is that relevant to?

Why we dont need charities. America gives practically piss all so you lot try to compensate with charities but these are not controlled so plenty are making big bucks.

iamthereforeithink · **#15** by **iamthereforeithink** » Apr 08, 2013 7:52 pm

That's certainly impressive. :thumbup:

Now if only your government also wiped your ass for you. Then you wouldn't need to wipe your ass either.

Loren Michael · **#16** by **Loren Michael** » Apr 09, 2013 4:22 am

Scot Dutchy wrote:
Loren Michael wrote:
Scot Dutchy wrote:Here look at the countries giving overseas aid:

What is that relevant to?

Why we dont need charities. America gives practically piss all so you lot try to compensate with charities but these are not controlled so plenty are making big bucks.

Oh.

I guess it never occurred to me that government policy is optimal policy, or that if I have excess money I should just give it to some country's government instead of poor people, or that the government's priorities for aid are the same as mine.

I probably never gave it a second thought because that's as fucking retarded as it sounds.

Ihavenofingerprints · **#17** by **Ihavenofingerprints** » Apr 09, 2013 5:36 am

If I ever become rich I doubt I'll be donating to charities. I don't see why people with that sort of money don't simply invest their money in 3rd world countries? Look for a profitable place to build and electricity or water grid and then sell it off to someone else so you can do it all again. If half of the money spent on foreign aid was actually spent on trade with these countries I can't see how that wouldn't help out their poverty problems just as much, if not more.

Loren Michael · **#18** by **Loren Michael** » Apr 09, 2013 6:16 am

Ihavenofingerprints wrote:If I ever become rich I doubt I'll be donating to charities. I don't see why people with that sort of money don't simply invest their money in 3rd world countries? Look for a profitable place to build and electricity or water grid and then sell it off to someone else so you can do it all again. If half of the money spent on foreign aid was actually spent on trade with these countries I can't see how that wouldn't help out their poverty problems just as much, if not more.

As noted in the various links, certain things have massive benefits to people for relatively low investments. Giving someone a job is great, but saving someone from crippling illness at an early age is probably even better, because then they're actually able to, say, get an education and/or work at jobs like the one you'd give them.

I tend to agree about trade, but the best trade is allowing freedom of labor mobility, because it both gives people access to jobs AND gets them out of a disease-ridden (or war-torn, or oppressive, or...) area.

But people who aren't poor people tend to hate that solution.

Loren Michael · **#19** by **Loren Michael** » Apr 09, 2013 8:38 am

Here's at least one good reason not to trust governments to do what's best for the people on the receiving end. I have no idea how representative this is (it sounds like it's one of the worst in the world) but there's little reason to suspect that other governmental aid is immune from tainting via national and/or special interests:

http://www.samefacts.com/2013/04/watchi ... attention/

US Food Aid Rules: If You’re Not Outraged, You’re Not Paying Attention

In order to see how egregious current rules are, suppose that there is a famine in Ethiopia (I know, hard to do). the quickest and most effective thing to do would be to find some farmer or group of farmers in other parts of the country, or in neighboring countries, buy their food and get it to the stricken area. After all, one key cause of famine is the lack of money, not lack of crops. But under current law, USAID is basically forbidden from doing that. Instead, it must buy grain in the United States and ship it several thousand miles to the famine area. You can imagine the amount of time that that takes; sometimes, several weeks. it’s a logistic nightmare. In the meantime, thousands die, usually the weakest such as children and the elderly.

But it’s worse than that.

If the food needs to be shipped, then that means that the shipping must be paid for. And it sure is: according to a study done by AJWS and Oxfam, nearly 55% of the cost of American international food aid goes not to food, but to shipping costs. That’s what your tax dollars are going to.

But it’s worse than that...

Scot Dutchy · **#20** by **Scot Dutchy** » Apr 09, 2013 10:58 am

Loren Michael wrote:Here's at least one good reason not to trust governments to do what's best for the people on the receiving end. I have no idea how representative this is (it sounds like it's one of the worst in the world) but there's little reason to suspect that other governmental aid is immune from tainting via national and/or special interests:

http://www.samefacts.com/2013/04/watchi ... attention/

US Food Aid Rules: If You’re Not Outraged, You’re Not Paying Attention

In order to see how egregious current rules are, suppose that there is a famine in Ethiopia (I know, hard to do). the quickest and most effective thing to do would be to find some farmer or group of farmers in other parts of the country, or in neighboring countries, buy their food and get it to the stricken area. After all, one key cause of famine is the lack of money, not lack of crops. But under current law, USAID is basically forbidden from doing that. Instead, it must buy grain in the United States and ship it several thousand miles to the famine area. You can imagine the amount of time that that takes; sometimes, several weeks. it’s a logistic nightmare. In the meantime, thousands die, usually the weakest such as children and the elderly.

But it’s worse than that.

If the food needs to be shipped, then that means that the shipping must be paid for. And it sure is: according to a study done by AJWS and Oxfam, nearly 55% of the cost of American international food aid goes not to food, but to shipping costs. That’s what your tax dollars are going to.

But it’s worse than that...

Once again quoting the American situation. Please dont compare. What your shitty government does when it comes to world aid does amount to bugger all. Just sending cheap modified excess food that nobody else will buy is not the answer.

You probably suck at giving charitably.

You probably suck at giving charitably.

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