Free-conomics: A New Marketplace Podcast

(Photo: Ken Hawkins)

Our latest Freakonomics Radio on Marketplace podcast is called “Free-conomics.”  (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.) 

The gist: economists are a notoriously self-interested bunch, but a British outfit called Pro Bono Economics is giving away its services to selected charities. Martin Brookes is one of its founders:

BROOKES: When we first set up Pro Bono Economics, there were some economists who thought it was wrong, in principle, to give a service to charity for free. That if the service of analysis of their data was valuable, they should have to pay for it.

If the supply side was reluctant, so was the demand side:

BROOKES: If you go and talk to fundraisers, one thing that fundraisers don’t tend to do is use data. They don’t tend to sell a charity to a potential donor by telling them numbers. They tend to sell the story by telling a story about a beneficiary.

But PBE is making its way, matching up volunteer economists with charities who want help in maximizing their efforts. One of PBE’s first partners was Barnardo’s, which helps victims of child abuse. Here’s the report compiled by Bank of England economists Greg Thwaites, Amar Radia.

Martin Brookes is also interested in a ranking of charities by efficacy, which unsurprisingly has encountered a bit of pushback from charities.

I have not heard of anything like PBE in the States; have you?

(HT: EJW — thanks! — from this blog post)

Audio Transcript

Kai RYSSDAL: Time now for a little Freakonomics Radio -- that moment every couple of weeks we talk to Stephen Dubner, co-author of the books and blog of the same name about (wait for it, wait for it) yes, “the hidden side of everything.” Dubner, how are ya?

 

Stephen J. DUBNER: I am great.  I love the holidays.  Everybody starts to feel charitable toward our fellow humans.  Let me ask you this, Kai: if you had to guess, how would you say that economists rank on the scale of charitable giving, let’s say?

 

RYSSDAL: (Laughs) Zero?  Is there a negative number that I can throw out there?

 

DUBNER: We do think of economists as a little bit more self-interested than average. There is a lab experiment that’s known as the Dictator game.  It’s meant to test charitable giving between strangers. And one of the best predictors that one person will give zero of their money to another person is if that person is an undergraduate economics major.

 

RYSSDAL: Yeah!  It’s the understanding the incentives thing.  It doesn’t surprise me at all.

 

DUBNER: Exactly.  But, let me say this: in Freakonomics Radio’s ongoing efforts to understand the creature known as homo econonomicus, we have uncovered evidence – in the wild, mind you – that the species may in fact be evolving.  There is a British economist named Martin Brookes.  He works at a hedge fund, and for some time, he had been interested in bringing a more data-driven approach to philanthropy. Then one day, his phone rang.

 

Martin BROOKES: “A big U.K. charity called Barnardo’s, which is a children’s charity, rang me up and said, 'could they borrow an economist from me?'  Because they didn’t know where to find them and they couldn't afford to hire one even if they did know where to find them.”

 

RYSSDAL: So I’m guessing here.  But the charity wants to hire an economist to see if they’re getting a good return on their money?  If they’re doing things right?  All that economist stuff.  Right?

 

DUBNER: Yeah, that’s exactly the right idea.  So Martin Brookes thought, well, what if I could recruit a bunch of economists who were willing to donate their time and skills, and match them up with charities who need it?  They did it and they called this thing Pro Bono Economics.

 

BROOKES: "For us, the pitch of Pro Bono Economics is that economists are better with a spreadsheet than they are with a paintbrush. And you should marry them up -- those economists up with a spreadsheet to help a charity rather than give them a paintbrush to paint a hut.”

           

RYSSDAL: Warms my heart, Dubner!  Does me good to hear about economists doing good in the world. 

 

DUBNER: Right.  Let me tell you specifically – this first charity that contacted Brookes, Barnardo’s -- its focus is helping young people who have been sexually exploited. So Brookes had a couple of economists who worked for the Bank of England analyze Barnardo’s data. They found that for every £1 that this charity spent on services, U.K. taxpayers saved at least £6. So, look, that’s good to know, right?  A charity wants to go around saying it does good work.  But it’s even better to have the data to show it, especially when you need to plead your case to the government or donors or the public.  Right?

 

RYSSDAL: Yeah.  So you’ve got to figure Pro Bono Economics has more business than it knows what to do with, right?  Charities are lining up to get these guys?

 

DUBNER: You would think so.  Pro Bono Economics has signed up more than 200 economists who have volunteered.  But the charities are not coming out of the woodwork to take advantage of them.  In other words, the supply of economists is currently outstripping the demand from charities -- even though the economists are working for free! Now, maybe this says something about the low regard with which people hold economists. Or it may be that charities think that the economists aren’t necessarily going to give them good news. Here’s Sue Holloway, who works as the director of Pro Bono Economics.

 

Sue HOLLOWAY: "We've worked with a number of charities where the evidence has not been conclusive that they are having a big impact or it's shown that, at the moment, that they're not making much change in the way they were expecting."

 

RYSSDAL: Do you think they’re worried that they’re going to give them bad news?  Or trouble?  Or wrong answers or something?

 

DUBNER: Or say that their mission is not really viable.  Look, I would think that any right-minded charity would want to know where it’s failing every bit as much as where it’s succeeding. That’s valuable information.  But, human egos being what they are, and institutions being what they are, you may be right. Martin Brookes found that the typical charity does not run itself at all like a business.

 

BROOKES: “If you go and talk to fundraisers, one thing that fundraisers don’t tend to do is use data.  They tend to sell the story by telling a story about a beneficiary.”

 

DUBNER: So what Martin Brookes wants to do is publicly rank charities by how effective they are – which, as you can imagine, has gotten a little pushback from the charity sector. In the meantime, I’ve been looking to see if there is kind of a U.S. equivalent of Pro Bono Economics.  I haven’t turned up anything yet. Maybe – here’s my holiday wish -- some warm-hearted economist is driving home right now, listening to this program, and when he gets home he’ll fire up his 501(c)(3) paperwork and get it going. How’s that for getting in the holiday spirit?

 

RYSSDAL: I like that.  I’m trying to think of what it would be like if we got an economist in here, man, at Marketplace just to poke around.

 

DUBNER: Be careful what you ask for, buddy boy.

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  1. Seminymous Coward says:

    Regarding ranking charities, I’m aware of 2 already existent efforts, one of which is American: http://www.charitynavigator.org . The UK-based http://www.givingwhatwecan.org/ uses QALYs/$ as the metric, which is fundamentally the correct answer ( http://www.givingwhatwecan.org/where-to-give/methodology/qalys-and-dalys ). Charity Navigator has a strong focus on administrative cost control and transparency, though, so it certainly provides a solid insight as well.

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  2. vimspot says:

    Givewell.org evaluates and pseudo ranks many charities. They only end up with a few charities that meet their criteria for efficacy and “room for more funding”

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  3. Brian Smith says:

    This is being done by Convergent Nonprofit Solutions (www.OutcomeDrivenConsulting.com), a consulting firm in the U.S. that develops Return on Investment analysis, or Organizational Value Proposition, to nonprofit clients in the U.S.

    As professional fundraisers, we definitely DO use data in telling the story. A testimonial from the client helps, but showing the economic impact of an organizations is as powerful a story. I like the idea of ranking by efficacy, as long as the metrics include the “warm fuzzies” that many organizations create. Doing good is as valid a metric as doing well.

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  4. frankenduf says:

    “some economists thought it was wrong, in principle, to give a service for free”- thus verifying Freud’s observation that some people don’t get enough love during their upbringing

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  5. Genevieve Riutort says:

    I work for the Westside Food Bank in Santa Monica. We are proud of our efficiency and would be glad to work with an economist such as Pro Bono Economists! Waiting for the mad rush of volunteer economists…. http://www.wsfb.org

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  6. Philip says:

    It’s not exactly the same, but Analysis Exchange partners web analytics professionals with non-profits to help them with data:

    http://www.webanalyticsdemystified.com/ae/

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  7. Michael says:

    DataKind is a rather new organization that pairs up data crunchers with charities. I participated in one of their weekend “DataDives” in DC that helped three local charities answer some of their data questions.

    http://datakind.org/

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  8. Enter your name... says:

    I’m not surprised that fundraisers tell stories rather than providing data: stories sell better than statistics. But I think that what they really ought to do is talk about how everyone else is increasing their giving (plus a story). If we will conserve energy, get more exercise, etc., because we learn that everyone else is doing it, then we will probably find a few extra dollars for charity if we learn that everyone else is doing it.

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