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End-of-the-Year Altruists

Altruism is a fascinating, nuanced, and (I would argue) wildly misunderstood practice. We have a chapter in SuperFreakonomics, “Unbelievable Stories About Apathy and Altruism,” which explores the issue in-depth. We make a few interrelated points:

1. Because it can be so hard to measure pure altruism in the real world, many scholars brought altruism into the lab; this produced heartening results — which, alas, turn out to be quite easy to overturn.

2. Therefore, economists often talk of “impure altruism” or “warm-glow altruism,” which means that we give not necessarily out of the goodness of our hearts, but because there’s some return to our giving. We give not only because we want to help but because it makes us look good, or feel good, or perhaps feel less bad.

3. This doesn’t mean that “impure altruism” is at all a bad thing; if the deed gets done, then the deed gets done. But, as with anything in life, it is good to understand the true incentives at work.

4. U.S. citizens are easily the world’s leaders in per-capita charitable contributions, donating about $300 billion a year, more than 2 percent of the nation’s GDP. But it should also be noted that the U.S. tax code is among the most generous in allowing deductions for those contributions.

Given all this, it’s may not surprise you to learn that for online donations, the single biggest day of the year is December 31, the last day of the tax year. As Stephanie Strom writes in The Times:

New data from Convio, a software company, shows that charitable donors that use Convio’s online giving systems made 13.2 times more gifts last Dec. 31 than the daily average for the rest of 2008, and that the charities raised 22.5 times more money than they did on an average day.

Convio, which estimates that as much as 10 percent of online giving moves over its systems, also found that in the last week of 2008, the average gift size was 57 percent larger than the weekly average for the rest of the year.

Sure, the end of the year is also a time for taking stock. Sure, the holiday season may inspire a lot of us to reach for the greater good. But it would be a very interesting experiment to remove the charitable-tax deduction for a year and see what happens at the end of December.

In related news, Daniel Elfenbein, Raymond Fisman, and Brian McManus have a fascinating new working paper called “Reputation, Altruism, and the Benefits of Seller Charity in an Online Marketplace” (pdf here; abstract here). By analyzing 150,000 eBay transactions, they found that items auctioned off for charity were more likely to sell and earned more money than identical items that weren’t being sold for charity. (We witnessed this ourselves when a charitable auction of SuperFreakonomics fetched for more than $1,500 — although, admittedly, that item was unique.)

Particularly interesting in the Elfenbein/Fisman/McManus paper: “We also find that charity-tied products by all sellers are more likely to sell (and at higher prices) immediately following Hurricane Katrina, implying that consumers derive direct utility from seller charity at times when charity is particularly salient.”

Yes, today is December 31. So get off this site and go find someplace to exercise your altruism, as impure as it may be.