What Makes a Donor Donate? (Ep. 51)
In our latest Freakonomics Radio on Marketplace podcast, we look at the economics of charity — specifically, what works (and what doesn’t) when trying to incentivize people to give. (Download/subscribe at iTunes, get the RSS feed, listen live via the media player above, or read the transcript.)
In Australia, Dick Smith’s electronics empire has afforded him enough success to be able to donate about 20 percent of his annual income to charity. But, he says, this kind of generosity is no longer the norm:
SMITH: When I was a young boy in the 1950’s, anyone who was wealthy was also known as a philanthropist. And they gave money away. These days we have incredibly wealthy people. I mean, our wealthiest is Rupert Murdoch, who gets a $33 million-a-year salary and also is worth about $4 billion dollars, but is not known for philanthropy in any way.
It’s the system of noblesse oblige, Smith says, that requires the wealthy to give, and he’s tried quietly to persuade his compatriots to fulfill their obligations:
SMITH: But I’ve not succeeded. I’ve completely failed. So now I’m going publicly and outing these people, and at least embarrassing them, hoping that one will break ranks and fulfill obligations of putting something back into society.
It’s too soon to say whether a healthy dose of public shame will be the kick that gets people to give, or if Smith, as one Australian writer put it, is just “a dickhead.”
University of Chicago economics professor John List has concentrated his research on the science of philanthropy, and as he tells Stephen Dubner, there are a few surefire ways to get people to give. Big-name endorsements, one-to-one matching gifts, and raffles all work wonders to lubricate cash flow. What doesn’t work? Rebates. An offer to refund money if a fundraiser doesn’t reach a goal doesn’t exactly send a signal of confidence. It’s like saying: We’re not so sure we can raise this cash, and you can’t be certain either.
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