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Posts Tagged ‘Charity’

Spin for Good

Americans love to gamble, as evidenced by the ubiquity of lotteries, the growing number of local casinos, and the remarkable success of Las Vegas.

One place Americans can’t legally gamble is online because, except in a few states, the current laws prohibit it.  Right now, the closest legal substitute that exists for Americans is virtual gambling at sites like Zynga, where people pay literally billions of dollars a year in real money to buy tokens that allow them to play virtual slot machines and tables games.  By virtual, I mean that even though the consumers pay real money, they can’t win cash prizes, but rather things like online trophies or more tokens that allow them to play the games longer.


Charity "Shoppers" vs. Charity Investors

I like Indian food more than sushi. And I like sushi more than Italian food. When going out for dinner and choosing which to eat, does this mean I always choose Indian? Of course not. I’d tire of Indian food.

On my savings account, I like earning 3% interest more than 2%. And I like earning 2% more than 1%. Suppose three banks offer accounts identical except for the interest rate: would I always choose the 3% account? Or might I say, “Hey, 3% is boring, I think I’ll try 2%?” Of course not. I’d stick with the bigger payoff.

Yet when it comes to charitable giving, most people spread their money around. Why is this? And is it an effective strategy for helping people, or just a way to make ourselves feel good?  

I look at this three ways:

First, we might think that even the best charity can absorb and wisely spend only so much money — that the impact of our next dollar is lower than the impact of the first. So we give to several worthy causes. And this may be the prudent approach for huge givers like Bill & Melinda Gates, Mark Zuckerberg, and Warren Buffett — but most of us don’t have to worry about that.


Not So Dismal After All

John List and Uri Gneezy have appeared on our blog many times. This guest post is the last in a series adapted from their new book The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life. List appeared in our recent podcast “How to Raise Money Without Killing a Kitten.”

Pay-what-you-want is a bit of an oxymoron for economists. After all, if you had the choice of how much to pay, wouldn’t you always pick $0? But as we’ve found time and again, people are a lot more complicated than typical economists have assumed.

Case-in-point: in 2007 Radiohead made their album In Rainbows downloadable online for whatever price customers wanted to pay. Precise statistics are hard to come by, but one thing is clear: a lot of people paid a good amount of cash for the album. In fact, it was so successful that other acts have followed suit. Heck, even corporations like Panera have gotten into the act, setting up cafes in St. Louis and Chicago where customers pay what they can for certain menu items. 

What got us curious, though, was trying to answer why people were paying more than $0. In particular we wanted to know what sorts of levers could we pull that would induce people to pay more or pay less in an economic environment like Radiohead’s website? Luckily, right around this time we started working with Disney Research, and they were just as interested in these questions.


Charity and the Beauty Effect

John List and Uri Gneezy have appeared on our blog many times. This guest post is part a series adapted from their new  book The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life. List appeared in our recent podcast “How to Raise Money Without Killing a Kitten“; the post below offers a fuller description of an experiment discussed in that podcast.

On a chilly Saturday afternoon in December, 2005, Jeanne, a bright, energetic junior at East Carolina University (ECU), trotted up the walk of a suburban home in Pitt County, N.C. Jeanne wore a shirt emblazoned with the name “ECU Natural Hazards Mitigation Research Center.” She also wore a badge with her photograph, name, and solicitation permit number on it. She knocked, and a middle-aged man opened the door. 

“Yes?” he said, eyeing her. 

“Hi,” she said, smiling brightly. “My name is Jeanne. I’m an ECU student visiting Pitt County households today on behalf of the newly formed ECU Natural Hazards Mitigation Research Center. Would you like to make a contribution today?” It’s probably safe to say that the last thing the middle-aged man had on his mind was the possibility of Jeanne being a double agent. Yes, she was really trying to raise money for the center. But she was also part of a bigger experiment involving dozens of college students knocking on the doors of 5,000 households in Pitt County. 


Products for Charity

We bought a box of Anzac biscuits — a very tasty cookie with no eggs or fat, thus not too many calories and easily preserved. The company, Unibic, states on the box that “4% of sales (revenue) go to the RSL (Returned and Services League).” This reminds me of Newman’s salad dressings, which advertise that all profit goes to charity.

It’s not clear which method would provide more money for charity generally, but I prefer the percent of revenue approach—it removes any incentive to raise costs (executive pay, for example). Either way, though, it’s nice that a few companies support charity so well and so openly. What other examples are there of products that support charity? And which method (percent of revenue or profit) is preferable?


Should We All Just Give Cash Directly to the Poor?

Silicon Valley heavyweights like Facebook co-founder Chris Hughes and Google have a new favorite charity: GiveDirectly, an organization that makes direct transfers (via M-Pesa) to poor people in the developing world. From Forbes:

“Instead of building hospitals, why don’t we just give poor people money? Research shows it’s effective,” [Hughes] said. Hughes, who purchased The New Republic magazine in early 2012 and serves as publisher, also joined the board of GiveDirectly.

Backing up Hughes’s point was Jacquelline Fuller, Director of Giving at Google. She told the crowd Thursday night that one of her superiors at Google was extremely skeptical when Fuller first suggested that Google back GiveDirectly. “I was told, ‘You must be smoking crack,’ ” Fuller recalled. But GiveDirectly had exactly what Google wanted: lots of data on how the recipients of cash used it to improve their nutrition, their health and their children’s education. After looking at the data, Google donated $2.5 million to GiveDirectly.

GiveDirectly stems from economist Paul Niehaus‘s research in India, where to limit corruption the government  makes direct cash transfers via mobile phones.  “A typical poor person is poor not because he is irresponsible, but because he was born in Africa,” says Niehaus, adding that GiveDirectly’s transfers have had positive impacts on nutrition, education, land, and livestock — and haven’t increased alcohol consumption.  The charity is also No. 2 on Givewell’s list of recommended charities.

(HT: Marginal Revolution)


Question of the Day: Should I Feel Guilty About Not Supporting Public Radio?

We recently ran a listener survey for Freakonomics Radio. Among the interesting findings: only (or should that be “only”?) 18 percent of the respondents are members of a public-radio station. A reader named Steve Cebalt wrote in to ask about the nature of public-radio membership:

So it’s pledge week at my local public radio station, when they interrupt my favorite news programs with appeals for money. Funny, I used to be on the board of directors of this station, so I have a great appreciation for it.

But I am not a member. I don’t pay. I am supposed to feel guilty, but I don’t. You know why? 

Because I am not really causing a negative externality on others — am I ?

Whether I listen or not, they’ll still broadcast right? And others contribute freely of their own volition. So is anyone harmed if I listen (or don’t listen) without donating?

I’d love to see your blog readers rip into this question from a Freakonomics perspective: 

So go ahead, people. Rip. Remember everything you’ve ever thought about free-ridership,  slippery slopes, and critical mass on issues like voting.


An Economist's Guide to Year-End Charitable Giving

The end of the year is a giving season for many (I suppose a cynical economist might think tax deductions has something to do with it).  Most of us like to make sure we’re making well-researched and wise decisions when it comes to our money, be it reading the online reviews before a purchase or investing our savings. By contrast, donating to charities can seem like a “black box.”  Many of us our rely on what feels right or seek out an organization in an area we have a personal connection to, but examining some bad habits about charity giving might help make sure our dollars go farther this giving season.

Bad Giving Habit #1: Choosing based on low overhead and fundraising expense ratios

Administrative expenses tell you nothing about if the charity’s work actually does anything, or if it does, how much good it does. The proper question to ask should be “for every $1 I give, how much good is generated?” and not care about how the sausage is made. Different organizations might have different business models, and two organizations might approach the same problem, say clean water in poor villages from two different approaches – perhaps digging new wells versus cleaning existing water sources. Don’t ask who spends less on expenses like copier toner and legal costs, ask which organization will get clean water to the most people with your money. I went into this in more detail in a post a while ago, and when I compared charities’ ranks on a site that rank using overhead ratios, to a site that does thorough research on effectiveness, organizations that were rated as more effective also tended to have slightly higher expense ratios.


Charitable Giving: Why Fewer Is More

December is the holiday giving season for many, but there are a lot of charities competing for your dollars, and it can be hard to know where they will do the most good.

I’ve written before about why you should be wary of sites that rank charities by administrative expenses. It tells you nothing about if the actual effectiveness of a charity’s activities. The recent Freakonomics Radio episode “Free-conomics” also pointed out that many charities themselves don’t even know if what they’re doing actually works.  This was one of the reasons I founded a non-profit which carries out research around the world to find out exactly which efforts to fight poverty work best. 

As well as choosing which charities to support, we also make choices about how we support them. Often overlooked, this choice can be just as important in influencing what our money actually achieves. Below, two experts in philanthropy, Caroline Fiennes and Phil Buchanan, explain one crucial effect of how we give. Fiennes is the founder of Giving Evidence and the author of It Ain’t What You Give, It’s the Way That You Give It: Making Charitable Donations That Get Results. Phil Buchanan is president of the Center for Effective Philanthropy. 


Free-conomics (Ep. 103)

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:


Cheating for Charity

New research indicates that people may be more likely to lie when a charity benefits from their dishonesty. A group of researchers led by Alan Lewis at University of Bath investigated this in their paper “Drawing the line somewhere: An experimental study of moral compromise” (ungated here). From the paper’s abstract: 

In a study by Shalvi, Dana, Handgraaf, and De Dreu (2011) it was convincingly demonstrated that psychologically, the distinction between right and wrong is not discrete, rather it is a continuous distribution of relative ‘rightness’ and ‘wrongness’. Using the ‘die-under-the-cup’ paradigm participants over-reported high numbers on the roll of a die when there were financial incentives to do so and no chance of detection for lying. Participants generally did not maximise income, instead making moral compromises.


John List Explains Why Lotteries Are in Fact a Good Fund-Raising Mechanism

We recently ran on a post on a reader’s query about the economics of a 50-50 fund-raiser. John List, the University of Chicago economics-of-charity wizard (related podcast here), wrote in with a comment:

The intuition of the reader is slightly off.  Although not directly a 50-50 charity drive, we have explored the efficacy of lotteries both theoretically and empirically.  As John Morgan (from Berkeley) has elegantly shown, under standard assumptions (no risk-loving or lottery-loving behavior is necessary), lotteries outperform the simple ask (what we call a VCM).  Lotteries obtain higher levels of public-goods provision than a voluntary contributions mechanism (VCM) because the lottery rules introduce additional private benefits from contributing.


Not Humanly Possible, Is It?

Close your eyes. Imagine what it would feel like to run a marathon. Now imagine that you’ve run not just one marathon, but two marathons in a single day. Seems crazy. Now imagine you’ve run two marathons in a day, every day, for 10 months straight without a day off!

Meet Pat Farmer. He’s an ultramarathoner from Australia who is in the process of running from the North Pole to the South Pole. He covers 50 miles a day, except when he is using snow shoes near the poles. He only manages 16 miles a day in snow shoes.


To Ask or Not to Ask: Experiments in Charitable Giving

Our recent podcast “What Makes a Donor Donate?” features economist John List, who has concentrated his research on the science of philanthropy. In short, when it comes to convincing people to give, some ways are better than others. But what about just directly asking them?

A new study from authors James Andreoni, Justin M. Rao, and Hannah Trachtman examines the way people behave when solicited for donations by bell-ringers from the Salvation Army Red Kettle Campaign. The authors designed an experiment where bell-ringers were sent to a grocery store in suburban Boston, and positioned at either one or both of the store’s entrances.


Diversity and Charity: An Inverse Relationship?

Our latest Freakonomics Radio on Marketplace podcast, “What Makes Donors Donate?” looks at what works (and what doesn’t) to incentivize people to give. A new NBER working paper studies the relationship between religious and ethnic diversity and charitable donations by looking at Canadian census data and tax records. Authors James Andereoni, Abigail Payne, Justin D. Smith and David Karp argue that the two are inversely related, that is to say that the more diverse a neighborhood, the lower its charitable donations. From the abstract:

A 10 percentage point increase in ethnic diversity reduces donations by 14%, and a 10 percentage point increase in religious diversity reduces donations by 10%. The ethnic diversity effect is driven by a within-group disposition among non-minorities, and is most evident in high income, but low education areas. The religious diversity effect is driven by a within-group disposition among Catholics, and is concentrated in high income and high education areas.


Bargain Hunting for Charities

Gosh that sounds so stingy. When we are charitable, we don’t want to be cheap. This is our moment of giving, of generosity, not bah-humbugness. Alas, that is exactly what we should be. If we go to a restaurant for chicken wings, what would you think of the following prices:

4 chicken wings: $8
6 chicken wings: $8
8 chicken wings: $8

Which would you opt for (assuming more is always better)? Naturally, it shouldn’t require much thought. So why not apply this to charity?

This is what Givewell does. (And I’m pleased to say, you can see the imprint of lots of research from Innovations for Poverty Action on their assessments and recommendations). You may remember I blogged about Givewell over the summer, and how there is no correlation between their assessment of organizational effectiveness and the horrid measure often used by those in search of a good charity, “general administrative and fundraising expenditures as a proportion of program expenses.”


How I Know I Love My Wife

A year ago, my wife said to me, “I need you to do me a favor.” I knew that was bad news. A charity she is heavily involved with, Half the Sky, was planning an event in Chicago and she had volunteered me to be the speaker.
In principle, this was no big deal. I speak in front of groups all the time. I can talk about Freakonomics, SuperFreakonomics, and my academic research in my sleep.
I knew immediately, however, that this speech would be completely different. Although I often tell stories about myself and my life, they are never stories about emotions. I am one of the most closed off people you’ll ever find when it comes to emotional topics. I have never learned, or really even tried to learn how to express emotions. I’m not proud of this, it just is the truth.
There was no way, however, that I could speak at a Half the Sky event without opening up my emotions. Half the Sky is an amazing charity – perhaps one of the world’s best – doing incredible work with Chinese orphanages. The only events that ever fully penetrated my emotional wall were the death of my son Andrew and the subsequent, deeply moving process of adopting a daughter (eventually two daughters) from China. More than a decade later, the emotions associated with these two events remain shockingly raw, hiding just below the surface.


How to Improve iPhone's New Charity Snooze App: Pick an Anti-Charity

A new iPhone app links your alarm clock snooze button to your wallet. Every time you hit snooze, you pay. To be precise, 25 cents goes to charity. Whilst I admire the charitable impulse and the entrepreneurialism here, I do wonder how effective this commitment device will be. A quarter isn’t a lot. Particularly when in a deep slumber. And the money goes to a good thing. Two slight twists on this app would intrigue me:
1)      The anti-charity. A popular option at stickK.com (disclosure: Ian Ayres, fellow Freakonomics contributor, and I are co-Founders of stickK.com), is to pick an “anti-charity” such as the Bush or Clinton Presidential Libraries, depending on your particular persuasion (those in the UK can choose their most despised football team).
2)      The reverse: Donate if you do NOT press snooze. Set a goal for money to raise for a charity you love. Every day you do NOT press snooze, you add money to your “to donate” pot. (Yet another disclosure: this would thus work similarly to the American Cancer Society’s http://www.chooseyou.com campaign, which is powered by stickK.com).


More Misadventures in Foreign Aid?

Last week CNN told the story here and here of Derreck Kayongo, a refugee from Uganda now living in Atlanta. His father was a soap-maker, and Mr. Kayongo is following in his footsteps, but with a nonprofit twist: he cleans and reprocesses discarded used soap bars from American hotels and ships them to Africa. He started the Global Soap Project, a U.S.-based non-profit organization, to do this.
An inspiring story of someone trying to turn waste into something good. That of course is great, and I like the ingenuity. And I admire how Mr. Kayongo has managed to navigate both the nonprofit and corporate space to figure out how to mobilize people to contribute the soap, and to coordinate delivery to people in need.
But is the best solution here really half-used soap?


Why Ranking Charities by Administrative Expenses is a Bad Idea

How does one know whether a charitable donation will make an impact? For this we need a simple formula (easy to write, hard to apply):

Idea X Implementation = Bang for your buck

When I give talks about aid effectiveness, people often comment that they too think this is important. And to make sure they are supporting good charities, they always hone in on the charities’ finances to see how much goes to administrative and fundraising expenses. Charity Navigator, for example, scrubs these numbers and doles out stars to charities that don’t spend “too” much on operations.
Given the title of my book with Jacob Appel, More Than Good Intentions, many assume that they are speaking my language, and that I admire such focus on those numbers too.
But I do not. Those numbers do not tell you what is really happening.


Winners of Heart + Mind Donations Contest

Earlier I ran a contest for two free copies of More Than Good Intentions. The quick summary: we ran a randomized trial to test whether employing the use of statistics, and worse yet scientific evidence, would raise more or less money when added to a standard emotional appeal in a direct mail marketing solicitation for donations for Freedom from Hunger (a charity I respect and do research with). We split the analysis by size of prior gift. The Freakonomics contest then asked two questions:


Deciding How to Decide: Taste-Matching Or Expert-Based?

This blog post is co-authored with Jacob Appel, co-author of my recent book, More Than Good Intentions.
Among the many questions David Gomberg and Justin Heimberg pose in their hilarious book Would You Rather is the following:

“Would you rather…
Become increasingly intelligent with the consumption of alcohol, but also become increasingly convinced you are Gloria Estefan
OR
Have a firm grasp of Roman numerals but look exactly like Weird Al Yankovic?”

Well, that’s a tough one. Seriously. It’s a classic problem of apples and oranges—or maybe, given the absurdity of the alternatives, a problem of apples and, say, cut-off jeans shorts—two things that are thoroughly incommensurable. Fortunately, those are not real choices.


Heart + Mind? Or Just Heart? Experiments in Aid Effectiveness (And a Contest!)

When signing our book, More Than Good Intentions, Jacob Appel and I often sign “Heart + Mind = Good Giving.” Nobody argues with the premise that we should act with compassion, but be smart about it. Of course nobody would ever say they do not care about the effectiveness of the charity they support.
But in practice, does evidence about charitable effectiveness impact donations? Or does the presentation of dorky evidence turn off the emotions that cause us to donate in the first place?


Ten Reasons Why I Would Never Donate to a Major Charity (How to Be a Superhero, Part 2)

“Giving to Charity” is another myth we fervently uphold as part of the Great American Religion — just like “own a home” or “send your kids to college.” It’s time we stop blindly believing in mythology. I’m not saying don’t give. I’m not saying don’t be spiritual or don’t be good. But do it with thoughtfulness, with true spirit, with a true desire to help. More harm than good is done when you blindly throw money at most charities.
When the first version of this article came out (“How to Be a Superhero…or Why I Would Never Donate to a Major Charity”), I got a lot of criticism. So I’m going to answer some of the criticisms/questions that arose and I look forward to any comments or further suggestions.


How to Become a Superhero (Or…Why I Would Never Donate to a Major Charity)

A few years ago there was a story in the N.Y. Post about a boy who had been locked in a closet almost from the time he was born until he was about fifteen years old. I might not have the exact details right. His parents fed him food but never let him out of the closet. So he never grew properly and he was only about 80 pounds or maybe less. The authorities took him away and put him in some sort of home for abused kids. His parents were arrested and are presumably now in jail.


Japan: To Give or Not to Give?

In the wake of Japan’s tragic earthquake and tsunami, Felix Salmon argues against donating to the cause. Salmon cites concerns about the hobbling effects of earmarked funds, uncoordinated NGOs, and Japan’s wealth.


Does Swipegood Lead to More Charitable Giving?

Dean Karlan is a professor of economics at Yale; president and founder of Innovations for Poverty Action; a research fellow at the M.I.T. Jameel Poverty Action Lab; and co-author, with Jacob Appel, of More Than Good Intentions. He’s guest-blogging for us about charitable giving. This week, he writes about Swipegood.