You are lucky enough to have some money to give away: It could be $100 or $1 million. Whether you are prepared to make a small donation or a big one, you would like to accomplish something good with it. But how do you evaluate the best way to deploy your money? Alas, economic research until now has offered little guidance. Nonetheless, a new intellectual and social movement — a loosely affiliated group of people who call their effort effective altruism — is encouraging donors to think more scientifically about philanthropy.
You are lucky enough to have some money to give away: It could be $100 or $1 million. Whether you are prepared to make a small donation or a big one, you would like to accomplish something good with it.
But how do you evaluate the best way to deploy your money? Alas, economic research until now has offered little guidance. Nonetheless, a new intellectual and social movement — a loosely affiliated group of people who call their effort effective altruism — is encouraging donors to think more scientifically about philanthropy.
From the standpoint of effective altruism, the problem behind a lot of charitable giving is that individuals often make donations without doing much analysis. They simply think the best of charities that interest them and accept at face value that these charities are doing a terrific job. Accountability is never considered.
To address this problem, GiveWell, a nonprofit organization dedicated to effective altruism, has been evaluating whether charities are solving important problems in a cost-effective manner. In addition, William MacAskill, one of the founders of the movement, has just published a book-length manifesto, “Doing Good Better: How Effective Altruism Can Help You Make a Difference” (Gotham Books, 2015). Although he is a philosophy professor at Oxford University, Professor MacAskill’s arguments rely on economic concepts. They include opportunity cost — comparing a given gift with relevant alternatives — and the notion of unintended consequences, since not all gifts bring the sparkling benefits that the donor expects.
What concrete advice does Professor MacAskill offer?
First, when there is a disaster and it is well publicized, your money may notbe urgently needed. In such cases, he says, there is typically more money being donated than the infrastructure on the ground can handle, as occurred after the Haiti earthquake in 2010. If we follow our immediate emotions, he says, the best intentions often do not produce the best outcomes. He also suggests that toiling in a high-paying job that isn’t itself socially useful and then making a big donation may be better for the world than quitting the lucrative job and volunteering for charitable work or joining the Peace Corps.
Second, don’t assume that charities with high measured overhead costs are necessarily bad; you would not usually discriminate against a commercial product on this basis, for instance. Sometimes effective aid requires a lot of back-office expenditures, just as a good medicine needs a trained sales force or Walmart relies on a large distribution network. Sometimes, he says, the most effective charities may spend a lot of money evaluating their own programs or even raising money for further investment.
Third, right now is an especially good time to give away money. Because some parts of the world remain so destitute, it may be possible to save a life for only a few thousand dollars of well-directed charity. That may not be the case in a future when the world is much wealthier and many fewer people live on the margins of subsistence. Professor MacAskill cites public health programs such as using drugs to rid people of dangerous worms, and eliminating malaria, as the Gates Foundation has tried to do.
Neither Professor MacAskill nor the effective-altruism movement has answered all the tough questions. Often the biggest gains come from innovation, yet how can a donor spur such advances? If you had a pile of money and the intent to make the world a better place in 1990, could you have usefully expected or encouraged the spread of cellphones to Africa? Probably not, yet this technology has improved the lives of many millions, and at a profit, so for the most part its introduction didn’t draw money from charities. Economists know frustratingly little about the drivers of innovation.
And as Prof. Angus Deaton of Princeton University has pointed out, many of the problems of poverty boil down to bad politics, and we don’t know how to use philanthropy to fix that. If corruption drains away donated funds, for example, charity could even be counterproductive by propping up bad governments.
Sometimes we simply can’t know in advance how important a donation will turn out to be. For example, the financier John A. Paulson’s recently announced $400 million gift to Harvard may be questioned on the grounds that Harvard already has more money than any university in the world, and surely is not in dire need of more. But do we really know that providing extra support for engineering and applied sciences at Harvard — the purpose of the donation — will not turn into globally worthwhile projects? Innovations from Harvard may end up helping developing economies substantially. And even if most of Mr. Paulson’s donation isn’t spent soon, the money is being invested in ways that could create jobs and bolster productivity.
In addition, donor motivation may place limits on the applicability of the effective-altruism precepts. Given that a lot of donors are driven by emotion, pushing them to be more reasonable might backfire. Excessively cerebral donors might respond with so much self-restraint that they end up giving less to charity. If they are no longer driven by emotion, they may earn and save less in the first place.
Still, those objections aside, it is hard to believe that Americans cannot improve their practice of philanthropy. In a world of high income inequality, we will have a much better future if donations from the very rich can bring some of the social benefits associated with the past generosity of Mellon, Carnegie, Rockefeller and others. And donations from less wealthy people can help a great deal if they are well directed.
Early in his book, Professor MacAskill considers the provocative hypothesis that the best man ever to have lived was a Ukrainian named Viktor Zhdanov. Working with the World Health Organization, Mr. Zhdanov called for a systematic campaign to eradicate smallpox. He presented a visionary plan, sold the organization on the idea and, by accelerating the end of smallpox, probably saved many millions of lives. If you haven’t heard of him, or haven’t thought of him lately, that’s evidence that the effective-altruism movement has something to offer. Even for small givers, a more rational approach to philanthropy can focus attention on areas that make the biggest enduring contribution to human welfare.