« A tale of two pueblos | Main | The real Swedish jobless rate is 15 percent »
John List and the economics of charity
Here is my New York Times column today. The focus is on how we often make bad charitable decisions. Excerpt:
...before we can improve our charity, we must first understand it. John A. List, an economist at the University of Chicago, is studying fund-raising campaigns toward this end. Professor List, combining his career as a researcher with a role as part-time consultant, introduces variations into real world fund-raising campaigns and studies the results. This reflects his core method of the "field experiment," which he has applied to topics as diverse as competition between the genders, how contestants cooperate on television game shows and how markets work in baseball card trading. Steven D. Levitt, co-author of "Freakonomics" and a colleague at the University of Chicago, refers to Professor List as the young economist most likely to win a Nobel Prize.
Here is another bit:
For purposes of contrast, Professor List and his team then increased the attractiveness of the woman who asked for the money. The more attractive women (a "one standard deviation increase in attractiveness," in statistical terms) had as big a positive impact on giving — in the range of 50 to 100 percent — as moving from the least successful fund-raising method to the most successful.
Posted by Tyler Cowen on June 15, 2006 at 06:51 AM in Economics | Permalink
Comments
Seems clear to me that government should take over the charity business.
Posted by: theCoach at Jun 15, 2006 9:56:15 AM
Three questions. (1) How did these five guys measure a one standard deviation in attractiveness of females? (2) How much time did they spend on this particular part of their research? (3) Do their wives/girlfriends know about this?
Posted by: Jim Garland at Jun 15, 2006 10:07:08 AM
How did these five guys measure a one standard deviation in attractiveness of females?
Seems pretty straightforward. Have a big bunch of guys rate pictures of women- from 1
to 10- on attractiveness. Get the mean for each woman- that is her "attractiveness".
Calculate the variance across the entire set of women. You now have the standard deviation.
Posted by: Jim Clay at Jun 15, 2006 11:48:33 AM
A question and a slight change of direction: I am interested not only in the efficiency of charitable giving but in the ethical arguments for charitable giving by/to persons of a libertarian tendency. Is there ever a case in which a person of that tendency should give to charity? Or is giving simply supererogatory?
Without giving very large contributions, a contributor will not be rewarded with a sense that the donation has furthered the contributor's purposes. It's sort of like voting. Might it be irrational to give to charity? Or does participation in charitable giving and furtherance of charitable ends (I don't want to get into what counts as "charitable") have some value that libertarians can share?
Posted by: dennis j tuchler at Jun 15, 2006 12:52:18 PM
"Without giving very large contributions, a contributor will not be rewarded with a sense that the donation has furthered the contributor's purposes."
How could you know that?
Posted by: Noah Yetter at Jun 15, 2006 1:54:38 PM
So, if the donors' goal is not the same as Tyler Cohens goal then donors are behaving irrationally. Is this coming from an economist or a moralist? In some cases the donors' goal may be to feel good by being generous. And giving to charities is a perfectly legitimate means to attain that goal. What Tyler wants to do is substitute his value judgement or goal of "improving the world" for those of donors value judgement of being genereous and felling good about it. He thinks that if donors do not adopt his values then they are being irrational. But, the economists role is not to tell others what their values should be! This is the realm of the philosopher and moralist.
Posted by: tom at Jun 15, 2006 2:18:48 PM
Keep in mind that this is only talking about small donations. Donors who give substantially give because they feel invested in the project, and care about it. Feeling 'good' about themselves is FAR down the list.
Posted by: andrew at Jun 15, 2006 4:46:03 PM
Apparently sex not only sells, it gives.
Posted by: Stretch at Jun 15, 2006 4:52:06 PM
To quote: "The philanthropic sector is showing a growing awareness of these sorts of institutional failures, so initiatives are under way to improve their performance. The Robin Hood Foundation in New York City pledges that its board will cover all overhead expenses; remaining donations go to antipoverty programs. The charity College Summit raised $15 million by going to Wall Street with a plan for growth and fund-raising, much as a venture capitalist might do. Geneva Global encourages donors to think of themselves as investors; it measures and reports results for each of its programs." This entire article was simply a way to plug applying these approaches (or mindset) to funding in the nonprofit sector. There is no data that any of these approaches actually help the nonprofits (which actually do the work) more effectively carry out their missions. It's anecdotal. Many of the trumpeted "new" approaches have been around for decades and are now being marketed as venture philanthropy (by the way, a term that one of the Rockefeller's used in the 60's to describe their approach to giving). Sometimes having Jack Welch come in and centralize the NYC school system works; sometimes it's just interference and it must be undone (see recent press). After all, how do you "solve" the problem of poverty? How do you measure success when treating alcoholism (why does a "ROI" even apply)? Moreover, why would a donor who is not expert in a subject know better than people with specialized training? This doesn't mean that not-for-profits shouldn't evaluate results, and good ones are smart about what is measurable and what just increases administrative overhead. I'm very glad that there are new voices coming to the table that think they are discovering new ways to give. But a little modesty would make many more allies in the sector and thereby further the author's aims. (Also, what does it mean to have no overhead? Why is that such a good thing? Why should people be encouraged that work is for free? How is rent paid for? Who is hired to input all the data into the smart new spreadsheet that will help turn schizophrenic homeless vets into the hedge fund managers?)
Posted by: will at Jun 15, 2006 10:59:57 PM
Great article! I am not sure, however, that high administrative costs indicate that donors are behaving irrationally. Rather, donors may prefer high administrative costs because such spending allows donors to capture greater private benefits from their contributions.
This was the case at my university while I was an undergraduate. Following a large donation, the university ramped up efforts to publicize the donation. Along with a name-change came elaborate new signage, stationary featuring the logo, and even a wardrobe (with appropriate embroidered logo). I am not sure anything was left to support research or education! Surely, however, the donor approved – even insisted upon – these “high” administrative costs. Generally, many costs may benefit donors as well: diners, social events, plaques, publication of sponsor lists, etc. This may be inefficient charity, but caters meets the demands of the paying “customers.”
In any case, I think it is too soon to deduce donor irrationality.
Posted by: blink at Jun 16, 2006 12:39:12 AM
It seems to me that one of the reasons donors fail to investigate whether their charitable dollar is being spent wisely is because of the considerable costs in obtaining information on a given charity. Put simply, the search cost is too great.
To encourage greater efficiency in the charitable sector, we need mandatory, uniform disclose and annual reports, very similar to that required of the private sector (and indeed the prospectus, referred to in the title).
Mandatory reporting of the outcomes of charitable work will add a small cost to the organisation in order to gather the information, but will have significant benefits for the efficiency of the sector by allowing donors to know which charities do their job effectively and which ones don't.
Posted by: Ari at Jun 16, 2006 2:20:24 AM
Great article and I agree with Ari's comment - the central problem seems to be: lowering the search costs of figuring out exactly where my money is going and the efficiency of my donation. Hopefully charity rating agencies like Guidestar (www.guidestar.com) can help -- they have a 5 star system to indicate the effeciency on thousands of 501c3 non profits here in the U.S.
More interesting are brand new philanthropy models that capitalize on the sentiment: "I want to know where my money is going and exactly how it helps". The best example I can think of is Kiva (www.kiva.org), which let's you loan directly to a low income entrepreneur in the developing world. Because you get your money back (at 0% interest) and still help a specific low income business, it's the ultimate in transparency and accountability.
Hopefully, we'll see other models like Kiva.
Posted by: Premal at Jun 19, 2006 1:48:54 PM
Without trying to justify their donors’ behavior, there may be some good explanations. Over half of all charitable gifts to to religious organizations and schools – typically, the donors’ own congregations, alma maters or schools for their children – and most other gifts go to organizations with whom donors have had some experience or contact. In most cases, donors likely feel they have enough information about the organizations to make a decision. We might find most people who buy stock have a similar level of knowledge about the companies in which they invest. Finally, even the most financially sophisticated donors apparently make large gifts without trying to quantify the effectiveness of the charities they support – as reported in “Why Measure?,” in the Stanford Social Innovation Review in Summer 2004 (http://www.ssireview.org/articles/entry/why_measure/), a study of major donors of over $50,000 found that information about performance measures did not influence their decisions to give, and in fact, they were skeptical about the feasibility of getting reliability information on outcomes.
Ari’s post about the need to bring down search costs is correct. In fact, whether nonprofits really are making a difference is exactly the right question everyone who cares about private action for public good should ask. Unfortunately, it’s a very difficult question to answer. I think it’s likely that the cost of reducing the search costs is not something anyone wants to pay. Assessing the value of a charitable organization’s work is difficult because it involves so many intangibles. (Anyone interested in the difficulties of quantifying outcomes may want to look at what the evolution of the Roberts Enterprise Development Fund’s efforts to calculate the “social return on investment” of its grants, at www.redf.org.) The for-profit world is supported by a billion dollar industry dedicated to providing information to investors, a universe of outside analysts dedicated to calculating value, serving a large market of investors and institutions willing to pay for that information. And still, there is no shortage of bad investment decisions and wasted resources, and many commentators lament the sometimes distortive effect that pressure to “make the numbers” causes. The nonprofit world has no equivalent analysis infrastructure, unfortunately (maybe in large part because either no one wants to pay for that analysis, or perhaps, people conclude rationally that the cost of deriving that information exceeds the benefit). I wouldn’t expect much from the rating systems or from Guidestar; they’re such blunt instruments. So the burden of proving value falls on each nonprofit organization itself, where the need to measure performance must compete with other pressing needs for a share of inadequate resources.
One final key point: In contrast to grant making by individuals, institutional funders such as private foundations, corporations and government agencies, typically require much more information and paperwork from grantees than the size of their grant should require. The cash crunch and administrative burden that come with government contracts, in particular, are perennial issues in the nonprofit world. While reducing these transactional costs would be a long shot, doing so would unlock a huge reserve of energy for nonprofits to direct toward meeting their missions. This is a subject for another series of articles entirely.
I sent a letter to the editor making similar points, but it probably won’t be published, and then a few days later I found this blog. I was very hesitant to post here, since I’m not an economics expert, but the nonprofit world really needs help solving the challenge of proving value from the best people.
Posted by: Pete Manzo at Jun 26, 2006 3:36:04 PM
grote tieten porno ^^^ tieners thumbnails ^^^ nice fighette ^^^ ritirarsi studentessa ^^^ formidable video ^^^ sexy sequence ^^^ strip tease vingt deux ^^^ fils perles ^^^ studentessa bionde inculate ^^^ favoloso amatoriali merda ^^^ dandy lesbisk dubbel fitta samlag ^^^ svag flickor asna till mun ^^^ friendly giovane gruppo ^^^ indescrivibile agente di polizia strip ^^^ ejaculation faible transsexuelles ^^^ enorme verge sexe ^^^ ematin tuntuu orgasmi ^^^ lesbien huora masturbating ^^^ hetere kjempeflott jomfru ^^^ kjolig sentimental kysk ^^^ kjekk kysk ^^^ djerv videoer ^^^ zesto souideza praxi ^^^ geladarisa skata sta skalia ^^^ plus froid photos ^^^ quarante intermediaire ^^^ tolmiros astinomikos ^^^ tolmiros geladarisa ^^^
Posted by: levan at Sep 8, 2006 6:05:57 AM
Hello all really cool blog
alprazolam drug fioricet drug hydrocodone drug vicodin drug tramadol drug xanax drug valium drug ultram drug soma drug carisoprodol drug ambien drug ativan drug lorazepam drug propecia drug adipex drug didrex drug cialis drug levitra drug paxil drug meridia drug viagra drug wellbutrin drug clonazepam drug xenical drug prozac drug butalbital drug phentermine drug
buy cheap ativan online buy cheap adipex online buy cheap didrex online buy cheap levitra online buy cheap cialis online buy cheap phentermine online buy cheap soma online buy cheap tramadol online buy cheap diazepam online buy cheap carisoprodol online buy cheap meridia online buy cheap paxil online buy cheap valium online buy cheap xanax online buy cheap ultram online buy cheap fioricet online buy cheap tooth whitening buy best online pharmacy generic alprazolam online buy best car insurance buy best payday loan search web directory search business directory buy carisoprodol buy hydrocodone cheap vicodin
Posted by: linda at Oct 9, 2006 7:59:01 AM
Posted by: at Oct 13, 2008 11:51:43 PM
Mabinogi Gold
Mabinogi online gold
Mabinogi money
cheap Mabinogi gold
buy Mabinogi gold
Posted by: aion kina at Mar 20, 2009 4:09:21 AM
