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Think Tank

The Rationalist's Guide to Charitable Giving

What's the Big Idea?

'Tis the season for giving, rationally. According to Julia Galef, President of the Center for Applied Rationality, rational giving is not something we are naturally very good at, and as a result, our unconscious biases create negative consequences for ourselves and for society. Fortunately, we have tools to help us make better decisions. 

Here's one example (mine, not Julia's). There was an earthquake in Japan. Lady Gaga designed bracelets to benefit relief efforts. You may have bought one of those bracelets because, well, you like Lady Gaga and you wanted to help Japan. The $5 bracelet sounded like a great way to get a large number of small donors involved. 

However, where did all the money go? A class action lawsuit filed against Gaga asked just that, demanding a public accounting. While denying the suit had any merit, Gaga and her co-defendants agreed to a settlement in which they donated $107,500 to a charity that benefits the earthquake victims.

So what's the moral of the story? While Lady Gaga's well-intentioned efforts may have encouraged more people to give, her star power may also have had a negative effect. Could you have found a much better return on your investment elsewhere if your aim was to help the people of Japan? 

For the record, neither Big Think nor Julia Galef, advises anyone on what charities to give to. What we both are interested in, rather, is understanding the kinds of biases that impact our decisions and what tools we have for overcoming those biases. So to stick with the Gaga example, there is a reason celebrities make for effective fundraisers, as we have an emotional connection to them. Does that mean that we are too hopelessly star struck to apply sufficient rigor to our decisions to give to their causes? Of course not. In fact, we have some fairly simple and effective tools to use. 

According to Galef, you can make great improvements on the impact of your charitable giving by asking questions, such as:

  • What are the roughly estimated expected benefits of giving to this charity instead of that one?
  • What are the benefits of writing a letter to my congressman versus volunteering at a soup kitchen?

In fact, as Galef points out, you have a lot of charitable options that don't involve donating money. But however you wish to give, simply asking question "how do I compare expected benefits against each other?" is already "far more than most people just intuitively do when they want to help the world," Galef says.

Galef points to other tools you have at your disposal, including organizations that "spend their research budgets on weighing the effectiveness of different charities against each other." Galef recommends GiveWell.org.  

What's the Significance?

Americans give away more money than the people of any other nation. Isn't it time we got a better handle on how effective these contributions really are?

We picked on Lady Gaga earlier. Now it's time to turn our attention to the giant incumbent organizations that account for the lion's share of donations that follow natural disasters. These organizations' fundraising successes are in many cases due to strong brand recognition and a perception of credibility, a powerful fundraising apparatus, and, in the case of the disaster relief organization the American Red Cross, its unique designation as a Federally chartered instrumentality of the United States

The Red Cross is a complex organization with over a million volunteers and 30,000 employees. No one would say the job is easy. However, the organization has also found itself in the crosshairs following its responses to disasters such as 9/11, Hurricane Katrina, and now Hurricane Sandy. In fact, calling the Red Cross's Hurricane Sandy response an "absolute disgrace," Staten Island Borough President James Molinaro recently urged the public to stop donating to the organization.

Whether you choose to follow Molinaro's advice or not, it is reasonable enough to expect a higher standard of accountability. And yet, we have to understand that we only get accountability by asking tough questions. You can't just continue giving blindly and expect a better result. As Galef points out, the comparative approach is highly effective. If one charity gives you a very high return on your investment while another one delivers mere pennies on the dollar, what rational person would choose the latter instead of the former?

After all, as Galef reminds us, "society would look very different if rationality, rational thinking and decision making were widespread."

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Follow Daniel Honan on Twitter @Daniel Honan

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