From the February 2016 issue of The Rotarian
The idea of trying to get the best value for our money should not strike anyone as strange. Would you be happy to learn that the high-priced dishwasher you purchased does not clean dishes as well as another brand that sells for half the price? To avoid such aggravating mistakes, people check online ratings and read Consumer Reports before making large purchases. Yet when donating to charity, most people do no research at all.
The variation in value for money that can be found among charitable programs is far greater than that among dishwashers. None of the dishwashers on the market costs hundreds of times more than a dishwasher that cleans just as well. If it did, the manufacturer would soon be out of business. Ineffective charities, on the other hand, continue to receive donations because donors do not demand hard information about the effectiveness of their programs.
Perhaps what those donors really want is the warm glow they get from simply knowing they have given to charity. Effective altruists, on the other hand, want to know they are doing the most good they can. They use reason and evidence to make sure their good intentions lead to the best possible outcomes.
When people take the time to research charities, what they learn is often not relevant to the effectiveness of the charity. They might check, for instance, what proportion of a charity’s revenue goes to administration and fundraising. A charity might have very low administrative spending because it has few employees – but without staff, it cannot monitor what its programs are achieving. It doesn’t matter that 90 percent of its revenue goes toward its programs if half of those programs do no good at all. On the other hand, a charity that spends 20 percent of its revenue on administration may have the resources to ensure that all of its programs are effective. If so, it will offer better value than the charity with lower overhead.
Many people, when choosing a charity to support, often donate to projects in their own communities. This is important. However, when those donors live in an affluent country, the poverty they are addressing is relative poverty – that is, relative to the affluence that typically prevails in that society. Even in the United States, which has more gaps in its welfare net than other affluent countries, even people who are poor have access to safe drinking water and free education for their children. Food stamps, on average, are worth about $4 a day – double the income of the 700 million people who live in what the World Bank considers extreme poverty.
That people in poor countries earn so much less than people in affluent countries makes a huge difference in our ability to help them. In the United States, a family of four will be below the poverty line if its total annual earnings are below $24,250. Suppose you give this family $1,000. They will no doubt find this helpful, but for a family of four living below the World Bank’s extreme poverty line, that $1,000 could make a much bigger difference. Independent researchers have tracked what poor families in East Africa have done with such a windfall. One of the most common things they do is to replace a leaky thatched roof with a tin roof. Then when it rains heavily, they – and their stores of grain – stay dry. They also save the cost of periodically replacing the thatch. They may have enough money left over to buy a cow or some chickens, or to start a small business. Of course, not all of them are so prudent. Some of them will just eat better for a year.
Testing effectiveness is important. Admittedly, it’s not easy to prove what kind of interventions lead, for example, to children doing better at school, but it’s not impossible, either. You can use the same methods that pharmaceutical companies use to test whether a new drug helps to cure a disease. They enroll patients with the disease in a trial. Half of them are selected, at random, to get the new drug, and the other half continue with the standard treatment or a placebo. If the patients who get the new drug do better, you know it is the drug that made the difference.
In many poor regions of the world, children, especially girls, often do not go to school even when education is free. Which of these strategies do you think would work best in increasing the time children stay at school?
- Unconditional cash transfers for girls
- Cash transfers for girls, conditional on school attendance
- Merit scholarships for girls
- Free primary school uniforms
- Treating primary school children for intestinal parasites
- Providing information to parents about how children who stay in school will earn more
All of these strategies look as though they might work, and, in fact, all have been tried. But without rigorous testing, it would be impossible to know which one works best. The Jameel Poverty Action Lab at Massachusetts Institute of Technology has done that testing and found that the last one on the list, providing information to parents about how children who stay in school will earn more, is the most cost-effective. Deworming, which is very cheap – one pill, costing as little as 2 cents, keeps a child free of the worms for a year – is also highly cost-effective.
The four other interventions turn out to give much poorer value per dollar. The cash transfers are particularly poor value, and whether they are conditional or unconditional doesn’t make much difference. The most effective method results in more than 200 times the benefits of the two least effective methods. To put it another way: For every $100 spent on one of the least effective methods, $99.50 is wasted.
Resources are always limited, especially in poor countries. Wasting resources means many children do not achieve their full potential. Testing different strategies isn’t cheap, but it’s a lot cheaper than spending money for many years on something that does no good at all.
I believe most people who donate to charity need to give more thought to whether the programs they support are effective and whether they are doing the most good they can with the resources they have available.
Peter Singer teaches bioethics at Princeton University. His most recent book is The Most Good You Can Do: How Effective Altruism Is Changing Ideas About Living Ethically.