The Effective Altruism cadre wants to tell you where to donate your money. They claim these recommendations are based on rationality, effectiveness, and efficiency and that any thinking person would agree with their rankings. It is easy to believe they have unlocked the secret to making the world a better place. But I don’t buy it.
I view myself as a thinking person who is rational and working to create a more efficient and effective social sector by helping organizations better use data. I should love the effective altruism movement! These should be my people. While I find them to be kindred spirits I think there is a major flaw with their thinking.
To understand that flaw I want to take you back to my Intro to Economics course at the University of Chicago. A couple of weeks into the quarter Professor Kerwin Charles stood at the front of the class and explained, “You have $20 and are going to a White Sox game. There are only 2 things to consume at a baseball game, hot dogs and beer. Hot dogs cost $3 and beer costs $5. How many hot dogs and beers will you consume?”
The answer to this question obviously depends on one of the most important ideas in economics: a person’s preferences. Some people want 2 beers for every hot dog, some people might want 2 hot dogs for every beer, and some might only want beers. Based on a person’s preferences (or utility function for you econ nerds) you can determine the point where they are most happy with the limited resources they have to spend. This is where their resources are allocated most efficiently and effectively.
Charity is about the same thing. We have many options for making the world a better place, i.e. organizations we can give to. We have limited resources, i.e. the amount of money we give to charity. The question is how do we allocate our limited resources across organizations to achieve the most good?
Just as we choose to allocate money across beer and hot dogs to achieve the most happiness, we choose to allocate money across charitable organizations to achieve the most good. That allocation is determined by our utility function, how we compare the various outcomes that organizations provide.
The Effective Altruism movement does a very good job at saying how we should allocate donations across organizations. What they don’t do a good job of is defining their preferences or sharing that their ideal allocations are based upon their preferences and therefore if you have different preferences you’ll end up with a different ideal allocation.
At its heart this comes back to the idea that it is very difficult to compare outcomes. Unlike financial returns where clarity is achieved because it’s dollars invested and dollars returned, in philanthropy the framework is dollars invested and outcomes returned. And those outcomes can be really different from one another. Donors can get increased test scores, decreased environmental harm, quality adjusted life years, or increased provision of arts education back as the return of their philanthropic investment.
The way we choose to allocate our philanthropic money then depends on our preferences, on how we decide to value each of these things against one another. How much do I value an acre of preserved forest vs an additional high school graduate? How much do I value providing access to an arts museum vs textbooks to rural African students vs food to a hungry family?
Donors should absolutely think through these questions critically. We should hold organizations accountable for outcomes. Our money should go toward entities that are effective and efficient, and we certainly need more information and tools to evaluate an organization’s impact. But we also have to account for the fact that donors have preferences and that is ok.
Whether you care about helping students graduate high school, reducing carbon emissions, or saving lives, give your money to the organizations that achieve that the best. As you think about where to direct your year-end giving, think about the outcomes you want to achieve then investigate the organizations that seem to deliver those outcomes the best.