Do anonymous donors signal higher status?

by on May 30, 2013 at 6:01 am in Economics, Uncategorized | Permalink

Here is a summary of some recent work by Mike Peacey and Michael Sanders:

New research that studied why people choose to make large donations to charity anonymously has found that it may act as a signal to other donors of the charity’s quality. The findings, published today, also show that anonymous gifts rather than public ones induce larger donations from subsequent donors.
…the researchers indicate that the reason why a person may choose to show the amount they have donated but conceal their identity is because it may act as a signal informing others looking to donate of the charity’s quality and worthiness. Knowing this to be the case, a who wishes to see the charity succeed may intentionally choose to keep their identity private.
But why the anonymous donation serves as such a signal remains unexplained.   Is it “this venture is so well-known I know my identity will be discovered anyway and then I will look all the more noble?”  Or is it “this venture is so high quality I value it for intrinsic reasons and do not require the publicity of affiliation”?
I find this result not surprising:

The findings also reveal that early donations are more likely to be anonymous than later ones, particularly for the first to a fundraising page.

If an anonymous donor gives early, there is a feeling of having “birthed” something.  Someone giving at the end may be more likely to expect a direct reputational benefit from the gift.
The paper itself is here, and do note that this result may be context-specific and it should not be taken to have any direct bearing on the more recent political disputes about anonymous donations.  For the pointer I thank William Benzon.

1 freestyle May 30, 2013 at 6:18 am

Larry David hit on this point a while ago:

http://www.youtube.com/watch?v=gqncCjxGqGw

2 Ethnic Warfare, Gullible White Cattle May 30, 2013 at 8:54 am

All wrong. There are two types of donors. Individualists, primarily white Billionaires (Gates, Koch) who do it for their own vanity or to cuckold for other ethnic groups, mainly Jews.

The second type is the ethnically motivated donors who dont care about looking “noble” Or “birthed” something.

These ethnically motivated donors are Jews (Adelson, Singer, Zuckerberg), Blacks (Opra), Hispanics, Asians who are aggressively advancing their interests, their fertility, their territory at the expense of white people.

3 Dan Weber May 30, 2013 at 12:29 pm

Please be Poe’s law, please be Poe’s law . . .

4 JBold May 30, 2013 at 6:22 am

Is there any human action to which Man does not assign meaning beyond first-level signification?

5 dan1111 May 30, 2013 at 6:43 am

In the Judeo-Christian tradition, humility and self-sacrifice are held up as ideals. Doing good anonymously is considered more virtuous than doing good while receiving beneficial recognition, because it is indicative of these ideals. The paper opens with a quote to this effect from Maimonides, but then immediately ignores it as a potential real motivator for people’s actions, which I find incongruous and bizarre.

I think people mainly give anonymously because they believe in this ideal of selflessness and either

1) Believe being a good person is a worthy goal apart from any recognition, reward, or observable consequences. or

2) Believe their actions are seen by a higher power and will be rewarded in the future.

To me, this makes a lot more sense than a tenuous, convoluted theory about signaling.

6 Artimus May 30, 2013 at 7:30 am

I agree.

7 Sigivald May 30, 2013 at 7:02 pm

I mostly agree, but think we can’t ignore signaling behavior as an additional factor.

After all, people who believe #1 won’t mind if someone “accidentally” reveals their identity.

And people who are in category #2, specifically with the idea that actively renouncing the worldly fame of a named donation is more favorable, will be mildly annoyed at a revelation, but are secure that God won’t care as long as their personal actions were in good faith about anonymity.

Thus the incentives seem to align towards rewarding identity leaks…

8 Curt F. May 30, 2013 at 8:00 am

This explanation has the virtue of simplicity, but can it explain all the data? “The findings also reveal that early donations are more likely to be anonymous than later ones, particularly for the first to a fundraising page.

9 Rahul May 30, 2013 at 8:12 am

Somehow the big, early, anonymous donation on fundraising pages reminds the cynical me of hustlers and panhandlers who’ll do better if they themselves put a bit of seed capital into the hat.

10 dan1111 May 30, 2013 at 8:13 am

No, some other explanation would be needed for that.

Still, I think the signaling explanation is simply untenable in my opinion. Its fatal flaw is that “anonymous donations are more likely to elicit further donations” has to be widely known for it to work. But does anyone know that? In fact, the paper itself is presenting that as a novel finding.

11 Rahul May 30, 2013 at 8:08 am

My vote is for neither signalling nor selflessness merely pragmatism: For many reasonably rich men it is simply annoying to attract any more attention to themselves. Nosy journalists, paparazzi and annoying solicitations for more donations etc. might be good reason in itself to stay anonymous.

Perhaps an IRS audit? Your employees and kin might also start expecting more from you. For a small subset, the increased risk of criminal targeting.

12 dan1111 May 30, 2013 at 8:15 am

I agree that for some people anonymity may be beneficial, and this may explain some of it. OneEyedMan touches on it, also. Another reason people may want to remain anonymous is if they are donating to a cause that is controversial or unpopular with their friends, employers, etc.

13 Rahul May 30, 2013 at 8:21 am

Yes, I was thinking of those potentially controversial causes.

Another plausible explanation for the early donations being anonymous, is that early-on the benchmark for what’s considered to be a decent donation hasn’t been set yet.

If I see 20 names I know signed on for approximately $100 then I am more confident of being non-anonymous. Early on I’ve more of a risk of seeming extravagant or miserly if my number sticks out as an outlier.

14 Judeo vs Christian May 30, 2013 at 9:54 am

its not judeo-christian. its judeo vs christian. throughout history. Jews are all about us vs them. As torah & Talmud teaches them. Christians are all about universalism. whats good for everybody. not that many christians havent done evil. but the act is different from the ideal.

15 dan1111 May 30, 2013 at 10:41 am

Do you know who Maimonides is, and have you read the quote from him in the paper?

16 Mike May 30, 2013 at 4:15 pm

I was going to go with a feeling that non-anonymous giving would seem gauche, like all the other rich people would look down on your for buying some charity recognition. If that’s a strong factor, presumably the ideal case would be to give anonymously and have the truth “leak” out later. How often are large anonymous donations leaked or uncovered, and is there any sign that that deters further anonymous giving?

17 OneEyedMan May 30, 2013 at 6:58 am

Traditional arguments on the merits of anonymous charity non-withstanding, my understanding of conventional wisdom in the fundraising community was that anonymous donations are typically by people so rich and powerful that they would be embarrassed by how small the donations are. But if those people then talk up the charity and ask their friends to donate then that induces follow on donations, not the anonymous donation itself.

18 Bob Knaus May 30, 2013 at 7:34 am

I was raised among a people who consider anonymous charity the only true form of charity. They quote the advice of a Jewish carpenter in this regard. Curiously, they call themselves “Christians”, but they seem far different from the stereotype. I doubt that most economists would know any of them.

19 zbicyclist May 30, 2013 at 8:20 am

Matthew 6
King James Version (KJV)
6 Take heed that ye do not your alms before men, to be seen of them: otherwise ye have no reward of your Father which is in heaven.

2 Therefore when thou doest thine alms, do not sound a trumpet before thee, as the hypocrites do in the synagogues and in the streets, that they may have glory of men. Verily I say unto you, They have their reward.

3 But when thou doest alms, let not thy left hand know what thy right hand doeth:

4 That thine alms may be in secret: and thy Father which seeth in secret himself shall reward thee openly.

20 Guy May 30, 2013 at 8:04 am

Maybe (in rare cases, probably) it’s that people with the means to make large donations can be polarizing figures. If I saw that someone whose views I disagree with donated to a certain charity, I might think twice about whether the charity’s goals are something I want to support. I would at least take a closer look.

21 RPLong May 30, 2013 at 8:16 am

Am I missing something? The point raised in the paper appears to be that anonymous donations inspire other people to donate more. It’s not about signalling higher status to the donor, but rather to the cause.

22 Guy May 30, 2013 at 8:32 am

My idea works that way. But rather than a positive signal, it’s the lack of a potential negative signal.

23 Cambias May 30, 2013 at 9:47 am

Anonymous donors are presumably motivated by actual philanthropy rather than ego-boosting or public relations. If a particular cause attracts anonymous donors, that strongly signals that the cause is worthwhile for its own sake, rather than as a vehicle for self-promotion. Others looking for a genuinely worthy cause will therefore support it as well.

In effect, anonymity becomes a “brand” for people who want to do good.

24 Doug M May 30, 2013 at 12:26 pm

How does this initial “seeding” of an anonymous donation influence other donors.

Suppose a group of volunteers decides that they want to buy the plot of land next to the senior center to crate a community garden, and it will cost $500,000 to buy the land, built the flower beds, buy soil, and plants.

If they announce the plan, people may say, I would support your cause, but I don’t think you are going to hit your goal. But, if they can say that they have a $100,000 pledge on day one, it may influence the psycology of other donors. If you found out that the $100,000 was coming from Daddy Warbux does your opinion of Daddy Warbux change your opinion of the value of the garden? I don’t know… perhaps.

Or, does the not knowing, and the speculation of who could it be, raise peoples interest? I suspect, that over history, there is enough data to show what the best way is to kick off a campaign. I know that it is important to be about 25% of the way to the goal before actually kicking off the campaign. I don’t know if there is data that shows that a large anonymous gift turns out to be an effective device as well.

Annother “trick” in the fundraising game is the challenge grant. If you give, your gift will be matched dollar for dollar up to $100,000. Nearly everyone in the fundraising game know that the challenge grantor will give the full 100 k whether or not the challenge is fully met, but it is considered to be an important motivator.

25 dirk May 30, 2013 at 12:52 pm

I take this to mean that the public is cynical, in general, about a donor’s motivation. Here’s the model:

People view most donations as paid advertisements for the person donating. That doesn’t invalidate the cause, but it doesn’t validate it either. An anonymous donation (unless Larry David is right) is the exception to the rule, and signals that someone has been motivated entirely by the cause, not the desire to self-promote, validating the cause.

26 dirk May 30, 2013 at 12:56 pm

Now I see that I wrote basically the same thing as Cambias above.

27 Stephen Carter May 30, 2013 at 7:21 pm

Let’s pursue a slightly different approach. Although we don’t know as much as we might wish about how people make the initial choices of which charities to support, it’s a safe assumption that many donors give publicly because to do so enhances their reputations. Suppose I am generally one of these — that is, I give in part to burnish my own image. I will therefore be more likely to give to a charity viewed as prestigious (e.g., the hospital, the opera) than to one viewed as less prestigious (e.g., the soup kitchen). Now suppose that for my next donation I have a choice between two equally prestigious charities, A and B. A allows me to set the terms of my gift; B requires that the gift be anonymous. Presumably I will give to A.

Why then would I ever choose to give to a charity in a situation in which I can gain no reputational capital? The gift is obviously more expensive for me, as I get less in return. Therefore I must believe deeply in the work of the charity. That is, I am deriving enough satisfaction from the identity of the group I am helping that I am compensated for the added prestige I am forgoing.

Therefore, when the next potential donor comes along and sees my anonymous gift, he will say, “Wow! They must do really good work if they can get anonymous support at that level! I think I’ll give, too!” And so it goes.

But the later donors want the additional reputational capital that comes from supporting a charity that is so wonderful that others support it anonymously. Therefore they must support it openly, or they do not gain the benefit they are seeking.

(Note: This only works, of course, if I already know that anonymous gifts signal future donors to give more. Otherwise I will make my donation openly, and enjoy the satisfaction of giving to the cause I strongly support and the added prestige from giving openly.)

(Also, just to be clear, I absolutely am not saying that the hospital or the opera is more important than the soup kitchen. But it is my experience that big donors tend to see things that way.)

28 Stephen Carter May 30, 2013 at 7:22 pm

Like Dirk, I must concede that this is just a longer version of the excellent point made already by Cambias.

29 Alan May 31, 2013 at 8:31 am

When I donate, I donate anonymously if possible. I am discouraged from donating if it cannot be done anonymously. It never occurred to me that I might be signalling anything to anyone. I keep it anonymous because how I spend my money is none of your goddam business.

I should not have been surprised to find that libertarian economists have no mental construct corresponding to a normal person’s concept of altruism.

30 Michael June 1, 2013 at 7:58 pm

As “Guy” mentioned, it’s more likely that follow-up donations are likely to be preceded by anonymous ones.

Ie – if Bill Gates gives to a charity, my secondary donation isn’t as important.
But if anonymous gives a donation, my secondary donation gives the organization someone to thank.

Even baser terms:
New organization A receives two $50,000 donations. One donation is anonymous. The known donor is publicly lauded for supporting this $100,000 organization (which cost him only $50,000)
New organization B receives two $50,000 donations. Both donor’s share the spotlight of supporting this $100,000 organization.
Generally, a solo spotlight is better, hence why organizations first started anonymously are more likely to receive a follow-up donation.

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