Does greater charitable effectiveness spur more donations?

by on April 15, 2014 at 6:46 am in Economics | Permalink

Well, at which margin?  At current margins, not for all donors and it seems not for “warm glow” donors.  Here is a new paper by Dean Karlan and Daniel H. Wood.  Every sentence in the abstract is interesting:

We test how donors respond to new information about a charity’s effectiveness. Freedom from Hunger implemented a test of its direct marketing solicitations, varying letters by whether they include a discussion of their program’s impact as measured by scientific research. The base script, used for both treatment and control, included a standard qualitative story about an individual beneficiary. Adding scientific impact information has no effect on whether someone donates, or how much, in the full sample. However, we find that amongst recent prior donors (those we posit more likely to open the mail and thus notice the treatment), large prior donors increase the likelihood of giving in response to information on aid effectiveness, whereas small prior donors decrease their giving. We motivate the analysis and experiment with a theoretical model that highlights two predictions. First, larger gift amounts, holding education and income constant, is a proxy for altruism giving (as it is associated with giving more to fewer charities) versus warm glow giving (giving less to more charities). Second, those motivated by altruism will respond positively to appeals based on evidence, whereas those motivated by warm glow may respond negatively to appeals based on evidence as it turns off the emotional trigger for giving, or highlights uncertainty in aid effectiveness.

How is that for a chilling final sentence?: “…those motivated by altruism will respond positively to appeals based on evidence, whereas those motivated by warm glow may respond negatively to appeals based on evidence as it turns off the emotional trigger for giving, or highlights uncertainty in aid effectiveness.”

mrB April 15, 2014 at 7:14 am

Personally I suspect that i get a “warm glow” from thinking that my giving is making more of a difference than “average” giving. I imagine its hard to disconnect the 2.

ummm April 15, 2014 at 8:06 am

I wonder why would homo economicus donate at all?

Charlie April 15, 2014 at 12:14 pm

The practice of charitable donations presents no problems whatsoever for rational choice theories or homo economicus assumptions.

dan1111 April 15, 2014 at 8:16 am

The last sentence is chilling if true, but why should we believe that it is true? This is a typical case of a study over-interpreting the results and making over-broad claims about their meaning.

The main problem I see is that they haven’t measured a response to an actual increase in the effectiveness of the charity; they have measured a response to marketing claims about effectiveness. The difference should be obvious: donors have reason to be skeptical about claims the charity makes when soliciting money.

This may also explain the difference between large and small previous donors: large donors likely have more knowledge about the charity and more of a relationship with the organization. Thus, they may be more likely to believe the claims made. Small donors, on the other hand, don’t have as much prior knowledge about the organization and might react negatively to the claims about effectiveness.

Of course, they also haven’t measured “warm glow” or any real proxy for it. They simply assume that small donors do so to feel good, while large donors are altruistic. The evidence for this is…?

crandall April 15, 2014 at 9:14 am

yup — just another BS academic “paper” proving nothing.

It’s basically just speculation about charitable giving with a facade of logical inquiry; the methodology and broad conclusions are unsupportable.

Ted Craig April 15, 2014 at 8:21 am

Chilling? No. Why would it be? Because good might come from irrationality? Religious charities have been doing good works for centuries and people have rarely donated to them for empirical reasons.

Eric Rasmusen April 15, 2014 at 8:34 am

Of course it’s chilling. It’s the Ford Pinto case again. It’s also a condemnation of democracy as opposed to oligarchy. Why do people vote? For the warm glow.

Daniel Meges April 15, 2014 at 9:16 am

Tyler,

Thanks for highlighting this. As someone responsible for fundraising for a local parish, understanding the motivation of big and small donors–even at modest sums, there are probably cleavages between the two groups–impacts how we message and interact with them.

Fascinating stuff.

Jeff April 15, 2014 at 10:44 am

I also find these result chilling. In my experience, nonprofits often have noble goals, but have absolutely zero accountability. They are not beholden to *anyone* so long as they can elicit that warm glow and all the *feels* and it’s truly depressing. Everyone seems to trust nonprofits but utterly despise for-profits, while only one of those groups faces intense pressure to appease the public. The relationship it totally asymmetric.

I work in the education sector, and have come across quite a few school districts that spend exorbitant sums money, disastrously, because some uppity but incompetent project manager has decided that money should be spent in X way. The Bill and Melinda Gates Foundation, for example, decided to spend $51 million developing small schools. Why? When you control for demography, there’s no relationship between school size and performance! And yet school systems readily embrace changes like this even though in the long run, tax payers are footing the bill!

Folk often complain about corporatism or corporate fascism, but the reality is that money, regardless of source, commands too much influence. Pay attention to your favorite nonprofits, folks. They might not be as grand as you imagined.

Source: http://www.gatesfoundation.org/Media-Center/Press-Releases/2003/09/New-York-City-Department-of-Education-Receives-Grant

vimal April 15, 2014 at 11:20 am

One nice thing to note is that the highly effective institutions who pass givewell’s criteria end up doing very well, in that millions of dollars get funneled to them via private donors and givewell’s larger partners. Of course, Givewell’s audience is the kind who gets a warm glow from evidence.

Mike Linksvayer April 15, 2014 at 12:26 pm

I wonder if nonprofit employees and volunteers are like altruistic or warm glow donors? Are they more productive with evidence that their work is effective, or when they feel a warm glow from working on an appealing problem, nevermind whether that work is actually helping address the problem? Maybe they sort?

Randall April 15, 2014 at 4:21 pm

Talking about warm-glow and evidence-based givers gets at something real, but it seems potentially more of a continuum, and less of a static trait of a person, than the abstract suggests.

I suspect that to care about distant people you’ve never met, first you need to get over the hump of seeing a full picture of them as people that feel and try and work and support each other and so on like anyone else you know, not only as an abstract concept that you hear about on the news.

Once you’re over that hump, you can start to sort out alternatives and worry about how many people your dollar can help; even then, it helps if you’ve spent enough time worrying about charities to know effectiveness varies a lot. (And, presumably, it helps if you’re the sort to worry about cost-effectiveness in general.)

In other words, if this result holds true, another explanation is that large prior donors were more likely to be already persuaded of the moral urgency of donating, and have already spent enough time worrying about charity to think of effectiveness as important. Small prior donors may have mainly needed the reminder that there are real folks out there that desperately need help and never have really though about comparing effectiveness; ending the appeal with evidence might just dilute the message.

It does encourage me that some efforts to reproduce currency-priming effects have failed; it makes me more skeptical of claims that waking up the calculating side of one’s brain tends to change one’s personality for the worse.

Categorical Imperative April 18, 2014 at 3:44 pm

Speaking of warm glow and effectiveness, there’s nothing like being at an actual charity giving event and feeling the pull of watching other’s give larger donations than you do. The only cure is to give as much as you can instead of holding back. This is hard to do unless you are 100% heart and soul into the cause. There is only one other cure, and that is to plan ahead and bring a pre-determined amount in cash because the charity’s conversion host (credit card company/bank) won’t be able to take a chunk of the charity profits in fees.
This can be a whole lot more fun if you don’t know what everyone else’s donations are worth…
I was at a meeting where they used Gold 2 Good. Every bodies gold is worth different amounts so no one can tell how much other donations are worth. Yes quantity is a feeling factor, but quality is a better factor. Also, everyone has gold laying around they would sell, but finding the highest bidding selling shops is a massive headache!
SO all you have to do is let the charity do the work for you. If you are the charity, use the service to make great money by converting the gold people donate with Gold 2 Good. Your donors can always give funds, but adding their gold is a great tool. If they don’t have the money, they can give something else that is valuable without hurting their bank accounts, and leave feeling like they helped too. And that is all the difference!

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