Giving away money well can be harder than earning it

by on May 30, 2014 at 6:25 am in Economics, Education | Permalink

Northwestern has a new class method trying to teach that skill:

Vinay Sridharan must make it through microeconomic theory and the writings of Proust before the end of his senior year at Northwestern in June. But in one course, the final project is far less abstract: give away $50,000.

It is also far more difficult than it may seem.

This course in philanthropy, endowed with a grant from a Texas hedge fund manager, requires students to find and investigate nonprofit organizations and, if they stand up to scrutiny, give them a portion of the five-figure cash pot.

But did the backing donor give his money away well?  I am not so sure.  There is more here.

1 fallibilist May 30, 2014 at 7:39 am

I can’t believe that someone trained in Princeton’s philosophy department–the second-best in central New Jersey–can’t figure out the meta-ethical issues inherent in deciding what it means to give “well.”

2 prior_approval May 30, 2014 at 7:51 am

‘But did the backing donor give his money away well?’

If only he had given it to advance ‘knowledge about how markets work to improve people’s lives by training graduate students, conducting research, and applying economics to offer solutions to society’s most pressing problems.’

That would have been money well spent. Especially combined with endowing a chair or two at the same time, a strategy likely to offer the best return on investment.

3 Marie May 30, 2014 at 8:36 am

Lots of things to learn from those courses, probably none of it about philanthrophy.
Wonder how someone would score if he did a walk around in 10 poor neighborhoods and made a list of 50 families that could use $1000, and why.

4 andrew' May 30, 2014 at 9:03 am

They likely worked pretty darn hard to earn the money but expect giving money away should be fun and easy. But giving well to me requires positive feedback similar to good investments plus efficient market questions like why it hasn’t been done, why it didn’t work if it had, why it is under-invested-in, etc. This is why education is enticing and also why it is over-bought and oversold.

5 Brian Donohue May 30, 2014 at 9:31 am

+1, although due to awkward construction, I thought at first that you were magnanimously stepping forward in the role of recipient.

6 Andrew' May 30, 2014 at 12:33 pm

I can’t buy a Koch in this town!

7 Mark Thorson May 30, 2014 at 9:48 am

When I read the title of this blog entry, I was sure it was going to be about the guy hiding money in the SFBA and giving out clues on Twitter.

I’m sure he thinks he’s given away the money well. He’s having a barrel of fun.

8 Hopaulius May 30, 2014 at 11:07 am

I wonder whether the courses have any way to vet the students, to prevent NGOs from planting students to steer donations their way.

9 Enrique May 30, 2014 at 11:17 am

By the way, what’s the real, non-altruistic reason rich people like Bill Gates or Warren Buffet give away so much money? Isn’t is to improve their image AND reduce their tax burden?

10 Nathan W May 30, 2014 at 12:19 pm

If you had enough money to maaaaaybe eradicate malaria, wouldn’t you give it all away except for the last 1% and retire on a private island anyways?

11 Brandon May 30, 2014 at 12:53 pm

Plenty of critiques out that w.r.t. the B&M Gates Foundation’s motives, goals and effects that don’t paint a very pretty picture.

12 Nathan W June 1, 2014 at 5:25 pm

Is he trying to trick the Africans into using computers, or something darker? I haven’t heard.

13 Joshua May 30, 2014 at 1:05 pm

I’d guess that the “real” reason is that they are selfish – it makes them feel good to give away money. As to why it makes them feel good, your guess is as good as mine.

14 Brenton May 30, 2014 at 2:00 pm

Joshua, are you saying that helping people is selfish if you do it because it makes you feel good to help people?

15 dan1111 May 31, 2014 at 3:16 am

What is the upside of questioning the motives of charitable giving?

You might be wrong. Even if you are right about motives, giving for selfish reasons is better than non-giving. A billionaire who expresses selfishness by giving away billions of dollars is surely better than a billionaire who expresses selfishness by keeping all of the money. Speculative claims about the selfishness of charitable giving will reduce the return on such giving.

16 Nathan W May 30, 2014 at 12:19 pm

Applying private sector management and control expertise to NGOs is difficult because the metrics are much less obvious. Therefore, we can only expect that the effectiveness of their management and control processes to achieve stated outcomes will be inferior to most private sector operators because in many cases they have to design completely new monitoring and control systems from scratch.

When you’re running a company, you ditch the failing division. In a non-profit, more likely you target it as the area where you need most work, unless you can find a partner with expertise to fill in gaps where you are weak. Same goes for public sector, more or less.

17 dan1111 May 31, 2014 at 3:07 am

“When you’re running a company, you ditch the failing division. In a non-profit, more likely you target it as the area where you need most work”

I don’t think there should be an inherent difference here (though you may be right that there is one in practice). Charities, just like for-profit companies, should use the strategies that most improve their return, including stopping activities that are not productive.

You are right about metrics being difficult, though.

18 Nathan W May 30, 2014 at 12:23 pm

School canteens. Hungry children don’t learn well (smarter kids). They also don’t grow as big (stronger kids).

Metrics? Number of children receiving minimum caloric requirements, minimum nutritional requirements, and number of children passing language and maths tests in grades 4, 8 and 12. Empirical connections to academic achievements are always going to be hard to pin down with certainty.

Want to stretch out the dollars and not create dependency? Require parents to provide half. If they can feed their child twice the food, they will certainly stump up the first half.

19 Brett May 30, 2014 at 1:56 pm

It seems like if all else fails, you could just donate it to United Way and the local Food Banks. Or in my neighborhood, I’m pretty sure the Boys and Girls Club and Utah Food Bank could each make really good use of $25,000.

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