How to choose a charity

MR reader Jeffrey Drucker writes:

I’ll be graduating college in just a few weeks and entering the real world.  That is I’ll be a salaried employee making all budgetary decisions for myself.  Aside from the necessary components of spending, saving, and repaying my college loans I’d like to set a portion of my earnings aside for charitable donation.  I’ve always thought that charity was a crucial element of any caring libertarian’s mindset.  Now that I will be able to spend my own money, I wondered if you could provide any insight into the economic considerations of charity.

Obviously, the decision to donate is based on personal considerations and evaluations of the relative merit of different organizations.  But economically is it more sensible to donate to a wide number of worthy causes or champion just one.  Should I focus on issues closer to home or those who are in the most need the world over?  How large a percentage of my income is it reasonable to donate, what issues should I consider (value of investment opportunities, lifetime consumption)?

Putting political and intellectual non-profits aside, here are some principles for purely charitable giving: 

1. Published information on budget ratios devoted to programs and fundraising expenses is not reliable.  Many charities manipulate the data.

2. Consider neglected but long-simmering problems; read my earlier analysis of whether you should focus on the crisis of the day.

3. Hardly anyone gives enough to charity and you won’t either.  Pick a cause or causes you will become addicted to.  Tell others you won’t back down from your cause, so that you will lose face if you do.

4. My preferred approach is pure cash transfers to rural Mexicans, vis-a-vis Western Union.  You don’t get the tax break but administrative expenses are very low.  Think of Western Union as a for-profit charity.

5. In-kind aid sounds inefficient to the economist, but the commitment may make you happier.  You are wasting most of your time anyway.

6. Don’t give money to beggars, the explanation is here.

The comments are open for other suggestions.  Analytical principles are especially welcome.


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