One of the more important things I’ve changed my mind about recently is the best cause to donate to. I now put the most credence on the possibility that the best option is donating to a fund that invests the money and disburses strategically in the future. I will refer to this as “giving later”, though I actually support giving now to a donor-advised fund set up to disburse in the future, for the value that donating now can have for encouraging others to donate (and because of the risk that even if one thinks one will donate later, one will at some point change one’s mind).
There are several reasons why I prefer a fund that disburses in the future. First, I believe people currently discount the future too much (see hyperbolic discounting, climate change). If people discount the future, that causes the rate of return on investments to always be higher than the growth rate (else people would not be willing to invest). In economics, the Ramsey equation is often used to determine how much a social planner should discount future consumption. It is specified by r=ηg+δ, where r is the real rate of return on investment, η is the extent to which marginal utility decreases with consumption, g is the growth rate, and δ represents pure time preferences. Unless one personally puts a particularly high value on δ, it makes sense to invest today and spend later to take advantage of the gap between the real rate of return on investment (~7%) and the growth rate (~3-4%).
…A second reason that I prefer a fund that disburses in the future is that I think we have very limited knowledge today and that our knowledge is increasing. I am concerned about the problem that research results do not generalize all that well, but with respect to economic development I am optimistic that the situation can improve. With respect to technological change which could bring huge benefits or risks, I think we know even less about the problems future generations will face and may be able to understand them better in the future. It seems unlikely to me that we are at the exact moment in time, out of all periods of time from here on out into the future, that we actually have the best opportunity to do good. We may not recognize the best moment when it comes, but that just pushes the argument back a step: I also think it unlikely that we are at the best moment, out of the whole foreseeable future, to have the best combination of knowledge and opportunity to do good.
Interesting throughout, here is the link, and in sum:
I think it appeals psychologically to many people – myself included – to think that we are living at a particularly important time. However, I recognize that people have thought this throughout history. As more time has passed, I have become increasingly confident that my gut antipathy to the idea that it’s better to “give later” is just a cognitive bias.