« Crowding Out on Charity | Main | Fires »

October 24, 2007

My Commenters is Smarter Than I: Charity Edition

Galen on philanthropic priorities:

Another advantage of government funding over philanthropic funding is the theoretical ability to do better macro level allocation of resources. If you have, say, 10 billion dollars in one bucket you can have a team of experts figure out the optimal allocation of those resources across a broad range of needs, whereas if that 10 billion dollars is private charitable giving the allocation will be made in chunks of hundreds, thousands, and millions of dollars by individuals who can't see the big picture. Restricted money for sexy causes is a lot easier to raise than unrestricted money for more general and less sexy purposes, and individual organizations and donors allocate funds according to their own interests. So you get things like disproportionately large amounts of money for in vitro fertilization research and disproportionately small amounts of money for free preventive medicine for the poor. Not that there's anything wrong with IVF research, but it ought to be a lower priority compared to other things. It's not the fault of the charities or the donors that this misalocation happens, but it's a problem nonetheless.

Right -- It's Arianna Huffington's old quote about finding it easier to raise money for operas than anti-poverty efforts, and the environmentalist's ancient lament that it's simple to attract donations to save endangered polar bears ("charismatic megafauna"), but not to save endangered, but all the more necessary, algae and insects. When you're raising money from private individuals, you have to focus on the causes they're interested in, not simply the ones that require funds. This is why, for instance, alumni associations suck up such a large percentage of charitable dollars. Given the range of possible recipients for my $10 million, I wouldn't rank the Longhorns -- or, for that matter, the Bruins -- high on the list. But donors like their alma maters, and so tend to direct a disproportionate amount of funds their way.

There is, of course, nothing wrong with that. It's their money! It's just not a substitute for social policy.

October 24, 2007 | Permalink

Comments

One of the issues not discussed about this subject is the tendency of publicly funded entities to tolerate more fraud and waste than private charities. No one in government programs wishes to confront those who receive unwarranted benefits. As a publicly funded entity, it's a fishbowl for every political group with an agenda and no one wants the headache. It's just easier to move on to the next case than to go head-to-head with someone who is determined to get benefits whether they really qualify or not. It's simply a human flaw that makes it easier to spend money if it's not yours. As a result, there are many on publicly funded programs that don't belong there.
In contrast, private foundations stuggle to raise money and are inherently more careful about how it's spent. There are no additional strings they must deal with when funding their mission. They regularly publish their efficiency rates such as percentage of donations that actually reach the recipients. A good example of efficiency would be the American Red Cross who currently claim that 91.5% of their donated revenue makes it to the actual programs and the 8.5% left is the small overhead expense.
Compare that to government 'efficiency'.....any study....you pick.

Posted by: El Viajero | Oct 24, 2007 9:20:57 AM

El Viajero -- But the government provides good jobs to millions of people. Surely that should play into any comparison, and I don't know but I'm fairly certain that the Red Cross isn't doing quite such a good job there.

And, that being said, really efficient distribution of revenue toward some causes doesn't really help so much with the other causes, as per the subject of the post.

Posted by: Mike Meginnis | Oct 24, 2007 9:52:05 AM

Yes, because in the realm of philanthropy, there's no such thing as fraud.

Posted by: Ezra | Oct 24, 2007 9:57:03 AM

El Viajero, of course, speaks complete and unmitigated nonsense. One of the most important reasons for a general support of government intervention over charity is vastly increased efficiencies. Collection of taxes is, quite simply, much, much less costly than solicitation of donations. Charities have to compete against each other to raise funds; charities, without internal or focused watchdogs, are much more subject to high scale financial corruption than government efforts; charities have to pay considerable money for information that government already has on hand for reasons unrelated to programs that might substitute for charities. Most charities have extremely high overheads. Even under the most generous assessments, some 30% of charities spend 25%+ of expenditures on overhead (http://www.charitynavigator.org); more skeptical sources show even higher rates of overhead in charities, and no government programs come close to the typical levels of overhead show in charities. Medicare famously has overhead around 3%; it's literally impossible for a charity providing medical care to have such low overhead.

Charity for matters like feeding the hungry and providing medical care to the poor is about making the giver feel better, while government intervention in these areas is about solving problems.

Posted by: Robert Johnston | Oct 24, 2007 10:01:16 AM

Not only that, but staffers at government agencies are invariably treated better and paid better wages than the staffers at "charities"/non-profits. The expectation is that government agencies are going to rely on a large amount of "institutional memory" and have standards for treating employees, while non-profits/charities seem more focused on running through new employees every 2-3 years.

It's hard to blame anyone who chooses to give their money to restricted, high-profile causes. Someone donating $1000 to the opera knows that it will help fund an opera and make it happen (and it gets you the option to buy better seats). There's something tangible that allows you to see exactly where you're money's going. If you donate $10,000 to a program to help poor children do better in school, it's hard to see the effects, and the effects may not be apparent for many years, if they happen at all. The same would be true for money given to support preventative medical care for the poor. It's an inherently riskier proposition with little "payoff" for the donator.

Posted by: Tyro | Oct 24, 2007 10:12:12 AM

This is how Guide Dogs for the Blind has ended up with more money than they can possibly use and became a major donor themselves, giving away all the torrents of money that people want to give to cute puppies who help poor poor disabled folks.

Also, I think you're misunderstanding the point of charismatic megafauna. It's not like you have to choose between saving the cute animal and saving its ugly neighbors. They are used as sort of the PR faces, the spokesanimals, of a given habitat. Need to save the ecologically vital algae? Tell people you want to save the seals that live near it.

El Viajero--some government programs are inefficient. Some businesses are inefficient. Some non-profits are inefficient. There's no cosmic significance to the category that you put an organization into, it just depends on how well it is run. Go read Ha Joon Chang's study on this, compare the amounts spent on administrative costs for Social Security and private health insurance, and go sit in the corner.

Posted by: rufustfyrfly | Oct 24, 2007 10:15:27 AM

It strikes me that's what under discussion here was asked and answered in your last couple of posts - yes, we shouldn't confuse government programs and private giving, but both are worthwhile enterprises in some ways, with laudable goals, and their own issues around fraud and waste. And I think it remains the case that what would probably work best is some combination of public programs and private charity. because the latter encourages people to contribute not just money, but time and energy for various causes, while the former makes sure that there's more service for all, and not, as is pointed out here, merely for what's popular or has the greatest emotional appeal.

And I reiterate, what's getting lost here is a discussion of what this means for the arts - Huffington's right that it's easier to get people to fund opera... but that's also as opposed to modern dance or experimental theater or other forms of performance art. The wealthy will gladly shell out for "classy" programs like the symphony and the art collections of old masters, but working artists, musicians and dancers struggle mightily because their work doesn't have the same patina. That's why this notion of government involvement ought to extend more broadly into the arts, and why this isn't just about soup ktchens or housing the homeless.

Posted by: weboy | Oct 24, 2007 10:23:20 AM

Public hospitals, arts programs, and universities raise corporate and individual donations, and private hospitals, arts programs and universities receive public money. So what's the issue, again?

Posted by: Dogberry | Oct 24, 2007 10:41:55 AM

weboy, the reason something like modern dance finds it hard to attract funding is because pretty much no-one wants to see it, ever. Why should people be forced to pay up because you enjoy boring crap?

Posted by: pimp hand strikes! | Oct 24, 2007 10:55:26 AM

I think the utility of a team of experts allocating resources in an optimal way is small. I would guess it would work about as well as Soviet five year plans.

That is even if we assumed that experts, rather then politicians more interested in supplying pork to their disricts were actually in charge of the allocation.

Certainly public funding is better for some activities then private charities or market based economies, but this is not one of the reasons for that fact.

Posted by: Dave Justus | Oct 24, 2007 12:09:50 PM

We pay for stuff on the edges, whether it is cutting edge scientific/medical research, or modern dance and performance art, because today's stuff that's "out there" is tomorrow's mainstream. Get a clue.

Posted by: BlueStreak | Oct 24, 2007 12:16:22 PM

I've always said that if rock stars were into giving to medical causes, we would have a National Institute of Acne in Bethesda.

Posted by: Joe S. | Oct 24, 2007 12:21:23 PM

"Collection of taxes is, quite simply, much, much less costly than solicitation of donations." -- Robert Johnson.

I guess that depends on how much you value free will and choice against following a diktat.

"But the government provides good jobs to millions of people. Surely that should play into any comparison, and I don't know but I'm fairly certain that the Red Cross isn't doing quite such a good job there." - El Viajero

Government could also just give people the money and not require that they do any work. A measure of the value of the job is the value it provides others, not the value it provides oneself. I had a job once were I created no value to the people paying me. It felt sleazy. I quit it.

Posted by: DCPI | Oct 24, 2007 12:40:31 PM

"Collection of taxes is, quite simply, much, much less costly than solicitation of donations." -- Robert Johnson.

I guess that depends on how much you value free will and choice against following a diktat.

"But the government provides good jobs to millions of people. Surely that should play into any comparison, and I don't know but I'm fairly certain that the Red Cross isn't doing quite such a good job there." - El Viajero

Government could also just give people the money and not require that they do any work. A measure of the value of the job is the value it provides others, not the value it provides oneself. I had a job once were I created no value to the people paying me. It felt sleazy. I quit it.

Posted by: DCPI | Oct 24, 2007 12:40:33 PM

And, that being said, really efficient distribution of revenue toward some causes doesn't really help so much with the other causes, as per the subject of the post.

OK, so let's go with your suggestion of a big government tax and spend solution instead of private charities.

Who decides who is worthy of my precious tax dollars that I earned and were extracted by force of law?

YOU?

If you're going to tell me a "panel of experts", well we already have that system in place for the distribution of science dollars and we all have seen some of the resulting waste. Mating habits of a small fly in Africa, etc.

Bottom line is if you are trusting government to handle your money carefully, you will always be disappointed.

Posted by: El Viajero | Oct 24, 2007 12:50:45 PM

"But the government provides good jobs to millions of people. Surely that should play into any comparison, and I don't know but I'm fairly certain that the Red Cross isn't doing quite such a good job there." - El Viajero

DCPI is a liar. I never stated that.

Posted by: El Viajero | Oct 24, 2007 12:52:37 PM

El Viajero is correct ... Mike Meginnis said that. I was mistaken. I am sorry and regret the error.

Posted by: DCPI | Oct 24, 2007 1:11:33 PM

If you're going to tell me a "panel of experts", well we already have that system in place for the distribution of science dollars and we all have seen some of the resulting waste. Mating habits of a small fly in Africa, etc.

You might think those types of studies are useless, but you're not a scientist now, are you? I realize this is a bog standard appeal to authority argument, but these studies do have broader implications in academics and research, and that is not known to the untrained eye. Which actually goes right back to Ezra's point - nobody is going to give money to research those things, it doesn't mean it isn't important. Government can fill in the cracks left by the the private charity system and there's nothing wrong with that.

It is like, for example, as I was pursuing my math degree, people would go up to me and look at my textbook and say, "wow thats pretty useless!". Of course, it wasn't, but they weren't studying mathematics.

And also, lets be real, those types of studies are usually pretty cheap.

Posted by: Joshua | Oct 24, 2007 1:15:26 PM

Ok, so looking over government for the past couple of decades, Ezra thinks its smart to claim that government does a good job at macro-level prioritization?

How'd we do on getting climate change to the top of the list? How about stem cell research? How about AIDS in Africa, or better yet the small, persistant, deadly, non-telethon-laden diseases?

The only word of value in Galen's comment is "theoretical", since it totally vitiates the rest of his argument. The priorities will follow the interests of those in power. The argument, then, appears to be "with the right people in charge, things would be better since they'd allocate money the right way". The right person of course being the one Galen likes best. Which strikes me both as fundamentally misunderstanding how government and politics work, and as disturbing in its willingness to follow a cult of personality.

Posted by: Nash | Oct 24, 2007 1:17:09 PM

A reasoned post Joshua.

However, it's my money so you need to sell me on it, just as charities do. Instead, government, as usual, will take the money and treat us all like mushrooms.....keep us on the dark and feed us manure.

Posted by: El Viajero | Oct 24, 2007 1:21:05 PM

Viajero, that system in place for scientific funding is without a doubt the best in the world, and it is also the most competitive processes (only about 10-20% of proposals get funded). Only the most naive would consider it rife with waste.

Certainly peer review of many government projects is likely a better method than earmarks, which is the main alternative.

Posted by: Tyro | Oct 24, 2007 1:29:54 PM

government, as usual, will take the money and treat us all like mushrooms.....keep us on the dark and feed us manure.

Quite the opposite-- government is forced to publish exactly where their money is going, how much people are getting paid, and what the results are. You can bury any government agency under an avalanche of FOIA requests... assuming you believe that government should be transparent, or whether you believe that the government should be shielded from public scrutiny under the doctrine of the unitary executive.

Posted by: Tyro | Oct 24, 2007 1:32:27 PM

Only the most naive would consider it rife with waste.

Yeah, how stupid of me to think that government might be wasteful.

Posted by: El Viajero | Oct 24, 2007 2:49:15 PM

how stupid of me to think that government might be wasteful.

To call a specific program -- one of the most successful -- wasteful , without any evidence to back this up that it is somehow particularly wasteful is, in fact, pretty stupid of you.

Posted by: Tyro | Oct 24, 2007 3:20:32 PM

Exactly what makes you think this one program is an island in a sea of government waste? What evidence do you have for your assertion that is is "one of the most successful" programs?

If a large majority of the money actually hit the programs, but the programs themselves are wasteful, would you still claim victory?

What makes you believe this government spending program is somehow immune to political pressures while all others are not?

Posted by: El Viajero | Oct 24, 2007 3:52:15 PM

The comments to this entry are closed.