Here on LW, we know that if you want to do the most good, you shouldn't diversify your charitable giving. If a specific charity makes the best use of your money, then you should assign your whole charitable budget to that organization. In the unlikely case that you're a millionaire and the recipient couldn't make full use of all your donations, then sure, diversify. But most people couldn't donate that much even if they wanted to. Also, if you're trying to buy yourself a warm fuzzy feeling, diversification will help. But then you're not trying to do the most good, you're trying to make yourself feel good, and you'd do well to have separate budgets for those two.
We also know about scope insensitivity - when three groups of subjects were asked how much they'd pay to save 2000 / 20000 / 200000 migrating birds from drowning in oil, they answered $80, $78, and $88, respectively. "How much do I value it if 20,000 birds are saved from drowning in oil" is a hard question, and we're unsure of what to compare it with. So we substitute the question into an easier and clearer one - "how much emotion do I feel when I think about birds drowning in oil". And that question doesn't take the number of birds into account, so the number gets mostly ignored.
So diversification and scope insensitivity are two biases that people have, and which affect charitable giving. What others are there?
According to Baron & Szymanska (2010), there are a number of heuristics involved in giving that lead to various biases. Diversification we are already familiar with. The others are Evaluability, Average vs. Marginal Benefit, Prominence, Identifiability, and Voluntary vs. Tax.
The general principle of Evaluability has been discussed on LW before, though not in a charitable context. This one is directly related to scope insensitivity, since both involve it being difficult to judge whether or not a charitable cause is a worthy one. Suppose that you need to choose between two charities, one of them dedicated to malaria prevention and the other dedicated to treating parasitic worm infections. Which one is a more worthy cause? Or should you instead donate to something else entirely?
Presuming that you don't happen to know about GiveWell's reports about the two charities and haven't studied the topic, you probably have no idea of which one is better. But you still need to make a decision, so you look for something to base that decision on. And one type of information that's relatively easily available for many charities is their overhead: what percentage of their costs they use on administration, as opposed to actual work. So you might end up choosing the charity which has the lowest administration costs, and which spends the largest amount of money on actual charity work.
If you truly have no other information available, then this might really be the best you can do. But overhead is by itself a bad criteria. Suppose that charities A and B both receive $100. Charity A spends $10 on overhead and saves 9 human lives with the remaining $90. Charity B, on the other hand, allocates $25 toward its operating expenses, but manages to save 15 lives with the remaining $75. B would clearly be better, but using overhead as a heuristic tells us to give to A.
GoodIntents.org also provides a number of other reasons why you shouldn't use overhead as your criteria: the overhead figure is easy to manipulate, and the pressure to keep administration costs low can cause organizations to understaff projects, or to favor programs that are inefficient but have low administration costs. Still, many donors base their donation decision on the easy-to-evaluate operating costs, rather than some more meaningful figure.
Average vs. Marginal Benefit. Two charitable organizations provide figures about their effectiveness. Charity A claims to save one life for every 900 dollars donated. Charity B claims to save one life for every 1400 dollars donated. Charity A is clearly the correct choice - right?
Maybe. If Charity A is a large organization, it could be that they're unable to spend the extra money effectively. It could be that the most recent one million dollars that they've received in donations have actually been dragging down their average, and they currently need 2000 extra dollars for each additional life that they save. In contrast, charity B might just have paid for most of their fixed costs, and can now leverage each additional donation of 800 dollars into a saved life for a while.
Information on the marginal benefit of a dollar is often hard to come by, especially since it's in the interest of many well-funded charities to hide this information. But it's still something to keep in mind.
Prominence. People tend to pay attention to a single prominent attribute, or an attribute they view as the most important. This can often be an effective fast-and-frugal heuristic, but only focusing on one attribute to the exclusion of others may make it difficult or impossible to compare tradeoffs. It may also cause people to ignore efficiency: if two safety programs differ in cost and in the number of lives saved, people tend to choose an option that saves more people. They do this even if the difference in lives is small and the difference in cost is large. As a result, they may pay large sums for only a small increase in the amount of good done, even though the extra money would have been better spent elsewhere.
Parochialism is characterized as an in-group bias in which people weigh the welfare of their own group more heavily than those of outsiders. In charity, this may show itself by Americans preferring to give to American charities, even if African ones save more lives per dollar. Whether this is truly a bias depends on one whether tries to carry out perfect utilitarianism: if not, preferring to help one's own group first is a question of values, not rationality. On the other hand, if one does strive for pure utilitarianism, then it should not matter where the subjects of aid are located.
It could also be that attempting to correct for parochialism might reduce the amount of charitable giving, if there are many people whose altruism is limited purely to the in-group. Denied of the chance to help the in-group, such people might rather choose not to donate at all.
On the other hand, if US citizens do experience a sense of commitment to tsunami victims in Hawaii, then it might be reasonable to presume that the same cognitive mechanism would affect their commitment to New Zealanders who suffered the same fate. If so, this suggests that parochialism results from cognitive biases. For instance, an American may have an easier time imagining the daily life on Hawaii in detail than imagining the daily life on New Zealand, and this difference in intensity may affect the amount of empathy they experience.
If one does want to reduce parochialism, then there is some evidence that parochialism is greater for harms of inaction than for action. That is, people are reluctant to harm outsiders through acts but much more willing to do nothing to help them. If this can be made to seem like an inconsistency, then people might experience a larger obligation to help outsiders. Parochialism can also be reduced by encouraging people to think of outsiders as individuals, rather than as members of an abstract group. "New Zealanders" might not attract as much empathy as imagining some specific happy family of New Zealanders, essentially no different from a family in any other country.
“Writing about his experiences in the Spanish Civil War, George Orwell tells this story. He had gone out to a spot near the Fascist trenches from which he thought he might snipe at someone. He waited a long time without any luck. None of the enemy made an appearance. Then, at last, some disturbance took place, much shouting and blowing of whistles followed, and a man: jumped out of the trench and ran along the parapet in full view. He was half-dressed and was holding up his trousers with both hands as he ran. I refrained from shooting at him. I did not shoot part because of that detail about the trousers. I had come here to shoot at `Fascists’; but a man holding up his trousers isn’t a ‘Fascist’, he is visibly a fellow-creature, similar to yourself, and you don’t feel like shooting at him.”
Identifiability. Aid recipients who are identifiable evokes more empathy than recipients who are not. In one "dictator game" study, where people could choose to give somebody else some amount of money, giving was higher when the recipient was identified by last name. Small et al. (2007) note that people often become entranced with specific, identifiable victims. In 1987, one child, "Baby Jessica", received over $700,000 in donations from the public when she fell in a well near her home in Texas. In 2003, £275,000 was quickly raised for the medical care of a wounded Iraqi boy, Ali Abbas. And in one case, more than $48,000 was contributed to save a dog stranded on a ship adrift on the Pacific Ocean near Hawaii.
From a simple utilitarian perspective, identifiability is bias. By increasing altruism toward the identifiable victims, it may reduce altruism toward the unidentified ones, who are often the ones most in need of help. On the other hand, it could also increase overall altruism, by making people more willing to incur greater personal costs to help the identifiable victims.
In fact, Small et al. found that teaching people about the identifiability effect makes them less likely to give to identifiable victims, but no more likely to give to statistical victims. So if you see a story about an identifiable victim and kill your impulse to give to them, or experience pleasure from never feeling that impulse in the first place, please take the money you would have donated to the victim if you hadn't known about the effect and actually give it to some worthier cause! The altruism chip jar is a great way of doing this.
Baron & Szymanska suggest an alternative way that might help in channeling the effects of identifiability to good ends: "Victims all have names. The fact that we are aware of one of them is an accident. We could make up names for the others, or even tell ourselves that our donation to some relief fund is going to help someone named Zhang." So if you know rationally that it'd be good to give to a "statistical" cause but are tempted to give to an "identifiable" cause instead, come up with some imaginary person who'd be helped by your "statistical" donation and think of how glad they'd be to receive your aid.
Voluntary vs. Tax. Finally, some people oppose government aid programs supported by taxes, often referred to as "forced charity". I'm inclined to consider this more of a value than a bias, but Baron & Szymanska argue that
In part, the bias against “forced charity” may arise from a belief in freedom, the belief that government should not force us to help others but should, more or less, provide us with services from which we all benefit and pay for collectively, such as roads, military defense, and protection of our property. (Some libertarians would not even go that far.) Insofar as this is true, it may represent a kind of cognitive inconsistency. Some people benefit very little from roads or property protection, so paying taxes for these things is a way of forcing them to sacrifice for the benefit of others. It is a matter of degree.
If we do accept that government aid programs are as morally good as private ones, then that suggests that contributions to political causes that support helpful programs could sometimes be more efficient than direct contributions to the programs themselves. Although the probability of having some effect through political action is very low, the benefits of a successful initiative are potentially very high. Thus the expected utility of donating to the right political campaign might be higher than the expected utility of donating to an actual charity.
Baron, J. & Szymanska, E. (2010). Heuristics and Biases in Charity. In D. Oppenheimer & C. Olivola (Eds). The science of giving: Experimental approaches to the study of charity (pp. 215–236). New York: Taylor and Francis. http://www.sas.upenn.edu/~baron/papers/charity.pdf
Small, D.A. & Loewenstein, G. & Slovic, P. (2007) Sympathy and callousness: The impact of deliberative thought on donations to identifiable and statistical victims. Organizational Behavior and Human Decision Processes, 102, 143–153. http://opim.wharton.upenn.edu/risk/library/J2007OBHDP_DAS_sympathy.pdf