Two problems with charity: 1) You usually don't know what your donation achieves. At best, you might know what your money is spent on. You don't know how effective this is at producing the outcomes you care about. Even Givewell, who seem to me to have done more careful work...
I've been doing some thinking about charity vs investment as alternative ways of doing good (leaving open for now what that means). One question I'm wondering about is, in what circumstances does your choice of what to invest in have any welfare consequences at all (beyond differences in your own...
Yes, the first idea is what I had in mind. The problem with getting financing in order to achieve results has a few possible solutions, I mention some below in the response to Kawoomba. Which other problems did you have in mind?
The advantages seem to me to work at various levels – improved incentives, much improved knowledge, and the possibility of a system emerging where you can leave it to the financial incentives and the feedback processes they create to bring about increased effectiveness and innovation.
I'm not sure if this is a disadvantage or an advantage. I think it might be a good thing if people starting charities thought more about what confidence they had in how effective their activities would be, rather than simply having good intentions and an idea of how they might be able to fulfil them. I'd be happier giving my money to a charity whose founders stood to lose something themselves if their work turned out to be ineffective, and welcomed the chance to prove their effectiveness one way or the other. However, I agree that people are often too risk-averse and that there might well be a need for charities to be able to share some at least of the risk with lenders who had social as well as financial goals.
Yes, it's thinking about social impact bonds and the like that started me thinking about paying charities for results. What I would note, though, is that, at the moment, individual donors/investors can invest in social impact bonds. What they cannot do is offer money for the payouts to investors in social impact bonds. So, you can put money into a bond which pays out if charities are effective at, eg, reducing the number of children who go into care homes in the UK. (this is a real example). But you'd only want to do that if you were confident that the charity was effective, otherwise you'll both lose out financially and have achieved no good. I'd be more interested in adding money to the fund which pays out for results I care about, thus giving investors who might have a better idea of what is and isn't effective incentives to put money into the charities they think will produce good results.
I definitely agree that financing charities is an issue, but there are various possibilities. You could finance them through donations for a few years while declaring that, from x years time onwards, your funding would depend on the results obtained using the money you donated; from that point on, the system would be self-sustaining for effective charities, and not for ineffective ones (which would be, I think, a good thing). Or they could borrow money from lenders who want to support charitable causes and are willing to lend at lower interest rates, or through a social impact bond structure where lenders provide money in return for some or all of the future results-based payments should the charity be effective. Or, finally, through borrowing at market rates, though I agree that this is likely to be uneconomical, at least until there is more evidence for judging which charities are likely to be able to produce good results and repay the money they borrow.
I agree that having a good control group would be very important. I also agree that for many charitable activities this would be impossible. However, in many other activities, it would be possible. A good number of randomized controlled trials are being run to measure the effectiveness of health, educational and even political/governance activities, so they can be done. They might be costly, but that's a separate question, and, as I said, there could be very large benefits in improved knowledge from doing them.
I think your scam analogy is somewhat off-target. A closer analogy would be that, for donations at the moment, they ask you to send $50 and don't offer any... (read more)
Two problems with charity:
1) You usually don't know what your donation achieves. At best, you might know what your money is spent on. You don't know how effective this is at producing the outcomes you care about. Even Givewell, who seem to me to have done more careful work on cost-effectiveness than anyone else, regard their cost-effectiveness estimates as very rough and no more than an indicative starting point for evaluating charities.
2) Charities have low or no financial incentives to be as effective as they can, not least because usually no-one knows how effective they are.
Potential solution:
Instead of donating to charities, pay them for results achieved.
Ideally, you would pay for the final... (read 869 more words →)
Fair question, and I should have been clearer, because the meaning is ambiguous. I would say 'ethical investment' has two main meanings: 1) investing money taking into account the ethically-significant consequences of your investment decisions. 2) making investments in the secondary market which avoid companies whose activities seem socially harmful (usually understood to mean companies involved in things like weapons or tobacco) and/or put money into companies who activities seem socially beneficial (usually understood to mean companies involved in things like clean energy or with strong policies on workers' rights or equal opportunities).
I think ethical investment (1) is very much worth thinking about, because a large amount of the influence that most people in... (read more)
I completely agree that it is not at all obvious what good and bad effects there are of companies' activities. I think it is very possible that some 'unethical' activites have more positive effects than many activities commonly understood as ethical. It would take a lot of reflection to work out what good and bad effects certain companies have. The point of my post was to ask, before engaging with this question, whether individuals' decisions about their investments in the secondary market have much or any influence on companies. If not, it's not urgent to think through the question about how much good various companies do, at least in terms of what influence this should have on your investment decisions.
This may have been obvious to many people from the start, but it wasn't to me.
'I think it's possible to create genuine incentives for companies to act more ethically if you have a large amount of money to allocate (preferably many billions)'
-'Assets in socially screened portfolios climbed to $3.07 trillion at the start of 2010' So there are already billions invested there. However, it's questionable what is ethical about these investments. First, billions or even trillions might not make much of a difference to prices, according to the logic of the argument I gave above. Second, these funds' criteria about what is ethical are open to question. Third, even if money invested in them makes a small difference, you also end up paying various management and other... (read 558 more words →)
I've been doing some thinking about charity vs investment as alternative ways of doing good (leaving open for now what that means). One question I'm wondering about is, in what circumstances does your choice of what to invest in have any welfare consequences at all (beyond differences in your own future wealth). I'm not sure about the answer and so, if any of you have comments or ideas, please put them down.
There is an argument that ethical investment is largely or entirely pointless, at least as a way of affecting asset prices and therefore making it easier for ethically acceptable companies to raise finance, giving owners/managers incentives to do things to make... (read 949 more words →)
Hello,
I'm Ben. I'm here mainly because I'm interested in effective altruism. I think that tracing through the consequences of one's actions is a complex task and I'm interested in setting out some ideas here in the hope that people can improve my reasoning. For example, I've a post on whether ethical investment is effective, which I'd like to put up once I've got a couple of points of karma.
I studied philosophy and theology, and worked for a while in finance. Now, I'm trying to work out how to increase the positive impact I have, which obviously demands answers about both what 'positive impact' means, and what the consequences are of the choices I make. I think these are far from simple to work out; I hope just to establish a few points with which I'm satisfied enough. I think that exposing ideas and arguments to thoughtful people who might want to criticise or expand them could help me a lot. And this seems a good place for doing that!
I see where you're coming from, but I see 3 advantages to paying for results. (1) This approach involves facing head-on the challenge of determining whether a charity is effective, which may be hard but is surely vitally important to answer. (2) It creates incentives for charities which are already effective to become even more so. (3) It could help to foster a system of charitable funding in which money goes to effective charities, not because experts have examined how they function and concluded that they work well, but just through the feedback processes which reward effective and punish ineffective charities. When charities operate in complex environments where the consequences of their activities are not always easy to predict, this sort of system might do better than expert evaluation.