The first case for a microfinance project is the “In defense of usury” WSJ article, about a randomized study of a loan’s effect on individuals.

http://research.yale.edu/karlan/deankarlan/downloads/WSJDefenseUsury.pdf

The second is a list of anecdotes from Opportunity International.

http://www.opportunity.org/NETCOMMUNITY/Page.aspx?pid=217&srcid=193

I am telling you that this is false. Fundraising today is done either with emotional appeals with zero relation to facts, or with such liberal use of “analysis” as to exaggerate the returns on charity beyond what they could reasonably be. That means there’s no incentive to share an actual success, because if you give all the details, it will look like an abject failure next to the un-filled-in stories other orgs tell. For a precise example of what I mean, see this report on microfinance vs. this one . The former can’t compete, in fundraising terms, with the latter.

“Markets make decisions better than individuals” is often true, but it is not a universal unconditional truth. It depends on the things that often make it true being true, including: traders have access to enough information to form acceptably narrow bid-offer spreads (not currently true in charity), and traders have enough incentive to bet (not true when the return-*to-risk* ratio is unacceptably low, as it is when so little info is available and anyone with an acceptably narrow bid-ask spread is likely to be an insider).

We are trying to change these circumstances. As I’ve said, there already is a mechanism for betting on projects (donating), so the problem isn’t there isn’t a market, it’s that the market’s broken.

Any org that didn’t make project information readily available to traders would automatically make people question its usefulness. Orgs that engage in successful useful projects at reasonable costs will want everyone to know.

This of course is currently the case, successful projects are publicized and unsuccessful ones are hushed up. So as with companies and stocks people can base donations to charities on past performance. This is where GiveWell is doing a great job.

But decision markets help ensure the success of future projects. The market is much better than the individual at gathering and assessing information.

Robin’s examples (malaria nets and country loans) of were both for future projects. As you know we don’t have unlimited resources so we have to decide which projects to support and markets make these decisions much better than individuals.

I don’t think the problem is that people are promoting what they know are futile projects. I think the problem is that people aren’t evaluating and discussing the projects critically enough.

Robin – yes, humans can bet no matter what information they have. But having less information leads to wider markets and less potential for value-added over the project funder. When we’re talking about betting on the mortality rate across an entire country 3 years from now, that’s a low-ratio bet even when the expected value is high. Nobody disagrees with your conceptual point, the question is where the priority should be, and I think it needs to be on getting information to people who already want to use it rather than paying people to bet on information they have very little of.

As for subsidizing insiders to trade on what they know, I oppose this idea outright, because I’d rather pressure funders to reveal their *actual information*, and let others get in on helping to interpret it, than incent them specifically to continue hiding it so they can try to take advantage of gamblers. Which do you think is more valuable to a group of intelligent, analytical individuals: the foundation’s numerical prediction re: mortality rates, or the information that goes into it?