Tag Archives: Charity

In April I posted on “trailer for David Alvarado’s slick-looking new [3D] film on longevity.” There’s now a new trailer:

The Methuselah Generation; The Science of Living Forever from David Anthony Alvarado on Vimeo.

They are using Kickstarter to solicit funds from folks like you to help them finish the film. The film looks nice, and I’m thrilled to be part of it. But alas I can’t in good conscience say that this is my best guess for the charity that, per dollar contributed, does the most good for the world.

It is interesting that they use an innovative way to solicit donations. Why is there so much more innovation in charity funding than in business funding? Here’s a related question: why do Alvarado and company ask for donors, but not investors, for their film? The film might make money, and if it does, why not offer to give some of that back?

The explanation in both cases is probably that regulatory hurdles are far larger for investors. Regulations set far higher standards for people who can ask for your money, if there is a suggestion that you might get some of it money back later. But why? Shouldn’t it be even more important that your money be spend well, if you won’t ever get any of it back?

This regulatory asymmetry seems to me to be an implicit recognition that we mainly donate to charity to signal our good intentions and loyalties, and that we don’t actually care much what happens to the money we donate.

If you invest money hoping to get it back and more, then you are furious if it is badly managed, perhaps stolen, and want stronger regulations to stop that from ever happening again. But if you donate money and the funds are mismanaged, perhaps stolen, so that your good intentions aren’t realized, well you aren’t actually so mad about that. You don’t as furiously demand stronger regulations. Because you already got most of what you wanted: a chance to show everyone how much you care.

Added 20Nov: David asks folks to vote for his project here.

Arnold Kling questioned the value of non-profits:

A profit-seeking enterprise is more accountable, in that a profit-seeking business must satisfy consumers or else go out of business. Hence, it must provide something of value to its customers. On the other hand, if a non-profit fails to provide any benefit to its customers, it still might be able to obtain grants from the government or from donors.

Fabio Rojas responded:

Non-profits provide services that are not sustainable in a for-profit format. … The customers simply can’t pay for what might benefit them and “we” (the donors) have decided that these people need the service. The non-profit format is a way to handle donations to third parties in an organized and semi-public fashion. … Examples include services to poor children (e.g., Boys and Girls Clubs), women (e.g., battered women’s shelters) and immigrants (e.g., many religious groups donate time and services to poor immigrants). My intuition is that it would be hard for a profit oriented institution to help battered women or poor children. …

It’s signaling. Not only in the Hanson “I do this because I care” sense, but as a commitment to a specific issue. The people who run the local church organization for recent Mexican migrants have to show that they won’t bail in order to give shareholders a slightly higher return. Rather, by making their organization non-profit, they show an allegiance to a specific type of person, not their wallet.

Fabio suggests that the main function of non-profits is as intermediaries between those who want to donate and the deserving recipients they want to help. But the obvious question here is: why can’t non-profits give these deserving recipients vouchers for service at for-profit firms? Why do non-profits need to provide the services themselves? Remember that 51% of non-profit revenue goes to medical orgs like hospitals, and 14% to schools — vouchers are quite feasible for both of these kinds of services.

Admittedly, in some cases there are strong complementarities between the task of deciding who is a deserving recipient and actually providing services. This applies, for example, to service coordinators such as social workers, who evaluate aid candidates and suggest relevant services to them. But why must the services that coordinators coordinate be provided by non-profits?

Now there might be good reasons for customers to sometimes choose non-profit service providers. Such a choice might assure customers that advice being given is not overly influenced by profit motives. But this reason should apply to many sorts of customers all across the economy – there is no obvious reason to expect a correlation between people donors consider deserving of help and people who buy trustworthiness by buying from non-profits.

So why don’t the non-profits that donors use to distribute help usually give vouchers to recipients, vouchers valid at either non-profit or for-profit service providers? Once one has decided who needs what sort of help, why does it matter what kind or organizations provide that help?

I suspect that what is going on here is that non-profit donors and employees both dislike the idea of letting money to go for-profit firms, regardless of how much that might benefit aid recipients. They affiliate with non-profits in order to gain an image of “doing good” and substantial affiliations with for-profits in that process taints that image.

Added 5p: Several commenters pointed out that many prefer to volunteer time, and without money mediating between their time donation and the cause. That is, they don’t just want to work at whatever makes the most money and have that money used for the cause – they want to personally spend their time on the cause. This also seems to fit my basic theory – that the more money and profit are involved in the process, the more that taints the do-gooding image of their donation.