Actually, the EMH says that taking on additional risk is the only way to increase your expected return.

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I'll propose another way of assessing this trade-off. Generally in for-profit investing, most investments tend towards an equilibrium of return for the unknowledgeable or at least average-knowledge level investor. Investors often tend to make higher than average returns when they have a higher than average knowledge of a certain investment strategy (whether it be real estate, stocks, etc.). Perhaps charitable giving is governed by the same principle. One can expect greater returns (on average) in charitable investments (except not for oneself, for the recipient) by giving now, if one has greater expertise in development economics and health than they do in other investment opportunities, whereas if you are more of an expert in real estate, or stocks, you probably can get a greater return (on average over the long term) by investing now and giving later.

Anyway, this is just an idea I am toying with, do you think there is any merit to this approach?

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"if you encounter an x-risk organization which clearly could look a lot better (e.g. the leaders could have had degrees..."

I will admit to actually having some related thoughts recently about the current x-risk organizations. It's not necessarily about certain (ahem) leaders not having degrees but that I feel like their strategies and goals could use work. However one does wonder if better organizations will just come along. One donation strategy might be therefore splitting your money between donating now and later, hoping to use current donations to develop contacts with whom you could discuss ideas and hopefully nudge toward what you believe is a better approach. It might make sense to donate at least small amounts even to organizations that you believe have poor strategies or low efficiency as long as their goals and human capital are good enough.

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"People who think that global warming and ecological collapse will soon make the world a hell can’t believe this, nor can those who fear great disruption in an em transition."

Has anyone explicitly made this argument for donating soon? I would be interested to see coherently argued cases for both sides. I mean, take the number that Bostrom threw out for the risk of human extinction in this century of 19% as estimated by various experts. If we stick to that 19%, does it still make economic sense for a current twentysomething to wait fifty years? And personally I would guess a higher risk.

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In general you can diversify your investments to lower risk. However, there's a limit to how much you can do this. If you invest evenly, no one company's failure will hurt you much, but a market downturn will. There are companies whose success has a negative correlation with the market, but since you can't get rid of risk well without them, that just means that they're priced as if they have negative risk. If you want risk lower than you can get by diversifying, you're going to have to pay for it.

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Why is that wrong? EMH says we shouldn't expect any more return from "risky" investments. Those may even pay negative nominal rates, not just negative real rates.

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When a person chooses to save financially, they choose to spend a bit less in their usual ways, in order to give money to someone else, in the expectation of getting money back from that someone else at a later date. If they had instead not saved, and spent the money instead, that spending may well have also indirectly benefited them in the future. They might buy some medicine, get more exercise, get more sleep, try out some new products, make some new friends, or learn some new skills, any of which might help their future self.But at the margin, a person who saves another dollar, or chooses not to borrow another dollar, must typically expect the financial returns from their investments will help them more in the future than will such indirect effects of spending today. In fact, they should expect this savings will benefit their future self more than any of these other ways of spending today.

This is Robin's new argument. I don't think anyone has directly addressed it or shown they've understood it. I certainly haven't.

At the margin, the recipient will be indifferent between spending or saving. He also (at least infinitesimally) prefers the bundle of future benefits obtained from saving than from spending. This is the new comparison Robin introduces into the marginal analysis, but how can it help? You can't justify an inference from how money should be allocated in the aggregate from an analysis at the margin. What am I missing?

Added April 11 Here's the answer, I think. The point is to show that donors aren't altruistic: otherwise they'd save instead of donating now. So, he figures all he needs to show is that its better to donate at the margin. "If you, given donor, really cared, you'd care enough to save rather than give now." That does not mean he can address the whole community of donors and say "The world would be better off if you all saved instead of gave now"—which is the way I, at least, had been reading him.

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Less competition between supermarkets

I live in an European city, not particularly densely populated as European cities go, and there are three supermarkets plus various smaller shops within easy biking distance (15 mins) of my house. Competition doesn't seem to be an issue.

(Alternatively, grocery store density rises until competition is significant again, but this destroys economies of scale big stores now presently enjoy, takes up lots of labor to run all the stores, and, again, prices increase, service declines).

I doubt there is a significant price difference when you take into account the costs of car trips. Small generic grocery shops lack some items, but usually you can locate a speciality ship nearby. Failing at that, you can always buy online and have the items delivered to your house.

No more buying in bulk, which adds to grocery bills.

Unless you are buying for lots of people the amount of fresh food items you can buy is limited by its shelf life.

Bulk purchases are still possibly with home delivery, which still uses motor vehicles but is much more energy efficient than driving your personal car back and forth to the store.

Lots more time spent on shopping, because a trip takes more time,


Less free time, more fatigue, higher chore load, worse relationships, higher stress.

Walking or biking is generally considered far less stressful than driving (unless you live in really extreme climates, I suppose).

More eating out, especially at fast food places, to replace having to buy and tote home groceries. All the reasons people don't bother to cook now, strengthened. And what does that do for the environment?

I suspect that fast food restaurants are much more energy efficient than home cooking, due to economies of scale. Unless you have special dietary needs, health issues can be avoided by choosing wisely (at least in all European countries I've seen. If you live in a place where the only fast food restaurants around are McDonalds' and Burger Kings, then you may have a problem). Prices are an issue (obviously you pay for the labor), but I suppose that peoples decision to eat out are dominated by commute time and cooking time tradeoffs and social considerations, not by the availability of food items in their houses.

Just increases AC bills in the summer.

On the contrary, it decreases it.

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Hanson: In your argument you implicitly assume that the charity recipients are rational in deciding whether or not to borrow or spend money. If this is the case, isn't it then also best to give them the money now as it is assumed that they themselves will use it optimally regardless?

Of course I don't agree with your implicit assumption. Charity recipients in third world countries are more than likely less well equipped to make sound economic decisions than we are. As such it is far more efficient to use our superior (and expensive) economic education to decide for them whether saving or spending is more efficient, than it is to derive the correct decision by looking at their behaviour.

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Uhm, okay, that was funny...

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The argument of saving/investing to donate more later being better can be extended until the end of time

I don't think this argument is valid: it only holds if time is infinite, and it merely expresses a paradox of infinite quantities. (See Can infinite quantities exist? — http://tinyurl.com/aqcy99w )

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Yes you are, implicitly, but still.

What is your reply to my second point? When have you saved/invested "enough"? The argument of saving/investing to donate more later being better can be extended until the end of time (when you die you just make someone inherit the account and the cycle repeats) so you get a world where no one is donating but everyone thinks they're improving the world by saving up for a donation that they keep postponing indefinitely because at any given point in time it's better to save/invest "just a little bit more" than donate at that point in time. Surely you need other arguments to determine the best time to donate, in fact you should only look at those other arguments because the "saving/investing always being better" argument doesn't lead anywhere, it's a pretty useless argument, except for people thinking about it and learning that it and other arguments similar to it are useless, saving them time the next time they come across a similar argument.

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You are thinking of "riskless" interest rates.

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While historically, real interest rates tend to be positive, they're currently negative. You have to go all the way out to 20 years before they become approximately zero: http://www.treasury.gov/res...

(and that's ignoring tax considerations)

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>unless charity recipients are saving nothing and borrowing as much as they possibly can

And if they are? My impression is that 'charity recipient' and 'high liquidity' tend to be mutually exclusive.

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