A Plea For Efficient Giving

Even among the econ blogs, there have been kind-hearted folk calling for donations to tsunami relief. Whatever happened to the dismal science? In keeping with the spirit of the holidays (the spirit of Scrooge, that is), let's snap out of this virtuous haze and criticize how and when people choose to give to charity. Making you feel bad about doing good - now that's proper economics :razz:

Here's the problem: unexpected events tend to rouse much greater emotions than expected ones. The tsunami was a freak occurence that swept out of nowhere. It made for great headlines and news stories, and was discussed anywhere people congregated. The result was a much higher reaction to death ratio than we have for more commonplace sources of mortality. This problem of drama, availability, and surprise is nothing new. It occurs in many settings - the behavioral economists call it "Availability Bias". In this situation it leads to regrettably inefficient giving, meaning that gifts here do not save as many lives as if they were directed to another cause.

The obvious alternatives are the Big 3 of infectious disease: Malaria, Tuberculosis, and AIDS, each of which kills more than a million people a year. That means that every month, year in and year out, each of these scourges takes a tsunami-sized toll on humanity. This devastation occurs steadily, no extraordinary events required, and silently, with few major headlines. Relief for a one-time occurence can only help once. Relief for a worldwide infectious epidemic can help find new methods of treatment which will help continuously, saving lives month in and month out for years to come.

Now, there is one difficulty with this argument, and that is that people who give to tsunami relief may be increasing their charity, rather than simply substituting. Hence if one approves of charity, then even this inefficient charity is a good thing. To that I would reply that my argument is not "Don't give to tsunami relief". Rather I urge all of you to give in to those charitable emotions, let them inspire you into getting out your checkbook, and then just change your target. You can use services like justgive.org to find charities like the Infectious Disease Research Institute, which "targets diseases with the highest prevalence, incidence, and mortality to humans of all ages. Together, these diseases kill more than six million people each year. Paradoxically, most governments and pharmaceutical companies neglect these diseases because they affect mostly the poor people of the so-called developing countries." That sort of policy makes much greater utilitarian sense than tsunami relief.

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One thing that makes the

One thing that makes the observed behavior efficient is the immediacy. I give money to tsunami relief, the people get it now, now, now. I give money to malaria research, and I get a possible solution ten years from now. That difference might well make tsunami relief a better bang for the buck.

In terms of the altruism mechanism, it also makes sense. The argument for being altruistic is that by helping out tribesmen in need and having them help out me in mine we all end up ahead. But the places where this mechanism works best is emergencies: I need the help when the creek rises and floods my basement, not in help paying my mortgage off. Indeed, if I started getting altruistic help for the latter, the mechanism would begin showing the traits that health insurance which included standard ongoing daily benefits does - you're no longer hedging risk.