Sunday, November 6, 2011

The most for your money

Let's say you periodically donate a certain amount of money, and you want to increase the good that you're doing. How would you do that? Well, the obvious way is to give more money.

If all charities were the same, yes, giving more money would be the only way to increase your impact. But there's a second way – you can change where you give.

Charity Navigator was one attempt to solve this problem, and there are other similar rating sites. They focus mostly on the ratio of program costs to administration costs. This is a good way to filter out the worst charities – I don't trust an organization that's spending only 6% of its budget on the actual work it set out to do.

But what about all those charities that spend a reasonable portion of their budget on program work? Charity Navigator lists 1,317 organizations with a four-star rating. Where to start?

Well, I can rule out causes I'm not interested in. If my goal for this donation is to save lives, I'm not interested in museums or colleges. But that still leaves hundreds. Should I just pick one I've heard of?

That's where research on effectiveness comes in. What we really want to know is not just how much money they're spending on programs, but what those programs are accomplishing. Sites like GiveWell and Giving What We Can have tackled this question.

Most charities don't have any evaluation of their programs that's available to the public. For example, one year GiveWell evaluated 83 charities that work in the US. 62 had no formal study of what they were accomplishing, 15 had studies that were badly done, and 6 had proper studies. Of those, 2 showed no impact, 2 showed partial or small impact, and 2 were actually recommended. Only 2 out of 83 were shown to actually work.

So if you've already decided to give $100, or $1,000, or whatever, it matters a lot where you give it. Take advantage of the research that's out there – you can accomplish more for the same money just by picking a better charity. It's the difference between accomplishing something unknown – maybe nothing – or something that's proven to work.

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