Earning to Live or Earning to Give?

EconTalk Extra
by Amy Willis
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William MacAskill on Effective... Mitch Weiss on the Business of...

What are you doing to make the world a better place? Co-founder of the Effective Altruism movement, Will MacAskill, joins Roberts this week to talk about Doing Good Better, "tooling up" to change the world, and earning to give.

We'd like to hear what you took away from this week's episode, and how it might affect the way you try to make a difference. Use the prompts below, or suggest alternative ones, to continue the conversation. We love to hear from you!

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1. What is the "Hundred Times Multiplier," according to MacAskill? Roberts is skeptical. Which side are you on?

2. At approximately 37 minutes in, Roberts says that MacAskill has cleverly played to his biases. What does he mean by this? Just how closely do MacAskill and Roberts approach charity?

3. What are your thoughts on MacAskill's concept of "Earning to Give?" How does this compare to the advice Dan Pallota has for the non-profit sector? Would you be comfortable telling someone who was planning to be a doctor that he or she might make a bigger contribution to others as a hedge fund manager who gives a lot to charity?

4. In MacAskill's book, he argues that it might be better to be a politician than an academic because a politician can have a huge impact. Do you agree with this advice? How might Roberts's skepticism about the potential for science to guide our altruism come into play in this example?

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COMMENTS (19 to date)
Tobyw writes:

Edwardconard.com talks about the unintended consequences of charity and other economics in his book and in many interviews and papers.

Richard writes:

As I listened to this excellent interview, I wondered about the opportunity cost for the world's poor of directed charity in general. Hundreds of millions particularly in China and India have migrated from poverty to middle-class status through education and employment in industries in globally-connected markets through investments facilitated by efficient global capital markets. Funds directed to charity might come at the expense of the pool of internationally loanable funds. So what are the offsetting effects of charitable giving on the vitality of the main mechanism that has financed the proven long term transition of people out of poverty?

Tyler Wells writes:

I live in Guatemala, a country that has one of the youngest and poorest populations in the Western Hemisphere. I donate both time and money to help the poor here have better lives, so I am very interested in Mr. MacAskill’s work.
100 times Multiplier: the amount of money that it would take to double the income of someone in Global 1% could be used to double that person’s happiness, or it could be used to double the happiness of 100 of the world’s poorest.
My skepticism with the 100 X Multiplier is a result of my lack of faith with direct giving. In Guatemala half the population under the age of 19. Poor people, at least in Guatemala, have a lot of kids. They also tend not to send these kids to school and put them to economically beneficial activities (to the parents, although not necessarily beneficial to the kids) as soon as possible. I’m not an economist, but it would seem that this increasing population would increase demand for the largess of donors without increasing supply.
Poor people may spend the money given to them on a way that makes them happy (great) but that doesn’t mean that it will be spent in a way that makes society either happier or more economically prosperous (not so great). Many things that are important to the poor (social practices that involve heavy alcohol consumption, having more children) might not be activities that are important to the donor and might not lead to growth.
That said, I donate my time and resources to multiple charities in Guatemala in the hope, perhaps misguided, that doing something is better than nothing. I could have kept my higher paid job in the US and just donated more money. MacAskill probably would have advised me to do so. But I wouldn’t get nearly as much pleasure out of giving if I didn’t have the personal contact with the recipients, something that every smart charitable organization is aware of.

Greg G writes:

regarding question #2:

The point about MacAskill playing to Russ's biases was a reference to MacAskill agreeing with Russ that local knowledge is crucial and will limit the effectiveness of central planning.

Both men share a keen interest in measuring the efficiency and effectiveness of charitable efforts. They agree that consequences matter more than intentions. They disagree on the extent that government should be involved in attempts to help the poor.

Russ points out (in the link, not the podcast) that most private charity goes to support religion, art or public health rather than the alleviation of poverty. This is relevant to those who want to argue about the correct definition of altruism since it seems that most people are more willing to give to causes that might benefit themselves in some way.

Russ believes that government aid to the poor "crowds out" private charity for the same purpose. While pointing out that private organizations that aided the poor were more "numerous" before the modern safety net, he admits that the modern safety net likely results in more total dollars going to aid to the poor.

No doubt some of this "crowding out" happens due to the success of the modern safety net at alleviating the most extreme forms of poverty. Possible donors see far less of it than they used to.

If I understand him correctly, Russ is also referring to an "I gave at the office" effect where people become less likely to make private donations because they feel they have already contributed to poor relief through their taxes.

No doubt some people feel that way but I am skeptical that it reduces net giving. When I think about donating to charity, the main thing that limits my donations is concern that I might not have saved enough to cover all the possible worst case scenarios that could affect my family. Knowing that there is a safety net we could fall back on in a worst case scenario makes me more, not less, willing to give.

Paul Stokes writes:

This discussion does not directly address the question of what the altruistic person in the US, then, ought to do with his time. Should he maximize his income so that he has more to donate to charity, assuming he identifies the right charity. Should the med student, then, specialize in plastic surgery and move to LA or Dallas for the cosmetic market, rather than in family medicine and move to Kenya, taking the income difference and donating it to Kenyan medical schools or science scholarships for bright Kenyan students? I understand that the discussion is not about that particular question and that you cannot cover all these questions, but that is the question I came away with.

Mark Crankshaw writes:
What is the "Hundred Times Multiplier," according to MacAskill? Roberts is skeptical. Which side are you on?

The first assumption is that "We" (westerners or Americans) are 40 times richer then "they" (the worlds poorest). The second assumption is that they, due to a lower cost of living, can get 2.5 times more purchasing power than "we" can. So, if "we" reduced "our" individual income 50%, and successfully transferred the resultant "savings" to "them", this would result in doubling the income of 100 of "them".

Do I even have to say it? Of course, I am skeptical. I have no doubts, however, that were a significant increase in aid to poor countries, of course, funneled through western aid agencies, that this would significantly increase the capital available to (usually quite affluent) western aid workers and advocates (and no doubt increase their salaries and benefits as well). Well, how cynical of me to even suggest such a thing...

Aside from the rather large black hole that significant amounts of foreign aid have fallen into alluded to above, there is another factor the leads me further into the skeptical camp.

The 100 times multiplier neglects to account for something the worlds poor do have and in abundance: namely, a parasitical ruling class. To tie in question 4, I agree that politicians do have a huge impact on world poverty. Just not in its alleviation.

Where ever one finds widespread poverty one need not look to far for corrupt government officials whose policies are exclusively designed to cement the current hierarchical economic, political and social order. While the Left moans about the gulf between the income gulf between "the average American" and, say, Bill Gates, that gulf is dwarfed by the gulf between the incomes of the average Zimbabwean and Robert Mugabe.

Does any one not understand that the Robert Mugabes' of the world do not want the status-quo to change? Seriously? Do they not understand that, for your average tin-pot dictator (of which the world has an overabundance), that significant increases in the incomes of their hapless subjects is a direct threat to the hierarchical, ruthlessly parasitical, extortion racket these crooks call "government"? Why, what next, those subjects might actually want a "government" that serves their interest rather than the ruling class!!! We don't even have that in the West, for heavens sake!

The assumption that aid, when directed towards the worlds poor, will be allowed to accumulate in the pockets of the poor without the notice of a Robert Mugabe, Kim Jong-un, or Joseph Kabila is absurd. The assumption that these dictatorial regimes won't help themselves to any increase in the incomes of their captive subjects is likewise absurd. Widespread poverty doesn't just "happen", it is manufactured and it serves the political interest of those with the power to manufacture it.

Cutting your income in half and sending the net to aid agencies in the hopes of "saving Zimbabwe" is far, far, far more likely to buy another Rolls Royce for the likes of Robert Mugabe or, be spent on a luxury cruise for some 6 figure Western-based "aid-director", than it is to "double the income" of 100 Zimbabweans. Yet another reason to count me out of that particular form of "madness"...

Russ Roberts writes:

Greg G,

When I was talking about crowding out, I was talking about how certain government expenditures crowd out certain kinds of private philanthropy. American give a lot to charity. Very little of it goes to the poor. If the welfare state disappeared, that would change. Part of the reason individuals contribute to private voucher programs to help poor kids get out of lousy public schools is because those schools are very bad. If they improved, those contributions would go elsewhere.

Andy writes:

I didn't see givewell.org mentioned by Dr. MacAskill in the links list, which may be of interest to listeners.

As a high tech worker, I sometimes feel guilty about working on consumer products that make the lives of those in the developed world marginally better, when I could be helping solve more fundamental humanitarian problems. Thus, I enjoyed the thought that I could potentially make a larger humanitarian impact doing what I do now than say creating low cost water purifiers. This perspective is similar to Craig Newmark's (Craigslist) quote, "Make a comfortable living, and then make a difference."

On the impact of EconTalk, it has certainly enlightened me to new ways of thinking about public policy and moderated my well intentioned but sometimes misguided liberal bent. Thank you.

Mark Crankshaw writes:

Greg G

When I think about donating to charity, the main thing that limits my donations is concern that I might not have saved enough to cover all the possible worst case scenarios that could affect my family. Knowing that there is a safety net we could fall back on in a worst case scenario makes me more, not less, willing to give.

Another example of how two people from the same country can have two very different views on the same phenomena (and why "political solutions" to problems that are mutually agreeable are very, very scarce). This is also what places a limit on my donations (limiting them to zero). However, my take on our "social safety net" leads me to precisely the opposite conclusion. If you are a married, non-drug using, non-alcoholic, white, working age male with an advanced degree and steady employment, the worst case scenarios that would result in me getting any help whatsoever from the plethora of means-tested aid programs provided by government would have to be apocalyptic in magnitude.

At which point you might well ask yourself, could the lack of such a "safety net" be all that much worse? Not really, as I see it. Either way, with the safety net or without it, unhappiness, suffering, bankruptcy, penury (or worse) is headed straight your way should a catastrophe of apocalyptic proportions strike.

This has policy implications. Which environment suits me best? One where I pay for a lot for a social safety net that provides me next to nothing in value, or one where I pay very little for a social safety net that provides me next to nothing in value? One where I pay a lot for a social safety net that is often abused and generally rewards people nothing like myself, or one where I pay little (or nothing) for a social safety net that is often abused and generally rewards people nothing like myself.

You and I can disagree about this, and as I've tried to make clear, that disagreement doesn't make you nor I "evil" or "misguided". We have a conflict of interest, you have a conception of the "good life" or "what's best for you" that differs from mine.

I am not of the opinion that welfare spending in the US is "over generous"; yet I still would prefer that these means-tested programs be cut. I am confident that, were the benefits cut, that the beneficiaries, being both intelligent and self-interested human beings, would quickly modify their behavior (by getting better educated, foregoing or postponing out-of-wedlock child bearing, relying more on family or private charity, and by providing increased paternal contributions) to compensate for the loss of benefits. I believe that welfare recipients are not mentally handicapped children who would simply roll over and die if government benefits dried up. They'd adjust their behavior and quickly. Reducing the costs of programs that do not help me (or my family) is "what's best for me".

As for charity, giving money away leaves one incredibly vulnerable to unforeseen future events, and the "quality" (or, more precisely, the lack of it) of the (very expensive) government social safety net completely eliminates my willingness to give to charity. I would consider that reckless and irresponsible behavior and not in the best interest to the people to whom I truly do have commitment towards and responsibility for, namely, my family.

The only effective insurance I have is the private sector insurance which I pay out-of-pocket for in the private sector insurance market. Very much why I resent compulsorily paying for such shoddy, threadbare, and inadequate government issued "social insurance" that seemingly benefits only others who are not part of my family, and hence to whom I have no commitment towards or responsibility for.

Jerm writes:

In terms of "crowding out" of philanthropy, I think that this use of the school vouchers example is incorrect.

First off, school vouchers are almost always heavily subsidized by the government. So if an individual "contributes" to a private voucher program (I'm not sure if Russ means that outsiders are contributing to the poor or if the poor are contributing to themselves), they are receiving a significant "match" of government funds. Presenting vouchers as if it were some sort of alternative to the welfare state is not an illustration of "crowding out", as they are both just different forms of government sponsorship.

In absence of public schools or government support of school vouchers, much MORE private support would have to go to the school system. Government sponsorship of education is "crowding out" all of the private schools that would exist in a world with no public school.

I think that Russ is mixing up efficiency gains with crowding out. It's not the assumed lousyness of public schools that crowds out philanthropy...it's their existence, good or bad.

Jerm writes:

A variation on question #3:

One of the parts of "Earning to Give" is to donate cash instead of labor. And I've seen this in action. If given a choice between 150 hours of volunteering (3hrs/week) or $1500 in donations (which qualifies as a major donor) per year, my museum will always choose the cash. Not that my labor is worth less than $10/hr...just that there's so much flexibility with cash.

But what about blood? We used to think of donating blood as sort of like a labor donation, and many people do it out of a sense of duty.

In recent years, more and more people are learning that their donated blood is being sold. The Blood Bank sells the blood...sometimes as much as $200 a pint.

Should that matter? For a while, I stopped giving blood at the Blood Bank. Because it seems like I'm being a chump, giving something away that is immediately sold for cash.

But maybe I should be happy. Maybe I should be proud. The blood isn't being wasted...just sold before it's used. Only the biggest of bigshots can throw $200 in a church collection plate. Nobody EVER puts $200 in the museum donation box. But if an hour of my time results in $200 of value entering the blood market...how can I say no? Giving blood is more valuable than working, it seems.

Russ Roberts writes:

Mark Crankshaw,

None of this discussion was about increasing foreign aid or development aid in the traditional ways that you decry in your comment. MacAskill is talking about giving money to private organizations that typically give money or assistance directly to poor people. Two different things. Or at least I think and hope so.

Russ Roberts writes:

Jerm,

The private vouchers I had in mind in my comment are ones where individuals give money to an organization that helps poor kids in public school afford tuition at a private school. I wasn't referring to government-funded vouchers. Sorry for not being clear.

Mark Crankshaw writes:

Russ,

Fair enough, I'll concede they are different in many respects. In one way, however, they are not.

Dictators (like Robert Mugabe) will behave parasitically and retain the same incentives to preserve their power by confiscating any increase in the income of their subjects regardless of whether it is government directed aid or privately directed aid that may have increased that income. This parasitic tendency of the governments, typical of most impoverished nations, serves as a considerable check against any break in the status quo. Unfortunately, for most inhabitants of poor countries, the status quo is grinding poverty for most and extreme wealth for a small ruling elite.

Here's the metaphor that is useful to illustrate how I see this: if you are at sea and your small ship is leaking water, you may well start to bail it out. However, if there is a three foot wide hole in the bottom of that ship and it remains un-repaired, it won't be long before the ship sinks regardless of how much time and effort you are prepared to "donate" toward bailing.

Efforts to improve the lot of the lives of the world's most desperately poor will remain severely blunted as long as the ruling classes of the nations in those poor inhabit either completely transform their whole parasitical approach to governance (extremely unlikely as that may likely lead to their violent removal from power by a force as parasitical or worse) or they are forcibly removed from power by an entity quite unlike themselves. I contend there will be considerable "push back" by these regimes against such a transformation and/or removal and there is a derth of non-parasitical entities within those counties willing and able to seize power. In that environment, I contend that the effect of aid (government directed or otherwise) will continue to "underwhelm" and will not improve any time soon no matter how many "sacrifices" are made from abroad. Consequently, I suspect that the number of Westerners willing to sacrifice significant portions of their income to aid (govt or private) will also continue to "underwhelm".

wesmouch writes:

I find Mark Crankshaw's comments to be quite illuminating. I have a skeptical view of most charities and find that they are promoted so that a few at the top can have cushy jobs. Giving to others is difficult to do without altering the recipient's dignity and economic incentives. Of course I have to be skeptical of my own reluctance to give to charity. Perhaps I am rationalizing my stinginess. On rare occasions I have had the opportunity to give in a way that had a positive effect on the recipient's life. But I accent that that was rare. My gut feeling is that most people of the left care only about making themselves feel better and not so much about the poor. This is not to say that they wish bad on the poor just that they wish to feel better about themselves more. Great discussion, Russ, as usual.

Floccina writes:

When ever I think about retiring the charities that I support come to mind. They will get less when I retire. That is one factor that keeps me working.

Jane DeLynn writes:

I find it amazing (& frankly, a bit offensive) for RR to voice objections to cash transfers by comparing saving people from starving to a billionaire giving him $ (" for what? So I can lie around all day? I don't get it").
For one things RR has an upper-middle class lifestyle. Any study I have read ( except the one in the show about $ doubling happiness: do you really think a billionaire is 10x as happy as a billionaire & that w 32 billion is 5x happier than a billionaire?) says that above a decent standard of living more $ does NOT lead to greater hapinnes (cf Study showing corporate and law firm attorneys less satisfied than public defenders).
Then, then idea that all these people would lie around in leisure if we gave them food etc is on a par with the "welfare Cadillacs" Reagan ( I think) used to go on about. Are there any studies examining whether this is true ? But suppose even half the people getting $ are lazy bums. You are still saving the lives of a lot of people. Should they die because their neighbors are venal? (We don't use such standards in other areas of life , say, to get rid of the Veterans Bureau becaus pe it could be doing a better job, or to disband thr military bec of Vietbam, Iraq etc, boondoggles on incomparably scales. We tolerate waste and corruption in every other area of life, why expect otherwise here?
I would have thought Libertarians would welcome an assistance program that would save $ by eliminating gigantic layers of bureaucracy ( both governmental & NGOs). This kind of program avoids the problems of the big projects whose monies go mostly to dictators

I like yr program very much, Russ, although I'm a Bernie Sanders type Profressive (they get to many of the same places by going in opposite directions) , but I do find you a bit naive in some ways. I remember a program where you said yr housekeeper had a better car than you, & implied such people were making a decent standard of living. You may pay $25 per person per hour to have your house cleaned, but most of it goes to the person running the business ( as it true of other businesses) --the average worker makes about $10 hour. I hired one once whose workers were not allowed to use the bathroom in homes they were cleaning. Since then I make it a point to hire individuals, not services, & that is why such workers are tipped. read Barbara Ehrenreich's NICKEL AND DIMED to see what life's like for hiysecleaners, waitresses etc.

Scott Swearingen writes:

Hello,
I am recent convert to EconTalk, brought to the fold by my financial advisor/friend. I have found the conversations fascinating and unsettling, which means Russ is doing his job.
On the talk about effective charity, I was struck that microcredit (village banking) was not mentioned. Our church has funded 40 microcredit banks instead of direct giving of money, medicine, school supplies, etc. In our recent work through a non-profit JustHope in Nicaragua, the payback rate is 100% and many microcredit programs have very high returns. And microcredit focuses on women borrowers because they are better credit risks and the profits from the business tend to go to the entire family (food, shelter, education). Has Russ interviewed an economist about this? Say Muhammed Yunus, Nobel Peace Prize winner? Keep up the great work!
Scott

[Hi, Scott. Three episodes so far on microcredit you might want to check out: Banerjee on Poverty and Poor Economics, Munger on Microfinance, Savings, and Poverty , and Townsend on Development, Poverty, and Financial institutions. --Econlib Ed.]

David Bley writes:

First of all, I enjoy Econ Talk very much. I am not an economist but I became interested in economics when I decided that the discipline was not providing leadership in the design of our economic system to create a more level playing field. This Effective Altruism has the potential to do this. I believe that voluntary sharing is much more effective than law which attempts to re-distribute wealth.

On another topic, something which I am concerned about is the elimination of jobs due to automation and outsourcing. This trend will continue and I don't see how these displaced people can all find other sources of income. Now many displaced people are tyring to generate revenue via the internet, but I can't see how this will help more than a small percentage. I think that we need to talk about what we want our economy to produce, how it needs to serve its members and who we want to have membership in the economy.

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