The wider consequences of giving away money
by Ben Gilbert on July 22nd, 2012
Like most of the people here, I’m asking myself what I could do that would have a positive impact on others – about what would have the most positive impact on others. One important part of this is making decisions about what to do with money. This matters for anyone with more money than they feel they need for themselves and those close to them; and it matters especially for people who plan to do good by earning a lot and giving a lot away. I think it’s fair to say that, so far, this site has generally answered this question by focusing on the good that can be done by giving to well-functioning charities. There is a lot to be said for this. The questions, though, seem wider to me. I’ll try to explain here why I think so.
One principle of this site is that it is important to think of the consequences of one’s acts, including acts of giving, rather than just the act itself. Thinking about these consequences should not stop at the fact that some individuals’ lives have been changed by your giving. There are questions about the effects of the gift, and its immediate results, on complex social and economic systems. There are also questions about what the consequences would have been of the other things you could have done with the money.
All of this is, of course, terribly complex. You cannot come close to the sort of confidence that you can have about the more direct consequences of, say, a health intervention, or many other concrete projects that charitable giving can support. Perhaps, in the end, you will decide that the uncertainties about broader consequences are so great that you should focus only on the immediate, more or less measurable good that you can do. But the wider questions are worth thinking about, and I don’t think people should despair at learning things that might guide their decisions until those questions have been struggled with.
As an example, could it end up doing more good to invest money in assets in poor countries, or to buy products you like from companies that source materials or labour from poor countries, than to give it to a charity that works in those countries? Could spending at home, in a rich country, succeed in increasing wealth there in ways that bring good to poorer countries that can export to them? For all their limitations, markets are powerful structures for generating efficiency and channelling resources to where they can be most productive. Could money that works through markets rather than gifts be more effective in bringing positive economic changes in poorer countries, and perhaps thus the welfare, political and social goods that are supported by increased economic productivity?
I don’t know. It seems to me that it might be worth listening to what economists have to say about these questions, with due scepticism about the limits of economic modelling but also respect for the attempt to trace the systematic consequences of certain decisions through complex structures involving millions of agents. Does anyone know of academics engaged with this particular question – the welfare consequences of giving money as compared to investing or spending it? Or the welfare consequences of how and where one invests or spends it? In any case, I don’t feel comfortable giving money before I have a better understanding of how to make that comparison.
There are other concerns which bring up similarly complex questions, for example about the political and social consequences of foreign-funded charities and aid organizations taking on the provision of certain services. Often, these sorts of concerns just act to forestall making any decision at all, or to give cover for carrying on living without concern for others. But this is all the more reason for people who really do want to find the answers to engage with them.
If people who are ready to live in line with their best understanding of what would do the most good, but perplexed at what that might be, take on those questions, knowing that some decision is called for and impatient to find the answers, perhaps things might become a little clearer. When you have the explicit aim of making a decision in the light of what you learn, the questions become sharper, and the uncertainties become perhaps more tolerable – when a decision is unavoidable, discoveries that nudge you in one direction are precious even if you remain finally unsure. A community exchanging ideas can perhaps help individual questioning aggregate into some body of ideas rather than remaining fragmented and personal, although there will surely be many disagreements. I hope a place can be found here for these sorts of questions.