When a Philanthropist is deciding what he should do with his
money, they must ask themselves two important questions. What is the best way to use my money and what
organization will use my money in the way that I see most fit?
Last Sunday, I was waiting online at
the starbucks drive through and a woman approached my car and handed me a $5
giftcard to purchase anything I wanted, from a coffee to a pastry. She said to me that she was trying to do
random acts of kindness to improve people’s day and to make sure that I pay it
forward. This made me think about that
chief rule of philanthropy, what is the best way to give my money? That woman was going around doing kindness by
giving straight money, although I could only spend it at Starbucks, I would
still be able to purchase anything I wanted from the store. One of the most effective ways to give
charity, is to simply just give cash. We
learn from the organization, GiveDirectly, which gives donations of straight
money, that when giving money to people in need, it is used much more
effectively when they can spend it how they see fit. As much good as organizations like food banks
and others that distribute clothing to families in need, how do they really
know what exactly that family needs?
Wouldn’t the members of the family be able to spend the money more
wisely on things essential to their specific family?
As important as it is to give money to organizations like
The Red Cross and the Salvation Army, there is evidence pointing to the many
benefits of giving cash directly. In
Uganda and other poor countries, one time cash grants have shown to improve the
lives of the recipients years later regarding their income levels and
employment. The people who received the
grants had 41% higher income compared to another group and also 65% more likely
to practice a skilled trade. Read about
all that here, https://www.poverty-action.org/impact/cash-transfers-changing-debate-giving-cash-poor.
There are a lot of ways a philanthropist can use their
money. Giving cash directly is an
incredibly effective way to do so, seriously improving the lives of the
recipients as it really ensures that the people in need are getting the things
they need to improve on their current situations.
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ReplyDeleteAfter discussing this issue in class, I had trouble coming to a conclusion on whether or not I believe money is the best form of giving, and after thinking about it I still do not believe there is one correct answer. Rather, I believe this answer lies within the debate between “head and heart”. Pragmatically, giving cash is not always the best answer. The main reason GiveDirectly donates to countries like Kenya and Uganda is because a dollar there goes much further than a dollar in America. For this reason, the founders of GiveDirectly are hesitant to expand elsewhere, like impoverished areas in New York, because they understand it will not have as profound an impact. On the other hand, taking the idea of heart into consideration, some people do not care about the size of the impact they make, but simply if they made one at all. In this article, http://www.philanthropyroundtable.org/topic/donor_intent/cash_for_the_poor, the author mentions 2 men who travel throughout the US and randomly leave envelopes of cash to people they feel may need it. However, these two men did not care if the people went and bought alcohol with that money or it had transformed their lives, all they cared about was making someone else’s day. Therefore, I do not agree with you when you say that giving cash ensures a person is always getting what they need, because in the end you may never know where that money truly goes. But, if your goal is to just make someone’s day rather than transforming their life, I believe giving cash is an effective way to do that.
ReplyDeleteHey Zach. I also thought that give directly sounded like an interesting approach. Let the people decide what they want, they know best. It seems to me that people are living in the area they should know what best meets there needs. However, as I looked into it. I found some interesting data. First is that, “GiveDirectly reports a 28 percent income return on a $500 grant. By benchmark analysis, if this return is consistent over 3 years (0.28 a year x $500 x 3 years = $420 total), then the income return per donor dollar on a $500 grant is less than $1.” Less than $1 means that you cant invest in anything such as food security, education, health and other assets. Because of this there is no notable growth in these areas. You are essentially throwing money at a problem instead of fixing the problem.
ReplyDeleteWhat makes this even worse is this is this $420 is gross income so when you factor out expenses this is even lower than originally stated. Now in comparison to a charity such as “KickStart and Proximity Designs, which distribute subsidized irrigation equipment, generate substantially more than $10 over 3 years per donor dollar. VisonSpring, which helps people recover lost livelihoods by supplying reading glasses, turns a donor dollar into $60 of additional income.” So while it appears that people know best it appears from the data that may not be always true. Sometimes you need an intervening agent to choose the best outcome.
Compared to GiveDirectly these statistics are overwhelming as it becomes evident of the inefficiency of GiveDirectly even though it seems like a great idea. Its unfortunate that the choice cannot be given to the people and maybe there can be a way where people vote directly where the money goes, instead of it given directly. But as of now GiveDirectly seems to be a failure. This raises a question regarding ethics. As is it ethical to donate to a charity such as GiveDirectly when you know that your money could go a lot farther and help more people with a different organization?
https://ssir.org/articles/entry/givedirectly_not_so_fast
Hi Zach,
ReplyDeleteI thoroughly enjoyed your blog post. After reading about the random act of kindness that happened to you, I was reminded of times that random acts of kindness happened to me. While in High School, a person once paid for a full tank of gas for me. It is heartwarming acts like these that restore my faith in humanity. I've even found online a list of random acts of kindness that you can perform today, along with other ways of being a RAKtivist.
https://www.randomactsofkindness.org/the-kindness-blog
As far as GiveDirectly, I recognize that it is a revolutionary way to practice philanthropy on a case by case basis. GiveDirectly allows you to answer those two essential questions, "What is the best way to use my money" and "what organization will use my money in the way that I see most fit?", in the most personalized way. The organization give unconditional cash transfers to families that are living in extreme poverty. Although research in the area of unconditional cash transfers have had different results in different studies, some finds show that the recipients don't need strict conditions for the donation to have a positive impact, they just need financial help. In the book “Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty” the author Abhijit V. Banerjee, a professor in the Economics department at MIT, use evidence- based randomized control trials to test the idea that unconditional transfers can have the same or greater effect as conditional transfers. The findings of the books are a fundamentally change in the way philosophers treat and think of the poor. This empirical approach has also been adopted by GiveDirectly, which will be conducting a 12-year basic income experiment in Western Kenya to see what method for unconditional cash transfer will have the most positive impact on the recipients. Banerjee and GiveDirectly provide the opportunity for trials such as these to allow for powerful lessons, and help find the best strategies for eradicating poverty. If you’d like to read more I’ve provided a link to part of the book.
http://brandonkendhammer.com/themes_in_global_politics/wp-content/uploads/2012/12/Poor-economics.pdf
Sincerely,
David Engelmann
Zach,
ReplyDeleteI see what you are trying to say about giving directly in terms of cash, but just like Lea said, I don’t believe that there is one way to “best” give. Earlier in the semester, we saw how relief efforts have to sift through dozens of donations such as food and clothing; using time that could be better spent connecting with and finding out what the affected community actually needed. That is one of the arguments you seem to be bringing to light; that money would be more effective because organizations that distribute food and clothing can never be definite of what the people they are trying to help truly need.
I, however, must disagree with this sentiment. Two years ago, I was a volunteer at one of my local food banks. Two years before that my family and I were one of the many families on the receiving end of their kindness. Twenty or so elderly volunteers ran the food bank. The food supply was a combination of donations from two local grocery stores, the local Panera, a local farm, and the church itself. The food that was being given out wasn’t always desirable, but it was something. However, the staff didn’t only deal in food; they had a personal stake in the people they were helping. They would set a cake aside if they knew a child’s birthday was coming up. They got pet food so that they could help people keep their pets. They offered words of encouragement if people had a job interview coming up. They gave people hope; made them feel like more than a number in line to receive handouts.
It’s that personal impact that caused me to join as a volunteer. People know what they want, but they don’t always necessarily know what they need. People came to this food bank because they wanted a way to get food to support their family, but the volunteers knew what they needed and that was the hope to start again.
In class we are encouraged to discuss the effectiveness of certain charitable giving. Statistically, it seems apparent that giving money will leave long-term impact, but I think we are neglecting another kind of impact. As a recipient of the food bank, I was determined to “pay it forward”. This desire led me to a volunteering position there, as well as, leading me to take this class. “Paying it forward” has been around for a long time, just take a look at what happened at this Starbucks in 2014: https://www.usatoday.com/story/news/nation-now/2014/08/21/378-people-pay-it-forward-at-fla-starbucks/14380109/ and at this Indiana McDonalds in 2017: http://www.foxnews.com/food-drink/2017/06/22/mcdonalds-customers-in-indiana-pay-it-forward-at-drive-thru-167-times-in-row.html. So I have to ask, if the “pay it forward” mentality isn’t just a hoax and it can be proven to encourage me and other recipients of charity from places like food banks, Habitat for Humanity, and hurricane survivors to give back; should we also consider this a source of long-term impact? And if we can, then would we consider it more or less effective than just the money we can directly give?
Zach, I believe that in addition to discussing the comparison between donors giving what they think people need versus allowing recipients to decide, your post raises the comparison between helping people in the immediate and short term, versus the long term. I agree in part that giving cash directly to people in need can help them more than what we believe they need. But I do not believe that this is always the case. Sometimes immediate needs such as food, clothing, and shelter are needed in an emergency situation. If one already has these needs met, it might be easier to say that help in a different area of his life is needed. In addition, like what Lea wrote, money can be used to buy indulgences instead of things that will actually benefit someone’s livelihood. Or, similar to Jaclyn’s response, money may be used to buy things people think they need, rather than what they truly need.
ReplyDeleteZach,
ReplyDeleteI enjoyed reading your post. However I feel that money transfers are not the best way to seriously improve someones life. There is indeed large amounts of research on how the money is used after given, yet I believe there is more of a psychological impact than an economic one. The research that GiveDirectly posted supports this: https://academic.oup.com/qje/article-abstract/131/4/1973/2468874?redirectedFrom=fulltext
Yes, an improvement of quality of life due to overall levels of happiness being improved and if that is your goal when donating then there is something to be said for that, but there isn't enough there to seriously move recipients out of such severe poverty. The money could be used more effectively elsewhere to avoid irresponsible use of the money on things that aren't necessarily the most needed.