Improve Your Charitable Giving

Við birtum einstaka sinnum greinar á ensku, þessi er héðan – eftir Art Carden

According to virtually every religious and ethical tradition, meaningful charity does not draw attention to the giver, and dignified charity does not draw attention to the recipient.  Here I will offer an economist’s perspective on the Biblical injunction to “let not the right hand know what the left is doing” in charitable giving and will argue that this results in more efficient charity (meaning that it increases the bang we get from every charitable dollar) in addition to strengthening the moral community.

One reason economics is a dismal science is that it shows us how the best of intentions executed with the greatest fidelity and sincerity can nonetheless worsen the problems people are trying to solve because they change incentives.  Some of the most basic ideas in economics concern the fact that people respond to incentives, people make decisions at the margin, and there is no free lunch.  The hidden wisdom in Biblical teachings about charity embody recognition of and respect for these principles.  I don’t know whether this is intentional or not; I’m not a theologian.  Regardless, this verse teaches an important economic lesson.

Let me be absolutely clear, here.  I am not arguing against benevolence.  Far from it.  I agree that we should help people who are less fortunate than we are.  My argument here is that there are effective ways to do this and uneffective ways to do this.  Letting not our right hand know what our left hand is doing makes our charity more effective.

This follows readily from the idea that people respond to incentives.  When charity is predictable and well-known, people will expend resources trying to become the beneficiaries of others’ charitable endeavors.  This is socially wasteful, and the entire value of the prospective transfer will be competed away as people fight over the most lucrative begging positions in town, rent children, or pay to have limbs amputated to increase their begging take (Tyler Cowen discusses this in his book Discover Your Inner Economist).

It also follows readily from the proposition that there is no such thing as a free lunch.  The money we are giving to charity has to come from somewhere, and it isn’t always clear that it will do more good, socially, if it is given to someone than it would if it were left in a bank account and lent to an entrepreneur.  That isn’t for me to decide, of course, but it is worth considering.

There are, of course, good reasons to be totally open about your giving–when you are trying to honor someone, for example, by naming a building or lecture series or something after them, or when you explicitly want to change people’s incentives.  If you just want to give people stuff, though, then your charity is most effective when it is given in secret.

So when you are giving, don’t let your right hand know what your left is doing.  And don’t let anyone else know, either.  Unless you’re explicitly trying to change people’s incentives, you do the most good when your charity is kept quiet.

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