It's not easy to save the world

I wrote a post here recently about charity (specifically, on incentives vs. grants), and in the wake of the Super Bowl, I've come across another interesting item that falls in the same basic category. Once again, there is some question as to what might be the best (or at least, most efficient) way of donating to charitable causes.

Every year before the Super Bowl (and other large sporting events, I'd imagine), officially licensed t-shirt producers print up two batches of "Super Bowl Champions" shirts, one for each participant in the game. The winning team's shirts are sold and/or given to the winning players, while the losing team's unfortunate shirts are shipped to Africa by an intermediary. As a Patriots fan, it's a process I'm all too familiar with:

This donation seems like a nice and charitable use for what would otherwise be wasted textiles, but according to guest poster Dean Karlan at the Freakonomics Blog, it's not quite that simple.

The Super Bowl stirred up an old controversy in the international aid community.  What happens to all those preprinted “Pittsburgh Steelers 2011 Super Bowl Champion” t-shirts?  Apparently, each year the NFL gives them to the international relief and development organization World Vision, who then ships them to Africa.

Is this good or bad? And why should anyone care?

This is not the first time these questions have been asked. Less than a year ago, [web entrepreneur] Jason Sadler planned to send a million t-shirts to Africa, only to be bombarded by scathing criticism from the aid blogosphere...

Opponents argue that sending shirts destroys local textile economies by flooding the market with free goods and undercutting local t-shirt producers. World Vision responds by saying something to the tune of, “but we spread it out.” That is kind of like arguing that something bad is okay if you do it in small enough doses to lots of people (rather than a large dose to a few people). Of course, such arguments don’t hold water: bad is bad, even if marginally so.

I think World Vision might have a better defense. They could argue that critics of the annual t-shirt migration (or at least all the critics I’ve heard) are thinking about the wrong counterfactual. The choice is not between (a) doing nothing — which, critics infer, would leave Africans to produce and sell 100,000 new t-shirts — and (b) shipping 100,000 t-shirts to Africa. Rather, the choice is between (a) selling the t-shirts in the U.S. as rags (or novelty souvenirs for delusional Steelers fans) and then sending to Africa the proceeds plus the money that would have been spent on shipping, or (b) shipping 100,000 t-shirts to Africa.

In other words, the NFL surely isn’t going to pay local producers to make 100,000 t-shirts after the Super Bowl. That option is not on the table. So in the end, the t-shirt migration has one pro and two cons, and we have no real data to tell us what to do. The pro: some people in Africa get some t-shirts, and hopefully those people extract some value from the t-shirts (either by wearing them or by selling them). The first con: market prices for t-shirts may go lower in Africa, and this adversely affects some. The second con: there may simply be a better way, such as selling the t-shirts in the US and sending the profits, as in (a) above.

Because of a lack of reliable data, Karlan is unable to go much farther in his analysis, leaving us to grapple with an open-ended question. As in my previous case of incentives vs. grants, it's not completely clear whether our "charity" is in fact doing more good than harm.

In attempting to devise a proper charitable program, these are exactly the kinds of questions that must be answered, and yet they're the most difficult ones to decipher. It is indeed difficult to save the world, even if our hearts are in the right place. So, as Dean Karlan did before me, I'll ask you: what do you think? Is it better to try and do harm than never to have tried at all?

[Freakonomics Blog]

Incentives vs. Grants

I came across an interesting post this weekend from economist Robin Hanson (whose blog I've teased here once before) on the topic of charity. He writes (bolding mine, italics his),

I’ve overheard many folks lately discussing what sort of charity most deserves their money. They consider the plans of various charities, and try to analyze the chances that such plans will lead to good outcomes. Most folks I’ve heard have been favoring various intellectual charities, where the money goes mostly to pay intellectuals to develop and communicate ideas. And most of these folks also seem to spend lots of time consuming intellectual ideas. They read a lot, and have many opinions about what previous ideas were interesting and useful.

Such folks would do well to review the advantages of prizes over grants, and consider becoming charity angels. Let me explain.

Consider a donor who seeks to encourage or induce some sort of result in the world. With a grant, such a donor must decide ahead of time who seems to have a promising ability and approach. But with a prize, a donor need only decide after the fact who seems to have achieved a lot. Once potential awardees see a pattern of achievements being rewarded by prizes after the fact, they will gain an added incentive to achieve, an incentive roughly proportional to the prize amounts being offered. And the prize process avoids much of the added waste of grant proposals, review, search, etc. (Promising potential winners who are strapped for cash can obtain resources by selling their future prize rights in capital markets.)

Since it is much easier to evaluate what has worked than what will work, folks who read a lot of intellectual work and who are inclined to support future intellectual work via charity should consider making a habit of just giving money to those who have already accomplished something noteworthy.

Instead of "Incentives vs. Grants", I just as easily could have titled this post "Rewards vs. Gifts"--when deciding to give to charity, should we reward someone for achieving, or simply for trying? There are dozens if not hundreds of well-meaning charities that try very hard to achieve a result, but end up having little measurable impact. It's not that they don't do some good, nor am I trying to suggest that they should be dissolved. It's just that they could--and probably would--be better and more efficient if they were forced to strive to meet well-determined goals.

Sure, our social ills are "hard" to solve, but they are certainly achievable goals. If the prize is large enough, you'll be amazed what human beings (or groups of them) can achieve. For examples, I refer back to this post from November (or even this one from October), which enumerated some pertinent instances where properly-created incentives led to seriously beneficial outcomes.

To be sure, providing an incentive will not always lead to the desired outcome. If the incentives are not large enough, or they are simply designed improperly, we shouldn't expect to see any substantive improvement in the conditions we are targeting. But I would argue that our current system represents the epitome of a poor incentive structure--we give money to organizations somewhat indiscriminately on the promise that they will do good things, and they don't have to give a dime back to us if they fail.

Businesses wouldn't last long if they structured their deals in that manner, but for some reason we expect charities to thrive in that same type of scenario. In charity as in business, we need to create real accountability in order to see the results we desire. Without accountability, any success is purely coincidental.

[Overcoming Bias]