How many causes should you give to?

June 2014

So you’ve decided to donate to effective charities, and figured out how you’re going to do it. Now comes the hard part: figuring out where to donate! In this post I look at whether to donate to one organization, or multiple–an interesting question touching on economics, cognitive bias, decision theory, and more.

Contents

In favor of one charity

Theoretical optimality

The most common argument for donating only to one charity is that, in principle, it follows mathematically from trying to maximize the expected good that your donation does. Most charities are large enough that they don’t experience diminishing returns: they’re scalable enough that the first dollar you donate to them does about as much good as the thousandth or ten-thousandth. That means that if you think your first donated dollar would do more good at, say, AMF than GiveDirectly, then your thousandth donated dollar would do more good there as well, and so on up to the limit of your donation.

Simplicity

Being a large donor for an organization takes overhead: you need to follow it more closely, update your opinion of it more frequently, figure out how your money was used, schedule and itemize your donations, and so on. If you only donate to one organization, you minimize these costs, freeing you up to do other effective things.

Making yourself more thorough and rigorous

Deciding on only one charity involves projecting extremely dissimilar things (e.g. global health interventions and catastrophic risk reductions) onto a single axis (good done per dollar) and comparing them. If you give yourself the option, it’s very tempting to throw up your hands and declare that they’re incommensurable so you have to donate some money to both. Deciding only to donate to whichever cause comes out on the very top in your analysis makes the stakes feel higher, which is a strong motivator to do your work thoroughly and reduce your uncertainty as much as possible.

The feeling of higher stakes is basically because of loss aversion bias–it feels disproportionately worse to make one really bad choice (like donating everything to your top charity when the second-place one later turns out to be better) than to make a lot of slightly bad choices (like splitting your donation among your top five charities when your top charity was actually the best one). There’s just as much potential to make a bad decision when donating to multiple charities, but there’s less potential to feel bad about it.

In favor of multiple charities

Diminishing returns

The point about maximizing expected value above is only valid if the charity you’re donating to doesn’t experience diminishing returns. But charities do sometimes experience diminishing returns, when the donation in question is an appreciable fraction of the charity’s budget. For instance, a $200,000 donation to UNICEF would be fine–they could just buy a bunch of extra textbooks or something. On the other hand, a $200,000 donation to 80,000 Hours would cover their entire operations for a year, so they probably couldn’t scale up fast enough to take full advantage of the huge influx of cash. Basically, if you’re donating a lot to a smaller organization, you might have to worry about issues of scalability that undermine the optimality argument above.

Psychological risk aversion

The argument that donating only to your top choice also has a flip side, again because of loss aversion. If you’re only donating to one organization, you’re likely to be disproportionately disappointed if that donation turns out to be a mistake–which might influence you to avoid organizations that seem to have a high upside but also a high likelihood of failure, in favor of organizations that seem like more of a “sure thing.” Biases like this are difficult to compensate for even when you’re aware of them, so it might be more effective to just set up your incentives to mitigate the bias (even at the cost of knowing that your donations are slightly sub-optimal) rather than fudging around it.

Signaling

Jeff Kaufman writes about splitting donations despite the above arguments because it looks less weird as an example to others:

It can also be worth it to give to multiple organizations because of what it indicates to other people. I help fund 80,000 Hours because I think spreading the idea of effective altruism is the most important thing I can do. But it looks kind of sketchy to only give to metacharities, so I divide my giving between them and GiveWell’s top pick.

If you’re interested in other people following your donating example, then it becomes a question not just of maximizing good done but also of minimizing sketchy appearances, which again undermines the optimality argument.

Less predictable funding

Organizations value some other things besides having money in the bank, like having predictable sources of funding in the future as well. And that’s a red mark for the single-donation strategy, because it makes your donations far less predictable. A single swap in your charity rankings (between first and second place) could redirect your entire donation stream. If you’re giving to multiple organizations, on the other hand, your donation streams are much less sensitive to small changes in ranking.

This applies more strongly to smaller organizations: as mentioned above, UNICEF would barely blink at $200,000 more or less of funding, but it might be the difference between life and death for a smaller organization. Some organizations, like GiveWell, have gone so far as to pass up large funding from a single source because of this worry:

At the same time, both we and Good Ventures agree that it would be a bad idea for GiveWell to draw all – or too great a proportion – of its support from Good Ventures.

One reason for this is that it would put GiveWell in an overly precarious position. While our interests are currently aligned, it is important to both parties that we would be able to go our separate ways in the case of a strong enough disagreement. If Good Ventures provided too high a proportion of support to GiveWell, the consequences of a split could become enormous for us, because we wouldn’t have a realistic way of dealing with losing Good Ventures’s support without significant disruption and downsizing. That would, in turn, put us in a position such that it would be very difficult to maintain our independence.

Coordination problems

As mentioned above, an individual donor’s gift is not likely to be large enough to experience diminishing marginal returns. But if many different donors are all donating everything to their most-preferred charity, then their collective gift might be large enough to change the calculus.

For instance, suppose that SCI and GiveDirectly are both soliciting donations from 100 donors with $1,000 each. Suppose that SCI is more cost-effective initially, but eventually diminishing returns kick in, so the globally optimal allocation is $70,000 to SCI and $30,000 to GiveDirectly. (And furthermore, suppose that everyone has perfect knowledge of cost-effectiveness.) If the individual donors only donate to the charity that looks more cost-effective when they make their donation, then everyone will donate to SCI, which is suboptimal. If, instead, everyone donates in proportion to the optimal outcome, then everyone will give $700 to SCI and $300 to GiveDirectly, which achieves the optimum.

This problem is mitigated if the donors donate at different times–for instance, if the first 70 donors give everything to GiveDirectly, then the last 30 could notice that GiveDirectly now looks under-funded and make up the gap. But this requires donors to donate frequently, and organizations to give frequent updates on their current funding level; it seems to me that current levels of transparency and donation frequency aren’t high enough to make this work very well.

Conclusion

A number of factors influence whether it’s better to donate to one organization or many. To name a few:

The debate is not as clear-cut in favor of single-donation as the theoretical optimality argument makes it seem, and donating to multiple causes is more intuitively appealing. On the other hand, this intuition may largely be caused by biases of loss aversion (as mentioned above) and scope insensitivity, suggesting that we should discount it. Although there is no one-size-fits-all answer, the points above may help tease out the finer points of the decision based on your own specific circumstances.

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Pablo Stafforini

Great post.

There are some additional arguments for diversification that apply only for certain donors or under special circumstances. For instance, Holden notes that by advising supporters to donate to multiple charities, GiveWell gets improved access to each of those charities, which result in improved opportunities to track its progress and learn from it.

There’s also the familiar “purchase fuzzies and utilons separately” argument, which may be construed as an argument for a certain type of charity diversification.