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Boris Yakubchik

Why I give

What motivates someone to pledge 1%, 10% or even 50% of their income? How does this affect their lives? Here, one of our 'pledgees' Boris, describes in more detail his reasons for giving 50% of his income to charity and how it has affected his life (the short answer is positively!) Later this month, you'll even have the chance to talk about this with Boris directly. Boris will be taking part in Bolder Giving's Bold Conversation on the 21st February, a monthly phone discussion with an extraordinary giver that you can participate in.

I didn't always give 50% to charity and until about five years ago, I gave nothing. During college, I had the immense fortune of learning about Peter Singer and eventually reading his 

. His essay left a long-lasting impression on me, I felt he opened my eyes to something that was clearly true - helping others when it is of so little cost to you is the right thing to do.

Giving was not what my family did, so it was foreign to me to give my credit card number to someone for a service I would never see performed. Nevertheless I felt it was right, and continued to learn more about the issue, reading 

. Giving more was a gentle progression, first joining a pledge to 

, then, realizing how good it felt, giving larger amounts and giving more often. I started doing "

" - I would ask my friends who insisted on giving me a present to donate to a charity of my choice instead; it was slow at first, but it's become a wonderful tradition.

The turning point came when an acquaintance from the Philosophy Department offered to meet up for lunch. We talked about 

 and other exciting topics; a bit into the conversation he asked if I've heard about Giving What We Can (I had) and then said "What do you think about joining?". At the time, he and our colleagues were starting a Giving What We Can chapter at Rutgers and I eagerly joined in.

What excited me most was that the organizations I was now donating my 10% to were cost effective and transparent. Finally, in December 2011 when I started my first full-time job as a high school math teacher, I realized I could give 50% without decreasing my quality of life one bit. Even after all the donations I was earning more than I was when I was just a math tutor. I've never liked wasting money and have always been frugal. Now I simply apply the principle of cost effectiveness not just to my donations, but to my spending. By 

thinking strategically how to spend money

, I get to enjoy a quality of life higher than if I had been spending 100% of my earnings as most people do.. I still get to enjoy restaurants and outings with friends, though we've found that movie nights or potluck at home are more fun. I don't feel I'm missing out; this year my girlfriend and I are going on a road trip across the US.

Giving 50% has been a rewarding experience. The difficulties people said I would face have not materialized. It is astounding to me that I live better than most kings in history: I eat fresher and more varied food, I listen to the world's best music at a press of a button, I have heating, cooling, and internal plumbing in my apartment, and I don't need to worry about being assassinated. It brings me a great deal of satisfaction to know that a significant fraction of my time that I spend at work, I work not to better my life, but to tremendously help thousands of others.

Alex Catlin

Death by Info-graphic?

The Institute for Health and Evaluation at the University of Washington in Seattle recently produced a time-based 

 of the causes of death broken down by cause and area. Even if you’re not a research geek, like me, you can easily spend hours mining the data and each time you look you discover another story, not just about yourself but about where we still have some real work to do both in terms of our focus at home but more importantly in the developing world. While these observations are fascinating and please feel free to feedback your own, I want to broaden the discussion to the rise of this sort of data and what it represents.

The Causes of Death graph is an illustration of the rising phenomenon of graphical representation of vast quantities of data. As is often said: “A picture is worth a thousand words”. With this in mind the appetite for info-graphics, information visualisation software, geo-visualisation and mash-ups continues to grow unabated. Hans Rosling’s development of the 

 Trendalyzer for instance, has offered a new way of looking at correlations of health, economic, and development, and other pertinent human data across all regions of the globe over the last century up until modern day. By doing this, global trends and developments on the ground can be analysed in terms of their direct impact on a number of relevant benchmarks. Rosling himself points out how you can now use the software to identify the huge bump in life expectancy caused by the invention of penicillin. This is something we have all assumed but it garners particular strength when presented graphically.

Will you sink or swim in the sea of data?

This should also be viewed in the context of what has been described as ‘big data’ - the current technological buzzword that encompasses the vast quantity of data both official and user-generated that is being accumulated through the web. For instance in 2011 alone some some 1.8 zettabytes of data will be created, according to a new IDC Digital Universe study, equal to 57.5bn 32GB Apple iPads. This means data volumes are doubling every two years – faster than Moore’s Law. Indeed, many commentators now predict a time when all policy as well as elements of journalism, think wikileaks, will come from the ability to mine and analyse that data in an appropriate way. Does this mean that database engineers will become the new Gods or does it pave the way for a new wave of analytical tools? Either way we are even more at the mercy of the machines.

While presentation of large quantities of data in a single image or graph makes them much more ‘consumable’, relying on them too much comes with a warning. This is particularly true when the data is being used in decision-making processes and particularly in policy-making. Academics have described this aggregation of data as the ‘data iceberg’ (see Jesringhaus amongst others for details on this) where only the top line figures are viewable, while the complex web of information that makes up the aggregated data is hidden. In terms of the QALY data, it appears to highlight areas that would warrant policy or NGO focus but unfortunately on its own offers no explanation of the context, causes or anomalies that have produced this data. With policy-makers’ time particularly precious there is a danger that this kind of aggregated data will be presented as telling the whole picture, ultimately leading to misdirected policy that attempts to affect the results rather than the underlying causes.

However this take nothing away from the power of this tool. Already people are gaining new perspectives on what areas of intervention require investigation. At the same time new data tells previously unknown stories about what people have to be aware of as individuals in terms of their own health. The data also highlights how lucky we are in the West and how much work has got to be done to address the inequalities in death rates between countries, gender and age. The other stunning fact is how many people die of avoidable causes. Surely the provision of clean water and of the basic necessities to all as well as the extension of Western drugs and healthcare globally can make a huge difference in balancing these figures?

A final thought: Looking at the data provides a little window into our own mortality. Ultimately one day we will be at the bottom of this ‘data iceberg’.

Jess Whittlestone

Encourage discussion, not defensiveness

Getting more people behind a cause you care about can be a great way to 

. To do this you need to be able to communicate your ideas in a way that allows people to engage with them fully. But this isn't always easy. Rather than encouraging constructive discussion, presenting new ideas - especially about moral issues - can often spark confrontation.

I know a number of people have found this when talking about the fact they give x% of their income to charity. As soon as the idea is mentioned, rather than really listening, people often respond defensively; giving reasons why they don't do the same or why your suggestion is totally unreasonable. "I can't afford to save money/pay my mortgage and donate too", "You must be getting financial support from elsewhere if you're donating that much!", and similar responses seem common. As soon as these kind of defensive reactions slip in, all hopes of getting your point across are pretty much shattered.

Why is it so hard to communicate new or controversial ideas without provoking confrontation? How can you improve the way you frame your case to encourage discussion, not defensiveness?

The first thing to note is that we mostly have a strong desire, arguably a 

, to believe that we are good, moral people(1). This means that if you present someone with a piece of information which seems to contradict that belief, they're not going to like it very much. Feeling like their own positive self-image is being threatened, people often 

tend to resent, rather than respect, moral behaviour in others

(2). This is down to a phenomenon known as 

(3): that feeling of discomfort you get when you realise the way you're behaving contradicts a view you hold of yourself(4).When you express to someone the view that "morally you should do/care about x" and they 

 do x, you seem to be suggesting that their behaviour doesn't square with their view of themselves as being moral.

If your behaviour appears to conflict with a belief you have about yourself, there are three possible methods of resolution:

Add new beliefs that justify your behaviour given your already existing beliefs about yourself.

Suppose you believe yourself to be a sensible, health-conscious person. One day, despite a great deal of medical advice to the contrary, you get into the habit of smoking. This causes quite an unpleasant feeling: you really do believe you're sensible and health conscious, but your smoking suggests the opposite. What can you do to resolve this?

You could accept you're not as health conscious as you thought you were, after all;

Or, you could attempt to justify your smoking to make it consistent with you being health-conscious: it's relaxing which has its own health benefits, the doctors have got it wrong, etc...

Faced with this choice, a lot of people seem to go for the third option. This isn't surprising. Changing your behaviour, especially if it means giving up something you enjoy, can be incredibly difficult. Accepting that you just don't have the positive traits you thought you did isn't that appealing either. Finding a way to justify your behaviour whilst retaining a positive self-image, therefore, might seem like the best of both worlds.

I think the reason people can be so defensive about moral issues is often similar to the reason people justify their bad habits. We (mostly) all believe we are good people. If someone points out that our behaviour doesn't square with that we can either a) change our behaviour - start donating more to charity, for example - which might at first seem to be a big sacrifice, b) accept we're not really a good person, or c) find some way to justify our behaviour. This is what people seem to be doing when they claim they can't reasonably afford to give money away, or try to find reasons why making such a suggestion is unreasonable, without necessarily giving it full consideration.

How can you communicate your cause to prevent this kind of reaction? There are two steps here that result in defensiveness: the unpleasant feeling of dissonance itself, and an attempt to resolve the conflict by justification. So there are two ways you might try to avoid confrontation: by communicating your ideas in a way that aims to minimise the dissonance caused to begin with, or by doing so in a way that encourages a different reaction to it.

The first tactic would be to try and prevent the reaction altogether, by framing your case in a way that appears consistent with what the person you're speaking to already believes. If someone feels they can consider your view without compromising their view of themselves as a "good" person, they're much more likely to fully listen to what you're saying.

"Most people want to do good, but just haven't been told some of the most important facts: like doing x can make a really big difference and is actually much easier than you might think."

"It's morally wrong not to do x, so anyone who doesn't do x can't be a good person."

"I don't think your behaviour fits with what you claim to believe: if you really believe that, you would do x."

Think positive: focus on consistency, not inconsistency. Highlight the fact that the behaviour you're suggesting is consistent with something the person already believes, and not on the fact that their current behaviour is inconsistent with it.

To some extent, trying to advocate something (especially if it's controversial) is always going to provoke conflict in people. Rather than trying to prevent the conflict occurring altogether, you might focus on encouraging people to resolve it differently; by changing their behaviour rather than justifying it.

The good news is that there's evidence you 

 actually use cognitive dissonance to your advantage as an advocate. Several studies have found that groups who are made aware of an inconsistency in their attitudes and current behaviour are more likely to change their behaviour than those simply asked about their attitudes.(6),(7) For example, households given feedback about their high levels of water consumption combined with a reminder of a previously expressed belief in conserving water significantly decreased their water use relative to those simply given feedback on previous consumption.(8) This suggests that in some cases, being made aware that their current behaviour was inconsistent with their professed beliefs ("I am responsible in conserving water") actually made people 

 likely to take on board arguments for conserving, not less.

So how can you frame your case to change behaviour, not cause defensiveness? A few subtleties appear to make all the difference:

Research has repeatedly shown that the more "guilt" nonprofits and commercial advertisers use, the less likely people are to take their messages on board.[^6] [^9] On the other hand, if people can come to realise 

 that their behaviour doesn't square with their values, they're much more likely to resolve this conflict by changing their behaviour than by justifying it.(6)

Why might this be? Recall that when you realise your behaviour contradicts some belief you have about yourself, this causes a "subjectively unpleasant phenomenon"(10) - that is, it doesn't feel very nice! If someone feels like you have caused this nasty feeling by trying to guilt-trip them, they're more likely to associate the feeling with you and your claims, and so seek to resolve it by dismissing them. If, on the other hand, a person is able to acknowledge that this nasty feeling is the result of an internal conflict, it seems more likely they'll try to resolve it internally by considering all angles, including the one you're presenting.(11)

Whilst you might think "naming and shaming" could encourage people take responsibility for their behaviour, it seems the opposite is true. According to a 1998 study, pointing out inconsistencies in peoples' behaviour is much more likely to encourage behaviour change if done anonymously.(12) Participants engaged in public advocacy about the importance of recycling, under one of three conditions:

The first group listed their past failures to recycle anonymously,

The second listed their past recycling failures and were personally identified,

The third did not list past failures at all.

Both those in the first and third group increased their levels of recycling following the advocacy, with those in the first group changing behaviour more than those in the third. However, those in the second group afterwards actually demonstrated a 

 belief in the importance of recycling. This suggests that making people aware of inconsistencies in their beliefs and behaviour can motivate behaviour change, but only if done in the right way: like guilt-tripping people, holding them personally responsible doesn't seem to do the trick.

Part of the reason people are often reluctant to change their behaviour is that it seems like a big sacrifice. Helping people to see that what you're suggesting isn't as difficult as they might think can therefore increase the chances they'll take it seriously. One good way to make something seem easy is to 

demonstrate that lots of other people are doing it

"X is really easy to do, and can make a really big difference because..."

"Loads of people have started thinking about x/doing x, and here's why..."

"Doing x requires massive sacrifices, but it's really important."

"No-one else cares about this cause except me - please listen to me!"

(1): "Most of us have a need to see ourselves as reasonable, moral, and smart. When we are confronted with information implying we may have behaved in ways that are irrational, immoral, or stupid we will experience a good deal of discomfort" - see Aronson, E., T.D. Wilson, and R.M. Akert (1999): Social Psychology. Third Edition.

(2): Benoit Monin, Pamela J. Sawyer and Matthew J. Marquez (2008), "

The Rejection of Moral Rebels: Resenting Those Who Do The Right Thing

Journal of Personality and Social Psychology

 Stanford, CA: Stanford University Press.

(4): Research studies have been conducted supporting the hypothesis that subjectively unpleasant physiological arousal follows from cognitive dissonance: see Elliot, A. J., & Devine, P. G. (1994). 

On the motivational nature of cognitive dissonance: Dissonance as psychological discomfort

 Journal of Personality and Social Psychology, 67, 382-394

(7): Stone, J., Aronson, E., Crain, A. L., Winslow, M. P., and C. B. Fried (1994), "

Inducing Hypocrisy as a Means of Encouraging Young Adults to Use Condoms.

Personality and Social Psychology Bulletin

(8): Aitken, McMahon, Wearing and Finlayson (1994) "[Residential Water Use: Predicting and Reducing Consumption](http://(

http://onlinelibrary.wiley.com/doi/10.1111/j.1559-1816.1994.tb00562.x/abstract

Guilt appeals in Advertising: What Are Their Effects?

(10): Elliot, A. J., & Devine, P. G. (1994). On the motivational nature of cognitive dissonance: Dissonance as psychological discomfort. 

(11): There's arguably a kind of "shoot the messenger" effect going on here - a person who brings bad news or evokes negative emotions appears less likeable by association - see Robert Cialdini's 

 (especially Chapter 5, "Liking") for more on this.

Hypocrisy and Identification With Transgressions: A Case of Undetected Dissonance

(13): See Chapter 4, "Social Proof", of Robert Cialdini's 

Julia Wise

Does Altruism Matter?

The other day on the subway, I gave up my seat for an older woman. Afterwards, I thought about why I had done it. Some was out of what you might call altruism, an actual concern that her feet probably hurt more than mine did. Some was to maintain my community as one I want to live in. When I'm pregnant or old, I want people to give me seats, so I'd better do the same for such people now. And some was because I want people to see me as a good person, the kind of person who gives seats to old ladies.

. "Aha," they say, "there's no such thing as pure altruism! You're really doing it out of selfishness!" ...so? The woman who got my seat on the subway doesn't care.

You can help other people because you think it's morally right, or because it feels good, or for the tax break, or to impress your friends. The result is the same. Do it for whatever reason works for you.

Jonathan Courtney

Book Review: It Ain’t What you Give It’s the Way you Give it

It Ain't What You Give It's the Way That You Give It

, Caroline Fiennes offers a clear and succinct guide to giving more effectively. The book provides a compact and accessible introduction to making effective charitable donations. The style is simple and straightforward, and the content is robust. The book provides a wealth of great advice, while exploring many of the complex mechanisms which have an impact on the effectiveness of both the way we donate, and who we donate to.

In this review I am going to focus on a few of the key points mentioned throughout the book. Those of you more familiar with Giving What We Can will notice a great deal of overlap between her and our thought on the challenges of effective giving, and the suggestions she provides for finding the most effective organizations. That said, there are a few points where the two approaches diverge.

How should we choose which charities to support? As you are likely aware, Giving What We Can advocates supporting those charities which do the most to help reduce poverty and suffering in the developing world. In practice this has involved recommending charities that do the most to combat preventable disease, as measured by reduction in the loss of years of health life, or 

 (Quality-Adjusted Life Years). Fiennes on the other hand argues that we should choose whichever charity best addresses the cause we care the most about. While these two methods might lead us to choose the same charities (a donor might care about poverty in the developing world), there is a strong possibility that we will naturally care about more specific problems, like the wellbeing of local sports teams, or the promotion of creativity in our schools. Fiennes argues that when it comes to choosing causes we should go with our heart, and have our heads decide which charity best address our concerns.

While this approach is likely to be more agreeable to most readers, there are some worries about the general impact of advocating this perspective. We might end up supporting causes which do less good in the world because we are biased toward caring about our particular community, or the wellbeing of a particular kind of animal (cute ones most likely). An individual in favour of Fiennes' method could argue that there are more than enough problems to go around, and that by allowing individuals to follow their passions, there will be more good done overall than if we limiting everyone to support a small group of charities focused on improving health in the developing world.

Perhaps it is easier to get people to think about effectiveness if you aren't trying to change the cause they focus on. On the other hand, the greatest gains in effectiveness - as measured by improving the welfare and flourishing of people - may be made by changing your focus at the highest level.

Nonetheless, while Fiennes and Giving What We Can may have different attitudes towards cause selection, they both agree that when we choose a charity it needs to be effective, so let's dive into some of the advice she provides for selecting these effective charities.

A good first step for choosing the best charities is to avoid common misconceptions about what makes a charity effective. As has been noted in the past, administration costs are a terrible way to judge a charity's effectiveness. We shouldn't judge a charity by its administrative cost, either as a sum total or as percentage of the operating budget, because these costs don't reflect what is really important, which is the impact the charity is having on the cause it is targeting. Arguably, what drives individuals' interests in administrative cost is their desire to have the money they donate go to the cause they care about. But as the book rightly points out, 'administration' is a necessary component of successfully addressing whatever cause the donor cares about. In the vast majority of cases, it is not ideal for money to go straight to the projects on the ground, there have to be individuals who coordinate these projects, and more importantly, who assess the effectiveness of the projects that are being funded.

Fiennes cites a study by Professor Dean Karlan of Yale, which analysed the top charities ranked by GiveWell on the basis of administration cost. This study found that the most effective charities spent more of their budget on administrative cost than their less-effective competitors. Fiennes argues that these results should not surprise us, more administration, when used effectively, means better management which in turn means more effective programmes. As she argues repeatedly throughout the book, focusing our attention on the most effective programmes has a dramatic effect on how much good we can do in the world.

Why Effectiveness Should be Your Primary Focus

Alright, so administrative cost is no proxy indicator for judging effectiveness, but surely we should look at other indicators, perhaps how much money the organization spends on office space, or fundraising? Fiennes again says no. While those other factors may be tolerable tie breakers, the first (and in most cases last) thing we should be looking at is the effectiveness of the charity. To drive home this point, Fiennes draws on her experience working as a teacher in India in a village in Tamil Nadu. When she worked in the school she noticed that many children would not attend class. In order to change this situation, the organization she was working with explored several options to solve the problems which prevented the children from going to school. One suggested problem was that the children were needed to help their families, and so a 'conditional cash transfer' programme was set up in order to financially compensate the families that allowed their children to go to school. This programme cost about $1,000 a year to keep a child in school. Fiennes then notes another unforeseen problem that was one of the root causes of students' absence from school - the prevalence of intestinal worms, which causes everything from malaise and lethargy to extreme pain. A deworming treatment, costing only $40 effectively achieved the same goal of getting a child into school.

Using this real world experience as a guide, Fiennes points out that a charity which adopted the deworming method would be 25 times more effective than a charity implementing conditional cash transfers. Using a bit of math, we can quickly see how irrelevant the supposed 'efficiency' of an organization is. Let's assume that a particular $10,000 deworming charity is horribly wasteful, and assume it spends 95% of its income on parties and handbags. This highly wasteful charity would still be more effective than a charity of the same size which spent 100% of its budget on a conditional cash transfer programme! (Charity A: 10,000-9,500 (95% waste) = 500/40(per child) = 12 children helped). Charity B: 10,000-0 (0% waste) = 10,000/1,000 (per child) = 10 children helped). This extreme example shows that when we are considering which charity to choose, our primary focus should be on the effectiveness of those charity's programmes, not on the distribution of their spending on fundraising and office space.

Alright, so we aren't going to choose our charities on the basis of administrative costs, and we are going to focus on the effectiveness of their programmes, but how exactly do we figure out which programmes are the most effective? Fiennes provides us with two methods for finding the best charities. The first is to refer to the analysis given by third party charity evaluation agencies. She provides a long list, including 

 (IPA). As we have seen, the conclusions of these groups can be 

, and there may be cases where we want to assess a charity for ourselves. That said, analysing the overall effectiveness of a charity can be a tough business, certainly the sort of analysis GWWC looks to offer involves detailed quantitative research most individual donors don't have the time or interest to perform themselves. Luckily, Fiennes provides us with a rough and ready 60 minute guide on how to assess the general effectiveness of a charity you are looking to support. While this analysis won't give you a total in-depth conclusion about the effectiveness of the organisation, it will allow you to have a general sense as to whether or not the organization you choose will be effective in promoting the cause you care about.

This review has only covered a few of the topics explored by the book. Others include

exploration of the other myths about charities,

and how to make your money work for your cause before you donate it.

There is also an entire section dedicated to what to do if you are a large donor, as well as a section on more advanced theories underpinning charitable assessment. If you are interested in effective giving, I highly recommend picking up a copy of this book!

Carolina Flores

The High Value of Water

It is often forgotten that, of those who have access to water within 1 km of where they live, only 42% have running water in their own homes or yards (World Health Organization). A new study - 

Happiness in a Tap: Piped Water Adoption in Urban Morocco

 (published in the latest edition of the American Economic Journal: Economic Policy) - finds that access to private as opposed to communal water supplies is highly valued and results in an important increase in quality of life. When given the opportunity, most participants in the study - who initially did not have running water in their households - were willing to take out loans and pay twice as much to have piped water in their own homes. They subsequently reported a significant improvement in well-being, happiness and social relationships.

The field experiment was conducted between 2008 and 2010. 845 households in Tangier whose occupants couldn't afford to connect to the city's water supplies were selected. Of these, 434 were randomly chosen and targeted in a door-to-door campaign to raise awareness of the possibility of getting an interest-free loan to have running water installed, and were given help with administrative procedures. The remaining participants - who had access to the same loan, but weren't targeted in this campaign - acted as a control group. The random allocation is key in insuring that both groups are initially similar so that we can attribute any difference afterwards to the intervention.

The results of the study illustrate the large impact of 'nudge' policies (i.e. policies which facilitate but don't mandate certain behaviours): in the first group, 69% had running water installed in the first 6 months of the campaign, as opposed to only 10% in the control group. One year later, 44% of the participants in the first group reported an improvement in quality of life, while only 22% of the others felt the same way.

Financially, this was a sustainable policy: as of mid-2010, 44% of households had repaid all of the loan, 28% owed less than 20% of the original amount, only 5% were late on more than 50% of the loan, no household had defaulted.

It must be noted that this policy resulted neither in income gain - in fact the average water bill increased from 11 USD to 21 USD - nor in better health, as all recipients already had access to clean water. As a result, this kind of intervention is unlikely to hasten self-perpetuating improvements in quality of life, nor beat our current best recommendations.

It seems that the main factor in increase in well-being was convenience - a legitimate desire in terms of life improvement. This is no small issue: in urban Morocco, people living in households without running water spend on average 7 hours a week collecting it from public taps. For almost two-thirds of them, access to water is a major concern, and for almost 30% it has been the cause of conflicts with family and neighbours. Thus this program contributed to reduction social tension, and freed up a significant amount of time. Interestingly, this spare time wasn't used to increase income nor to improve school performance by working and studying longer hours, but in social and leisure activities.

This highlights another point: improvements to people's quality of life are often 'consumed' right away, rather than 'invested' in raising children, further education or expanding a business. For this reason we can't count on the help we provide to necessarily trigger long-lasting economic growth.

This study shows that improving convenience of access to water greatly increases well-being. The value of installing water access can be increased by providing it to individual households. More generally, we may extrapolate that it is important, when measuring the impact of a policy in welfare, to consider convenience - and factors such as time for leisure and socializing - in addition to income and health. Furthermore, the study indicates that 'nudge' policies have a large effect on improving people's quality of life at a reduced public cost, and without interfering unduly with their lives. By making it easier for individuals and families to improve their own lives, it is possible to contribute to individual happiness and all-round social development in a cost-effective way.

Ben Hoskin

Decision Making under Uncertainty

Sadly, there are no certainties in life. In charity research, as in other decisions, we have to deal with the fact that we can only ever have 'probabilistic' knowledge: there is always some chance we might be wrong. Indeed, the available information on intervention cost-effectiveness leaves us with considerable uncertainty about the true figures.

A naive way of dealing with this would be to simply work out what the most likely outcome is, and focus on that. So if we think a drug will probably save a life, we count the drug as saving a life. If it probably won't, we consider it as not saving a life.

However, this is clearly a dangerous approach. My house probably won't burn down this year - but I still buy house insurance. I probably won't be hit by a car as I hit the road - but I should still check for cars. When the stakes are high enough, we definitely need to take into account low-probability events.

On the other hand we shouldn't simply fixate on the best or worst scenarios. We take reasonable precautions against being involved in a car accident - but we still cross the road. Instead, we need to take into account both the severity of the consequences of a possible outcome, and the likelihood of that consequence.

The mathematical procedure for doing this is using 

. We multiply the probability of each outcome by its magnitude, add them together, and produce an expected value.

Expected Value = (Probability of outcome 1)

(Magnitude of outcome 1) + (Probability of outcome 2)

(Magnitude of outcome 2) + ... + (Probability of outcome n)*(Magnitude of outcome n)

This approach has many advantages; those interested in the mathematics should see the Wikipedia articles on 

The Expected Value approach requires we be able to assign probabilities to each of the possible outcomes. But this can be very hard, or even seem impossible - how can we assign a probability to something that only occurs once, like the Duke of Wellington winning at Waterloo?

We deal with this by treating probabilities as 

. A probability doesn't express something objective about the world like frequencies or propensities. Instead, it expresses a mental fact about our confidence in a proposition; a probability of 1 means utter certainty, and a probability of 0 means utter disbelief.