Imagine you're buying canned tomatoes. Side by side are two different brands. You inspect the labels and notice that they are virtually identical — the only real difference between them is the cost. One brand costs $2 and the other costs a whopping $20.

Which one would you buy?

I'm not a mind reader, but I'm pretty confident that you'd buy the better value brand, saving your extra $18 for later.

If, the following week, the store had a similar third brand on sale for 20 cents, you'd probably stock up, fill your bag, and still walk out with spare change.

While it's unlikely that store prices would vary so much for similar items, research suggests that these kinds of astonishing differences in cost effectiveness exist when it comes to charitable giving. How much 'good' your money can buy varies significantly from charity to charity.

In this article we cover ten reasons why it is important to prioritise cost effectiveness when donating to charity.

1. We Want to Do Good, Not Harm

In the year 2000, a nonprofit organisation named PlayPumps won the World Bank's Development Marketplace Award[1]. Their signature product was a small merry-go-round designed to replace hand pumps with water pumps powered by kids having fun.

PlayPumps were praised by the likes of Bill Clinton, Jay-Z, and First Lady Laura Bush. By 2009 there were 1,800 PlayPumps installed across South Africa, Mozambique, Swaziland, and Zambia.

PlayPumps raised a ton of cash and were considered a success by the media. There was just one problem: PlayPumps didn't really work. In fact, the pumps were doing more harm than good.

Most merry-go-rounds build up momentum and then spin freely — this is why they are fun for kids. But if they're being used to pump water, they require constant force. Applying such force would be exhausting for any adult, let alone a child.

PlayPumps turned out to be a dangerous, ineffective, and expensive alternative to a traditional hand pump — inferior in almost every possible way. They were a chore rather than a source of enjoyment for children. Kids didn't want to play with them, so the women of the local village ended up pushing the merry-go-round themselves, which was tiring and not an activity the women signed up for.

This cautionary tale of charity ineffectiveness highlights why assessing the effectiveness of any charitable initiative is essential, even if only to make sure that we are not causing any harm to those we intended to help.

2. We Have Limited Resources

Each of us only has so much time, money, and energy. Even very affluent people have a finite amount of resources that they can spend; all of us are limited by the number of hours in the day, and days in a human lifespan; and there are only so many things we can focus on.

Choosing to spend resources on one thing is an implicit choice not to spend it on other things. In economics, this is called an "opportunity cost:" the loss of the benefit that could have been enjoyed if the best alternative choice was chosen instead.

Just as we cannot wind back the clock to relive our day, we cannot not spend the same dollar twice.

This is important because the scale of the things we care about — the things we desire to change — will typically be much larger than the scale of what we actually can change with our limited resources. If we use our resources effectively, we can have a much bigger impact on the things that we care about.

3. Charity Effectiveness Varies Significantly

While most people assume that the best charities are only slightly more effective than average, experts estimate that the best charities are often 100 times more effective[2].

On the Giving What We Can charity comparisons page, there is a list of concrete examples of how effectiveness varies between charities. For instance, providing deworming treatment is roughly 100 times more effective than merit scholarships are for improving education.

The difference in effectiveness can be even bigger when comparing charities working in a wide variety of causes.

These huge differences in effectiveness provide us with an opportunity to do much more good with our charitable dollars if we choose charities strategically, rather than simply choosing the charities that we are familiar with, or the ones that are most convenient.

4. Charity Is About Helping Others

By definition, charity is about helping others. Its ultimate goal is to relieve suffering, increase flourishing, and improve the lives of its beneficiaries.

However, many organisations that accept donations are closer to commercial services than they are to a pure charity. Rather than donating purely to help others, we donate to these organisations as a way of paying for services, expressing our opinions, or investing in our interests. These might include your local school, hospital, church, or art gallery. While it is reasonable to pay to support things you are involved with and benefit from, it's important to distinguish these activities from true charity.

Giving to charity in order to help others is a moral activity in which the focus is on the beneficiaries, and not on donors.

This is well illustrated by a thought experiment proposed by philosopher William MacAskill:

"Imagine that you discover a burning building, with no one else around. Through the windows you see that, in one of the bedrooms, a family of five is trapped. Next door, a small garage that belongs to an art museum is also ablaze. The garage has recently been cleared out, but you can see that one painting worth $20,000 still remains. You know that you have time to save either the family or the painting, but it's unlikely that you can save both. What do you do?"

MacAskill thinks it's self-evident that saving the painting instead of saving five lives would be morally wrong. "It's uncontroversial," he writes, "to think that someone who chooses a painting over the lives of five human beings has made a mistake in their assessment of what's really of value."

Yet, MacAskill points out, anyone who donates to an organisation like an art gallery rather than an organisation that saves lives is making the same mistake as a bystander who saves the painting instead of the family. If you can choose between saving lives and funding a material or cultural good, he argues that you should save lives.

It is natural to care about a variety of things. You might care about your children's education, enjoy watching musicals, and have a passion for nature walks. These can all be elements of living a good life. You have more than one goal, and that's fine.

However, if one of your goals is to help others, then you should think through how best to do so. Allocating some of your resources to supporting the most effective charities can help you maximise your impact while leaving space for pursuing other values.

5. Helping More is Better than Helping Less

It could probably go without saying but if it's good to do good, then it's better to do good better. All else equal, we should save more lives rather than fewer, help people live longer lives rather than shorter ones, and make more people more happy rather than less happy.

Imagine you're a doctor with 20 sick patients in front of you and enough medicine for all of them. I am sure you would save all of them rather than just some of them.

If it's good to save one patient, it's better to save all 20 of them.

In his 2013 essay, philosopher Toby Ord goes even further than saying it's simply better to do more good, rather than less. He considers it a moral imperative to do as much good as we can. By doing so, he suggests, we would be "saving many more lives and preventing or treating more disabling conditions."

6. Our Decisions Carry Implicit Moral Judgements

When we make decisions about how we spend our money we are implicitly deciding what we value.

If we are willing to pay $400 to buy a new television rather than spending the same money on a new mattress, we are showing that we value the television more than the mattress.

Similarly, if we are willing to spend $400 to rescue a cat rather than spending the same money sparing the lives of 40,000 farmed animals, we are showing that we value rescuing cats 40,000 times more than sparing the lives of farmed animals.

If a wealthy donor could double the income of a single average American household for ~$60,000 or double the income of 100 households in Kenya, which would you say is morally better?

Of course, the numbers are not always crystal clear, and there is room for reasonable disagreement about how to weigh different moral outcomes. Still, it's important to make these decisions intentionally if we want our actions to represent our values.

7. We Care About Effectiveness Elsewhere

Earlier, when discussing grocery shopping, we gave an example of how we consider cost effectiveness regularly in our everyday decisions.

Many of us will even spend hours researching relatively small purchases like headphones in an attempt to get the most bang for our buck.

Spending money on charity is similar to making any other purchase in the sense that (a) money is fungible (i.e., we could spend the same money on something entirely different), and (b) some donation options, like some purchasing options, are better value than others.

8. We Expect Effectiveness from Others

If you pay attention while watching the news or talking with friends, you will quickly notice that we expect effectiveness from others all the time.

If we don't find a company's products to be effective, we'll buy from their competitors. If we don't think our government is using our tax-dollars effectively, we vote them out. If the rich donate money simply to get their kids into college, there is public outrage[3].

Imagine how (rightfully) indignant you would feel if your government only vaccinated 1% of its citizens against a deadly virus when they could have vaccinated everyone at the same time for the same cost.

If we can expect others to be effective when they do things that impact us, it seems only fair that we should try to be effective when we do things that impact others.

9. Supporting Effective Charities Creates a Virtuous Cycle

How we choose charities can have very long run effects on what they are incentivised to do. Just like with other purchases, we are essentially voting with our dollars.

If we reward expensive marketing campaigns or flashy but ultimately ineffective ideas – we'll get more of those charities, and less good will be done.

If instead, more donors select charities based on their effectiveness, then this increases demand for more effective charities and better information about charity effectiveness. This cycle hopefully leads to more good being done in the world.

10. Giving Effectively Just Makes Sense

When we asked our members why they joined the Giving What We Can community, many of them answered that giving as effectively as possible just makes sense. They’re not alone; research suggests that a large segment of donors identify impact as a key motivation for giving.[4].

This is great news! It means that most people don't need to be convinced that it's important to donate effectively.

So why does data suggest that few people are actually donating in the most effective ways?

This might be because:

  1. Donors' understanding of effectiveness can be limited. It is focused mostly on avoiding perceived wastefulness (such as overhead costs) and less on maximising impact.

  2. Donors often lack the information they need to make informed decisions. Only one third of them do any research, and only 3% give based on relative performance.

Therefore, if you value charity effectiveness it is essential to do your research and actively seek out the most effective charities based on solid research.

Charity evaluation can be a daunting task, that's why I recommend you check out Giving What We Can's guide to giving effectively which includes recommendations for highly effective charities so that you can maximise your impact.

Donate to effective charities

I hope you'll also consider joining Giving What We Can's community of impact-orientated donors who are committed to give a meaningful portion of their income to effectively improve the lives of others. Joining a community can help you to live up to your values, meet like-minded people, and inspire others to follow suit.

Join Giving What We Can


Footnotes

  1. Read more about the story of PlayPumps. ↩︎

  2. Caviola, L., S. Schubert, E. Teperman, D. Moss, S. Greenberg, and N. S. Faber (2020). "Donors vastly underestimate differences in charities' effectiveness ." Judgment and Decision Making, 15:4, 509–516. ↩︎

  3. See, for example: Matthews, D. (2018). "The Case Against Billionaire Philanthropy." Vox.
    Shamsian, J. & K. McLaughlin (2021). "Here's the full list of people charged in the college admissions cheating scandal, and who has pleaded guilty so far." Insider. ↩︎

  4. See, for example: Camber Collective (2015). "Money for Good 2015: Revealing the Voice of the Donor in Philanthropic Giving ," Camber Collective.
    Caviola, L., S. Schubert, and J. Nemirow (2020). "The many obstacles to effective giving ." Judgment and Decision Making, 15:2, 159–172.
    Cunningham, H., S. Knowles and P. Hanson (2017). "Bilateral foreign aid: how important is aid effectiveness to people for choosing countries to support?" Applied Economics Letters, 24:5, 306–310. ↩︎