A recent NYT article outlines some recent research showing that many people who give to charity “often tolerate high administrative costs, fail to monitor charities and do not insist on measurable results — the opposite of how they act when they invest in the stock market.” Tyler Cowen writes in “Investing in Good Deeds Without Checking the Prospectus,” about the research of John A. List, a professor at the University of Chicago, which “implies that most donors do not respond when they have opportunities to be more effective in their giving.”
Cowen, who is a professor of economics at George Mason and blogs here, concludes, “If donors do not abandon failing causes, those efforts will continue. Perhaps the content of donor pride needs to change. Rather than taking pride only in their generosity, donors should also take pride in their willingness to confront unpleasant news.”
The bottom line is that when you give to charity, you have a responsibility to give to charities that are good stewards of the money, thereby rewarding good charities and punishing bad ones. Doing this gives the proper incentives for charities to work well.
Part of the problem is that people may not really know how to measure the effectiveness and stewardship of a given charity. The Acton Institute’s Samaritan Guide is a tool designed to assist donors in meeting this responsibility.
Indeed, Acton’s effective compassion initiatives, based on Marvin Olasky’s seven principles for effective compassion, are largely based on providing the education that donors need to find out the sort of issues and questions that they should be asking.
HT: EconLog