Investing and charitable giving are two different ways for someone with resources to contribute to an organization or cause.
I’ve conflated them in the past, but recently read an article advising people not to.
In Market Watch, Berman, Barasch, Levine, and Small explain that people give when they feel emotionally connected to a cause, not necessarily because they’ve demonstrated that the cause will turn a profit or be financially productive. Nonprofit watchdogs like Guidestar and GiveWell (mentioned in the article) allow organizations to share much more about program outcomes and financial reports. Yet all that extra information may not change anything about how donors actually give.
On the one hand, no one wants their charitable donations to go to waste, and effectiveness information could help people avoid low-impact charities.
On the other hand, ‘going with the numbers’ may not align with the causes people are drawn to support, and those causes are often what motivates people to give in the first place.
For instance, many feel a deep commitment towards their local community. Yet eliminating suffering in the developing world is often much cheaper and can help many more people for the same price.”
According to these writers, donors don’t seem too concerned about the impact of their dollar when they’ve already emotionally bonded with the organization they’re giving to.
So perhaps fiscal transparency is like a seatbelt: it only matters to the people on board when something important has already gone wrong.
Read more: “Why we resist treating charities like investments,” MarketWatch (8/22/2016).