Five challenging questions on philanthropy

The recent success of the Ice Bucket Challenge for ALS across the world raises numerous questions on philanthropy. In this post I give some background information to answer five of these questions.

 

1. Where will it end?

It is hard to predict how much money will be raised for ALS through the Ice Bucket Challenge. Some two weeks after the campaign really took off it has raised more than £100 million according to this UK source.  The growth of donations to the ALS Association in the US now shows signs of decline, suggesting that the campaign is losing energy.

IceBucket_graph

Source: Tweet by Ethan O. Perlstein, August 29, 2014

If the S-shape in the graph above continues, total donations to the ALS Association in the US could reach $120 million.

IceBucket_graph_extra

 

2. Will other charities lose from the challenge?

It is often assumed that donors think about donations from a fixed annual budget: a dollar donated to the ALS Association cannot go to other charities. From this perspective, the Ice Bucket Challenge would come at the expense of other charities. However, it is also possible that the campaign does not affect other charities. There are many examples of campaigns that have not decreased amounts to other charities. In the Netherlands, the success of the Alpe d’Huzes bike rides against cancer has increased the amounts donated to the Dutch Cancer Society, while other health charities on average do not seem to have lost. Also for the Cancer Society itself the success of the bike ride has not come at the expense of regular fundraising campaigns, until questions were asked about the ‘no overhead costs’ policy promoted by the organizers of the event.

Also there is the possibility that people will donate more to health charities (or charities in general) because they become more aware of the need for donations. When I was nominated for the challenge by my wife my response was to donate to the Rare Diseases Foundation (ZZF), a Dutch foundation supporting research on a variety of rare diseases. My best bet is that the Ice Bucket Challenge is a fortuitous fundraising event that does not come at the expense of donations to other charities.

 

3. Is the success of the Ice Bucket Challenge ‘fair’ given the relative rarity of ALS as a disease?

Looking at all deaths in the course of a year, ALS is a relatively rare cause of death, as US data from the CDC show. Fi Douglas made a comparison with amounts donated, showing that donations do not seem to be directed towards the most lethal diseases.

diseases_donations

Source: Tweet by Fi Douglas, August 23, 2014

In a paper I published back in 2008, I compared donations to charities fighting groups of diseases and the number of deaths that these diseases cause. Giving in Netherlands to health charities seems more needs-based. It should be noted that the relatively high donations to charities fighting diseases of the nervous system is not due to the Netherlands ALS association, but mainly to other health charities.

Fundraising_Income_Needs_Netherlands_2008

 

4. What is the effectiveness of donations to the ALS Association?

When people think about the effectiveness of donations, they often look for financial information about revenues and expenses. These numbers have limited value, but let’s look at them for what they are worth. According to its annual report, the Netherlands ALS association raised €6.5 million in 2013 and spent about €7 million on research, dipping into its endowment. The costs of fundraising approached €0.5 million, a relatively low proportion relative to the ALS Association in the US (ALSA). The ALSA annual report tells us the association spent $7 million on research in 2013, and $3.6 million on fundraising, having raised a total of $29 million. One could say fundraising in the US is less effective, more difficult, or simply more expensive than in the Netherlands.

However, these numbers tell us nothing about the effectiveness of Ice Bucket Challenge donations. Their effectiveness depends completely on how the millions that are raised will be spent. From my limited knowledge on ALS it seems that the development of treatments or drugs against the disease is not on the verge of a breakthrough. Even though it would be premature to expect an effective ALS treatment any time soon, the sheer size of the amounts donated now will enable researchers to make some big steps. Now the stakes have been raised, donors may expect a well thought-through strategy of the ALS associations to spend the money in a responsible manner. The challenge for the ALS associations across the world is to manage donor expectations: to carefully communicate the uncertainty inherent in the development of medical innovations while avoiding disappointment and anger among donors expecting quick results.

Moreover, some have questioned the utility of health research charities relative to other charities, saying that there are more effective ways to spend donations. In the Netherlands this opinion was expressed by my colleague from Rotterdam, Kellie Liket, in one of the major national newspapers, De Volkskrant. Some of the responses to this op-ed piece have identified the same substitution logic that we saw above; a logic that can be questioned. More importantly, the opinion depends on the assumptions made about what counts towards the ‘effect’ of a donation. If we count lives saved per dollar contributed, medical research does not have a strong position in the debate. We can save many more lives by donating to improve health and living conditions in developing countries, where life is much less expensive to begin with. The same $100 buys more health in a poorer country, all else being equal. But this is not the health of people we know, or the health of loved ones who have suffered from a disease. It is our greater empathy for people close to us that makes us donate more readily to certain causes than others.

 

5. Why should we give to a certain cause or organization?

Perhaps the most fundamental question raised by the Ice Bucket Challenge is a moral one. While research on philanthropy may show that we give out of compassion for people we know, there are many other reasons for people to give to charity. The joy of giving, aversion of guilt, being asked to give or seeing someone else give, the desire to obtain prestige, or simply an unexpected windfall or a ray of sunshine can motivate people to give. What we think of these circumstances and reasons is a different matter. The wisdom on the ethics of giving is much older than the 120 years of empirical research on philanthropy since Thorstein Veblen’s description of donations by the late 19th century New York elite as forms of conspicuous consumption. In the 12th century, Maimonides described eight levels of charity. Giving in response to a request is lower than anonymous giving; the highest form of giving would make recipients self-reliant and their dependence on charity disappear. Because of its largely public nature, the Ice Bucket Challenge can be placed on the lower rungs of Rambam’s Golden Ladder of Charity; but you can choose your favorite manner of donating in response to the challenge. And who knows: in the very long run, even your grudgingly accepted challenge and public donation may contribute to a cure for ALS – making victims of the disease less dependent on the charity of their loved ones.

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4 Comments

Filed under altruism, charitable organizations, household giving, philanthropy, psychology, trends

4 responses to “Five challenging questions on philanthropy

  1. reddeboterbloem

    Beste René,

    Erg leuk geschreven, interessant en inzichtelijk artikel! Mijn complimenten.

    Hartelijke groet,

    Suzanne

    Ars memorandi 06-22495928 skooij@arsmemorandi.nl http://www.arsmemorandi.nl

    Op 1 sep. 2014, om 09:08 heeft Rene Bekkers het volgende geschreven:

    > >

  2. Lovely summary of the many discussions going on, Rene. In a corollary to your last point,I offer another hypothesis about why people are doing this.

    I am reading “Social Physics: How Good Ideas Spread” by Alex Pentland. His explanation of the spread of ideas (including bad ones, by the way) relies on what I learned as a bandwagon effect, although he frames it with direct measures of social interaction and more mathematics, so it can be compared with other determinants. In his models, social information about peers is as or more powerful than most other determinants of behavior. Thus, for the IBC, people are not likely to consider the severity of the illness, their own level of compassion of the donors, or other motivations for giving to charity. They do it because their friends and friends of friends do.

    Of course, some do the challenge because they know someone living with ALS. Some people, however, publicly decline to take the challenge because of their financial circumstances or health. The fact that they feel they need to explain their choice not to participate suggests there is a role of public “shaming” at play, offering perhaps a real-world example of Pentland’s thesis.

    In any event, it will be a great case study for philanthropic programs worldwide for years into the future.

  3. Gea

    Inmiddels is er ook een alternatieve Ice Bucket onstaan. En daarbij blijken inmiddels al aardig wat (gezondheids-) doelen donaties te ontvangen. Kennelijk is het idee van doneren leuk , uitdagend, activerend en geeft men naast ALS en/ of aan een ander doel van zijn/haar keuze. Ben benieuwd wat de omvang van deze alternatieve ice Bucket is? Leuke onderzoeksvraag

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