How to make charity decisions

 In Critical Thinking, Decision-making, Financial decisions, Insights, Not for profit, Realizer Blog

There are 40,000 registered charities in Australia. As we approach the end of the tax year and one of the busiest times for getting your donations in before June 30, how on earth should you pick which charity to give to? The normal answer is we pick ones which do one of these things:-

  • Resonate with a cause you are personally close to, e.g. if a relative has had cancer
  • Ones which have strong emotional appeal e.g. ebola raises more than malaria even though malaria is much more prevalent and more treatable
  • Ones which have good top of mind awareness (remember the ice bucket challenge and the $20m they raised in 2 months?)

Luckily for me, and for you, there is a growing movement called effective altruism which seeks to help us make donation decisions based on where your dollar will have the most proven impact on the most serious issues in the world. In essence the movement DOES advocate comparing a charity for guide dogs in Australia with a charity that removes cataracts in India. It even quantifies the impact per dollar, which in this case will be far higher not least due to the lower costs in India, and the higher benefit where you are actually restoring eyesight in Indians, not just alleviating it.

If you get even more analytical, it even turns out it’s better to do one eye for more people than 2 eyes for less people as the marginal gain going from no proper eyes to one proper eye is far greater than the marginal gain of going from one proper eye to two.

That might seem a bit uncomfortable, so effective altruism isn’t for everyone. And yet if it is for you, there is good news. For the last few years many of the charities that have been proven to generate the highest impact with their work have not been registered charities in Australia, meaning that if you give to them, you don’t get a tax refund. But now, the organisation Effective Altruism has been set up in Australia and you can give to the highest rated charities through them, and get your tax relief. Meaning that we can afford to give c. 40% more, AND give to the best possible charities.

Personally I am a fan of this approach, as it combines my passion for decision-making with my desire to make a difference. But whatever way you do it, I know that we Australians are part of one of the most generous nations on Earth and we should continue to help others on a personal and society level.

Further reading: the book Doing Good Better by Will MacAskill

How to Make Charity Decisions: Written by Rob Pyne