Money isn't real. When you donate money to a charity, how does it actually help?

post by Dagon · 2020-02-02T17:03:04.426Z · score: 19 (11 votes) · LW · GW · 14 comments

This is a question post.

Contents

  Answers
    47 korin43
    14 shminux
    5 Aiyen
    5 Jader Martins
    4 jmh
    3 Charlie Steiner
None
14 comments

Money is a shared illusion. Neither paper, gold, nor electron patterns can stop a mosquito or feed a hungry person directly. Transfer of money is a temporary, low friction way to motivate unidentified strangers to preform an action.

So what's the mechanism by which monetary charity works? Are we "just" exploiting a comparative advantage in dollar-gathering in order to force the people on the ground to behave the way we prefer? Do we have any evidence that it can create channels of behavior that are self-sustaining?

On small (and not-so-small, but not universal) margins, money is a fine way to change some behaviors. I'm wondering if there are ways to shift the equilibria at the core rather than the margin.

Answers

answer by korin43 · 2020-02-02T17:53:27.278Z · score: 47 (22 votes) · LW(p) · GW(p)

Calling money an illusion and describing at as a way of temporarily motivating strangers seems like a misunderstanding of what money is. It's true that money itself is just a piece of paper that we agree to treat a specific way, but the way we treat it is as a representation of real work done and real favors owed.

When I give you a dollar, I'm saying that you've done something worth (at least) a dollar for me and that I now owe you a favor worth (at least) a dollar. This works without money ("IOU's", or just keeping track of favors). The innovation of money itself is that we can get favors repaid by complete strangers without having to figure out the chain of favors every time (and in some cases, being able to get a favor repaid before it's owed).

Which is all a long way of saying that if you do something to make someone owe you a favor, you can transfer that favor to a charity instead of calling it in yourself. The piece of paper won't feed a hungry person but the favor attached to it can.

comment by ESRogs · 2020-02-05T08:06:33.091Z · score: 2 (1 votes) · LW(p) · GW(p)
describing at as a way of temporarily motivating strangers seems like a misunderstanding of what money is

Compare to:

The innovation of money itself is that we can get favors repaid by complete strangers without having to figure out the chain of favors every time

What's the difference? It sounds like the two of you are saying the same thing. Except just that you don't like using the term "illusion" to describe it?

comment by korin43 · 2020-02-05T21:49:24.497Z · score: 1 (1 votes) · LW(p) · GW(p)

My original response was a more abstract explaination of why I think describing money as "not real" is misleading but maybe I more direct response to the article would be more useful since I think that part actually isn't core to your question.

Money is a shared illusion. Neither paper, gold, nor electron patterns can stop a mosquito or feed a hungry person directly.

I'm assuming this is for rhetorical effect, but "money is a shared illusion because you can't eat it" is a strange definition.

[...] Transfer of money is a temporary, low friction way to motivate unidentified strangers to preform an action.

So what's the mechanism by which monetary charity works?

The mechanism by which monetary charity works is by motivating unidentified strangers to perform a charitable action.

Or alternately, if you mean charities like GiveDirectly, the charity works by giving money to poor people who can then motivate unidentified strangers to perform charitable actions (like building roofs for them).

Are we "just" exploiting a comparative advantage in dollar-gathering in order to force the people on the ground to behave the way we prefer? Do we have any evidence that it can create channels of behavior that are self-sustaining?

This depends entirely on the charitable action and has nothing to do with money. How can we answer if a particular charity is helpful if we don't know what the charity does? As you say above, money works indirectly so we need to know the thing we're doing with it.

On small (and not-so-small, but not universal) margins, money is a fine way to change some behaviors. I'm wondering if there are ways to shift the equilibria at the core rather than the margin.

If you come up with a way to shift the equilibria at the core, you could pay people to implement that..

comment by ESRogs · 2020-02-05T23:18:14.129Z · score: 2 (1 votes) · LW(p) · GW(p)
My original response was a more abstract explaination of why I think describing money as "not real" is misleading but maybe I more direct response to the article would be more useful since I think that part actually isn't core to your question.

Just to clarify, I'm not the OP. It just seemed to me like you and the OP were saying something similar.

comment by korin43 · 2020-02-06T15:46:31.755Z · score: 3 (2 votes) · LW(p) · GW(p)

I guess "temporarily motivating strangers" is a reasonable description of what money does. I should have argued against calling that motivation illusory or not-real.

answer by shminux · 2020-02-02T20:42:32.493Z · score: 14 (10 votes) · LW(p) · GW(p)

To paraphrase Sean Carroll, money is as real as baseball.

Does baseball exist? It's nowhere to be found in the Standard Model of particle physics. But any definition of "exist" that can't find room for baseball seems overly narrow to me. It's true that we could take any particular example of a baseball game and choose to describe it by listing the exact quantum state of each elementary particle contained in the players and the bat and ball and the field etc. But why in the world would anyone think that is a good idea? The concept of baseball is emergent rather than fundamental, but it's no less real for all of that.

In the modern human society money is no less real than guns or food. This may change if the society will collapse or change forms, but as things are now, there is nothing illusionary about money. When you donate money to charity, they gain the power to get food, or mosquito nets, or workers on the ground, or anything else that is hard to provide in a direct way.

comment by quanticle · 2020-02-06T03:24:17.796Z · score: 2 (1 votes) · LW(p) · GW(p)

I would alter that ever so slightly to say that money is as real as mathematics. Math is an unreasonably effective abstraction that allows us to efficiently and comprehensively describe a wide range of natural phenomena.

Similarly, money is an abstraction that allows us to trade a wide range of goods and services.

comment by aleph_four · 2020-02-06T03:38:56.299Z · score: 1 (1 votes) · LW(p) · GW(p)

Mathematics is more real than money certainly. If we collectively agree that money has no value, it has no value. If we collectively agree that mathematics has no use, it does not stop being an unreasonably effective abstraction for describing natural phenomena.

answer by Aiyen · 2020-02-05T18:28:52.194Z · score: 5 (2 votes) · LW(p) · GW(p)

Consider a charity providing malaria nets. Somebody has to make the nets. Somebody has to distribute them. These people need to eat, and would prefer to have shelter, goods, services and the like. That means that you need to convince people to give food, shelter, etc. to the net makers. If you give them money, they can simply buy their food.

This of course raises the question of why you can't simply ask other people to support the charity directly. But consider someone providing a service to the charity workers: even if they care passionately about fighting malaria, they do not want to run out of resources themselves! If you make food, and give it all to the netweavers, how can you get your own needs met? What happens when you need medical care, and the doctor in turn would love to treat a supporter of the anti-malaria fight, but wants to make sure he can get his car fixed?

In a nutshell, people want to make sure there will be resources available to us when we need them. Money allows us to keep track of those resources: if everyone treats money as valuable, we can be confident of having access to as many resources as our savings will buy at market rates. If we decide instead to have everyone be "generous" and give in the hopes that others will give to them in turn, it becomes impossible to keep track of who needs to do how much work or who can take how many resources without creating a shortage. You can't even solve that problem by having everyone decide to work hard and consume little; doing too much can be as harmful as doing too little, as resources get foregone. And of course, that's with everyone cooperating. If someone decides to defect in such a system, they can take and take while providing nothing in return. Thus, it is much easier to mange resources with money, despite it being "not real", even in the chase of charity. Giving money to a charity is a commitment to consume less (or to give up the right to consume as much as you possibly could, whether or not your actual current spending changes), freeing up resources that are then directed to the charity.

answer by Jader Martins · 2020-02-02T17:50:08.128Z · score: 5 (2 votes) · LW(p) · GW(p)

I don't like the term "money is a shared illusion" (as it misguides the real concept), money is the materialization of credit. The history of money is pretty long to this comment, but to summarize: money is the idea that someone owns you some amount of resources (work/material/etc), and as the society agreed with this common denominator (money), so the society also owns you some amounts of resources.

Price formation (or price system) consider a lot of things, geographical resources, comparative advantages, technology and many more, all this knowledge we call market information.

So the "unidentified strangers" will want (or not) this credit with society so they can exchange in something that the society could provide to them, the amount requested by this stranger is based on how he evaluates the information it haves, with his own perspective and when it decides the X amount, this will also add to the information above and update the weights in this high-dimensional network of values.

When you pass this credit to someone else, this person could use his subjective value to offer X amount of his credit to satisfies his interests as he knows that society will also have personal interests and want the credit too. This could be pretty obvious but I introduce now what problem the "money" solves and no economist could figure out another solution to this: https://en.wikipedia.org/wiki/Economic_calculation_problem

So money and market is a super distributed computer of calculation and allocation of resources, considering subjective value, socioeconomic factors and many more things that is by now impossible to account in any other known way.

A video of intuitive explanation: https://www.youtube.com/watch?v=zkPGfTEZ_r4

comment by aleph_four · 2020-02-06T06:15:18.400Z · score: -2 (2 votes) · LW(p) · GW(p)

money is the materialization of credit

woah, a marvelous inversion

answer by jmh · 2020-02-02T19:49:18.515Z · score: 4 (3 votes) · LW(p) · GW(p)

I am not sure the standard economic logic has a really good fit with the market for charity. That is not to say there are not insights to be gained or aspects that can be examined/analyzed well but only that they are incomplete.

I agree with the other two answers but only up to a point.

Markets for charity have the problem of being more complicated than the standard producer-consumer or seller-buyer structure. It's really a case where the consumer is not buying anything. The side that does all the buying is actually part of the production side. In this regard, I think it might be more relevant to focus on the rationing aspect of money in monetary market settings (basically every setting in the modern world outside direct personal interactions).

So we might consider the donations and the activities around getting those donations as something along the lines of relaxing a production constraint. I do think it might be worth considering when and where that is the binding constraint though. Just consider the recent complaints from those in Wuhan about the local Red Cross poor ability to get resources it has distributed to where they are needed or to even spend the donations they have received (though it's not clear that not spending is a clear sign they are failing in their job).

A secondary thought here would be just how one might implement any type of real market would be a good parallel to normal monetary markets (retail, wholesale, financial, specific products...) to would allow the standard prices as information approach to work. But I'm not entirely sure we need to do that either.

comment by korin43 · 2020-02-06T15:57:34.109Z · score: 1 (1 votes) · LW(p) · GW(p)

This is a big part of why I'm more optimistic about direct transfers like GiveDirectly. Standard charities act kind of like socialist economies and run into a lot of the same issues. When they're operating inside of capitalist economies, they get some advantages through price signals to indicate what products people might want, but they still run into a lot of problems with top-down planning.

Of course, it's complicated because some charities are plausibly more efficient because they use top-down planning and the planners correctly know that people should be spending their money on vaccines and not whatever else they would have bought for $0.50..

answer by Charlie Steiner · 2020-02-03T04:48:55.476Z · score: 3 (3 votes) · LW(p) · GW(p)

It's fine, people are only 1 layer of unreality removed from money, so they can interact via gravity, which "leaks" into the 4th dimension (explaining why it's so much weaker than the electromagnetic force).

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comment by Unreal · 2020-02-03T20:45:47.842Z · score: 10 (5 votes) · LW(p) · GW(p)

I just want to say this is the best question I've seen asked online in a while.

I'm sorry this comment doesn't have anything much to add other than:

Wow this question is amazing, and I wish more people would ask it, and I'm better for having read it. So thank you for asking it.

comment by Unreal · 2020-02-03T20:48:53.535Z · score: 4 (2 votes) · LW(p) · GW(p)

Some directions I would go with this question myself:

  • How does shared cultural narrative affect human behavior, and is it more reliable than money?
  • Can money buy commitment? Personal development? Deep confusion and questioning about one's ethical choices?
  • What's the connection between money and relationship-building? (Especially with regards to fundraising.)
  • Can money buy coordination? How much coordination would it be able to buy? How reliable would it be?
  • What is a thing that is NOT money that can result in coordination, better shared narratives, personal development, a commitment to ethics, etc.?
comment by Dagon · 2020-02-02T20:51:06.257Z · score: 7 (4 votes) · LW(p) · GW(p)

I may have taken too much background as common knowledge. I appreciate the "money is as real as baseball" reminder, especially as nobody recommends donating baseball to improve the lives of others. I absolutely favor the model of money as fungible favor system, and it shares some characteristics of that, but it isn't that either. Personal favors have lasting impact on the relationship, and cannot be accounted perfectly so there's always some residual debt (IMO, this is a feature). Money is necessarily transactional in nature. Once both sides of the exchange are complete, there is no remaining effect (except perhaps the chance of future money).

Altruism is (generally) seeking deeper value and behavioral change. This seems like a very deep contradiction, but I suspect I misunderstand altruism more than I do money.

comment by Raemon · 2020-02-03T22:32:13.063Z · score: 6 (3 votes) · LW(p) · GW(p)

I'm sort of confused about which question you're actually asking here. This post seems to separately be boggling at a) money, b) at altruism, and c) the way the two interrelate. It seems like it's specifically looking at the interrelation. But I don't know enough about the intended frame for money, or intended frame for altruism, to understand what you're interested in here.

Is there a reason you're asking about donating to charity (using money), rather than paying for goods or services (using money?)

comment by Dagon · 2020-02-03T22:56:59.082Z · score: 2 (1 votes) · LW(p) · GW(p)
boggling at money, and at altruism, and at the way the two interrelate

This would not be an incorrect summary of my confusion. The difference in realm between social and fiscal motivations is fairly well-studied, including some counter-intuitive things like taking payment for transgressions causing more incidence, as you've removed the unquantified guilt for it. And yet, we often exhort people to donate cash rather than time or changing behaviors in other ways.

comment by Raemon · 2020-02-03T23:08:48.491Z · score: 5 (2 votes) · LW(p) · GW(p)

And yet, we often exhort people to donate cash rather than time or changing behaviors in other ways.

It seems like you want some sort of general answer to this, when it seems to me it depends on a ton on the details.

Sometimes, you want to feed and cloth bunch of homeless people, and you don't really need people to change their behavior or donate time – in fact, getting them to donate time is almost net-negative because then you have to figure out how to coordinate them. Meanwhile, it's not that hard to give out clothes and food, you just need economy of scale.

Sometimes, you're trying to change the underlying systems that give rise to homeless people, and... well, what comes next depends radically on what you think the problem is and how to solve it. Maybe it's some kind of collective action (requires lots of people), maybe it's passing a new law (requires dedicated lobbyists and people to figure out which law to write), maybe it's building better mental hospitals or free therapy, maybe it's making it easy for them to receive mail and get showers and nice clothes so they can get a job.

Almost whatever problem you're focusing on requires people who can dedicate lots of time to thinking about it (whether or not the solution ends up involving collective action or distributed material goods or small-but-high-leverage-interactions), rather than volunteer hobbyists thinking about it occasionally. Which basically always requires some amount of money.

It sounds like there were some particular examples you had in mind where it didn't seem like donating money would help, but it's hard for me to figure out what to say given the current vague wording.

comment by jmh · 2020-02-06T16:56:27.418Z · score: 1 (1 votes) · LW(p) · GW(p)

Do you have some behaviors that might be offered up as examples for this?

I am now thinking that is different than talking about behaviors of the recipients of charity so it's more about paying up for transgressions being wrapped up in the charity plea for money.

Afterthought here too. Early 1900s I think you would find more request for donating time -- more volunteer work, less "professionalization" of the industry of charity. I think a few studies (no cites or titles to offer though) have suggest that shift has introduces some negative impacts in terms of output.

comment by quanticle · 2020-02-06T06:53:14.714Z · score: 4 (2 votes) · LW(p) · GW(p)

Personal favors have lasting impact on the relationship, and cannot be accounted perfectly so there’s always some residual debt (IMO, this is a feature).

First, have you read Graeber's Debt: The First 5000 Years? It speaks to exactly this situation and makes points similar to the ones you're making.

Second, the real advantage of money is that it scales. Exchanging favors is great when we're all living in tribes or small towns. But if I, as many EAs believe, think that the real problem is not that my neighbor needs a new jacket but that a person 15,000 miles away needs a bednet to protect them from malaria, it's not at all clear how I can donate that bednet by doing favors for people.

While favors might have a lasting effect on the relationship, the problem with favors is that they require the relationship to already exist. Historically, this wasn't a problem because people lived in small, economically isolated communities, and didn't move. You got a set of pre-existing relationships simply by virtue of being born into that community, and you were stuck with those, whether you liked it or not. In that environment, people could keep and settle tabs, often without resorting to any sort of physical currency at all. But now, thanks to globalized trade networks and the businesses that built them, we have the ability to make use of faraway resources (like products made in China) and help people all over the globe (by donating bednets in Africa). In addition, the fact that people have the ability to move means that there needs to be a way for people to transact with others impersonally. I can't rely on trusting my IOUs when I'm new in town.

So while I do think that gift and favor based systems have some advantages, there is no way I'd trade our modern money-based financial system for a gift economy.

comment by Pattern · 2020-02-03T20:06:55.885Z · score: 4 (2 votes) · LW(p) · GW(p)

TL:DR;

If the goal is a feedback loop/virtuous cycle**, something built for it might do a better job. This may already exist. (In places you haven't seen/heard of, and it might take some looking to find.)


in order to force the people on the ground to behave the way we prefer?

Force?

Suppose someone made a bet with you at the start of the year, that you would not in fact create that new habit of (doing X), that you had set a new year's resolution to do. Suppose they were so certain, they offered a bet at 1:0 odds - if you proved them wrong, they'd give you $X, and if you didn't they wouldn't get anything at all.

This doesn't sound quite like what you're looking for.

Transfer of money is a temporary, low friction way to motivate unidentified strangers to preform an action.

(There's an unstated assumption here that the motivation is to do something they wouldn't have done anyway This assumption may very well be correct.) This sounds like a possible flaw in how things work, even if they don't work quite like that.


Do we have any evidence that it can create channels of behavior that are self-sustaining?

Well the system where people donate money (and the money is presumably used to do good) doesn't seem to feed back into itself. Convincing other people to donate seems less suspect than donated money being used for advertising, and we don't expect people who receive money from give directly to immediately donate all of it to charity. One could tell a story about how maybe people who are better off may one day be in a place to give to others/donate to charity...though:

a) there's flexibility around things being improved (if all the charities with Purpose X or Y finished up and closed down, I can imagine the world still have good things happening after that problem has been eliminated. Likewise, there's a lot of ways people in a better place might be both good (in and of itself) and lead to more good.)

b) If the goal is a feedback loop/virtuous cycle**, something built for it might do a better job*

*This may already exist. (In places you haven't seen/heard of, and it might take some looking to find.)

**Or something that grows and feeds in to other things.

comment by Dagon · 2020-02-03T22:26:44.959Z · score: 8 (3 votes) · LW(p) · GW(p)
(There's an unstated assumption here that the motivation is to do something they wouldn't have done anyway This assumption may very well be correct.) This sounds like a possible flaw in how things work, even if they don't work quite like that.

Very good point - I hadn't considered this aspect in my original question. Cash donations may not ONLY cause a behavior that wasn't previously motivated by the recipient, it may also act via a mechanism of letting the recipient follow their preferences (which they've shown to be aligned with your altruistic desires) with fewer outside constraints.

Donating money to a food bank may not (only) motivate employees to distribute food any more than they otherwise prefer; it may make them more able to focus on their preferred amount of food-distribution.

Put another way, some of it may be more like UBI for people performing activities you support, than for direct motivation of those activities.

comment by Pattern · 2020-02-04T03:17:31.866Z · score: 2 (1 votes) · LW(p) · GW(p)

Patreon*, Pay what you want, and maybe Humble bundle are sometimes an example of this.

*Though occasionally, it is argued that such means may have negative effects on production or quality/bias/etc., in general or in specific cases, sometimes relating to rewards.

comment by dumky · 2020-02-02T22:35:01.288Z · score: 4 (3 votes) · LW(p) · GW(p)

Forget money for a minute, since it’s just a proxy for real resources. Assuming that people involved have a decent understanding of what resources are helpful, then Charity is trying to provide those resources. For the question of whether we know what resources would be useful and whether they have the desired impact in the long-term, that’s a hard question. GiveWell is an attempt at evaluating the impact of charities. There are others as well.

comment by jmh · 2020-02-03T13:29:44.469Z · score: 3 (2 votes) · LW(p) · GW(p)
So what's the mechanism by which monetary charity works? Are we "just" exploiting a comparative advantage in dollar-gathering in order to force the people on the ground to behave the way we prefer? Do we have any evidence that it can create channels of behavior that are self-sustaining?

I think most of the answers, including mine, miss this aspect of the problem.

Seems the question is really, what incentives for the recipients of charity are created by the charitable assistance that is akin to teaching them to fish rather than just giving them a fish for the day. I think this is actually a separate issue than how the charitable assistance is produced (monetary donations). However, I also suspect there might be interactions that, when examined, will shed some light.

One thing I would like to put on the table. Do the recipients want to change their behavior? I think it is very easy to say they want to enjoy a better standard of living and avoid hunger and disease but to what extents?

I suspect there is a bit of a disconnect here in the case of charity. I suspect most donors do not think that far along. They do want the good feeling of giving the hungry that fish without thinking about how the recipients might become self sufficient. The incentives for the charity (not the people providing the work, and particularly those on the front line) may not align well with teaching how to fish. That could be the case for both standard bureaucratic (it doesn't want to die either and changing focus hard -- it has its niche) and because that is the higher cost solution, requiring longer time. If donors' need more more visibly immediate results that type of solution may reduce levels of donation.

comment by Mati_Roy (MathieuRoy) · 2020-03-18T15:35:50.259Z · score: 1 (1 votes) · LW(p) · GW(p)

related keywords: real economy vs financial economy