John Halstead and Hauke Hillebrandt have an interesting new paper posted on the Effective Altruism Forum. To be fair, it draws a fair bit on some of my research and so I am likely biased. But it does raise and argue some important points about effective altruism.
The “new philanthropy”–by which I mean mainly the philanthropy of the new fortunes, mainly in tech–has generated a lot of interesting thought and debates. The general idea of “effective altruism” with its focus on getting beyond just “warm glow” has a lot to be said for it. As a professional economist I am a big fan of the challenge to prove that the proposed “charitable” projects actually are better than cash (e.g. Blattman and Niehaus 2014). This is a hard standard as the overhead costs of delivering projects (particularly if they were costed at opportunity cost of the work done) are often very high and the incremental benefits over cash often low (or non-existent).
However, this debate about “which type of intervention/project/program is the most cost effective” is limited but one hopes not limiting. These types of interventions are still mostly “linear” in costs and benefits. Suppose giving a specific girl (targeted perhaps by a certain age, in a certain region (perhaps distance from school), a certain household income/socio-economic status) is a cost effective way of raising the likelihood the girl attends school (as suggested in Muralidharan and Prakash 2017 based on program of that type in Bihar India). Beyond a certain scale (and one reason why cash is often cost effective as programs have large overheads on small numbers of beneficiaries) this impact is (roughly) linear in costs–each girl getting a new bicycle requires buying a new bicycle–and (roughly) linear in benefits–each girl benefits the same amount (if anything, one would expect if targeting were effective the marginal benefits would decline).
However, one thing the creators of the new fortunes understand is non-linearity of costs, and maybe benefits. That is, all producers of software know that the marginal cost of an additional user is next to zero. Moreover, it could be that the value to an additional user of using a given product might be increasing in the number of users. If that can be turned into higher marginal revenue per additional user then one has (the possibility of) an enormous fortune as margins (marginal revenue over marginal cost) increase with number of users. These non-linear economics create “winner take all” dynamics in sub-segments: something like 90 percent of all searches are done on Google, across its platforms Facebook’s four platforms report 6 billion users (not all different individuals as some use multiple platforms). The economics of “infrastructure” (what I would take should define the term) are often “club goods” elements of delivering a service which are non-rival (until congestion externalities set in) but excludable.
Far and away the most important “club good” in the world today is the national development of the country you live in. What I mean by “national development” is the progress in the four-fold transformation of a country in having high economic productivity, a responsive state, a capable administration (of both state and non-state organizations), and equality of treatment of citizens. (Practically) all indicators of human well-being (income, poverty, health (infant mortality, malnutrition), schooling and education, safety) are very strongly predicted by national development. For instance, a country’s level of headcount consumption/income poverty is completely predicted by the consumption of the median (typical) household.
This is why it is kind of puzzling that people’s whose private fortunes are generated by non-linearity would spend so much time debating which was the best (cost-effective) linear way to give away their private fortunes: cash versus non-cash? Bicycles versus conditional cash transfers? Business training versus loans/financing? Giving away shoes? (just kidding, that was obviously dumb as altruism, but maybe super smart as corporate marketing).
Since human well-being is strongly determined by one’s access to the excludable club good of national development there are two obvious ways to promote human well-being: (a) reduce the numbers excluded from moving to good “club good” places (reduce barrier to labor/personal mobility) or (b) improve the quality of the club goods people who live in poor countries have access to without moving by improving national development.
There are four arguments against a focus by philanthropists on national development:
- No one knows how to, or can know how to, promote national development, it just is what it is due to deep determinants.
- While someone might know how to promote national development the instruments available to us, as private philanthropists, cannot be used effectively to promote those things that promote national development.
- While there might be ways for us, as philanthropists, to effectively promote national development we cannot do so in ways in which the positive benefits of those actions can be reliably attributed to us so we cannot get credit for what we did.
- Engaging in national development versus linear privately organized transfers might bring higher benefits, but it also brings much higher reputational (and other) risks to us of being engaged with national governments (or other actors).
All of these are arguments to explore with analysis and evidence.
However, one important point is that the argument against investing in promoting actions that would facilitate higher (and more stable) rates of broad based growth in poor countries that “we don’t know what to do” is insufficient. After all, the obvious response to “we don’t know what to do” is to fund and engage in research and learning to learn what to do. The wildly popular agenda for better causal identification in impact evaluation is premised on the idea “we don’t know currently what to do” (otherwise, why spend millions on research?). So the argument against philanthropic engagement in promoting economic productivity (one aspect of national development) has to be not just what “we don’t know what to do now” but also that “there is no set of learning activities or research that could improve our knowledge of what to do that passes a cost effectiveness test (of gains in the value of useful knowledge versus expense)”. That is a possible argument, but much, much tougher argument to make.
That is, I could argue that in the allocation of funding for physics research no new research into technologies for faster than speed of light travel of human beings should be funded because our best available physics theories say this it is impossible. I could argue against research into changing the rest mass of an electron on the basis that, in our best available theories, this is impossible and that it is a universal constant. Neither of those is true of economic growth. It is certainly not constant over time for countries–we see massive accelerations and decelerations of economic growth. And, it is not the case that our best available theories say it is impossible to influence growth–and we have seen leaders and elites of countries change strategies and accelerate growth, and change strategies and induce economic disasters.
A perhaps useful analogy is a decision a philanthropist concerned about the well-being of African-Americans in the USA would have had in the early 1960s. The United Negro College Fund was founded in 1994 and gave scholarships to individuals and supported funding of historically black colleges and universities. Suppose (and I don’t doubt it) that this linear funding opportunity was cost effective. This would be a very attractive investment. Against that, there was a new organization, founded in 1957, the Southern Christian Leadership Council that was engaged in advocacy around civil rights. There are lots and lots of reasons why support to the SCLC was risky–maybe it is impossible to change civil rights legislation in America over any reasonable time horizon, maybe this particular organization doesn’t have a correct “theory of change”, maybe funding this organization will expose me to reputation and other risks from their strategy and tactics. Moreover, there was no way to bring reliable “scientific” evidence to the UNCF vs SCLC decision. I think (and this isn’t my academic area) that ex post having been an early funder of the SCLC would be the equivalent of being early venture capital into Google or Facebook..but way better of course.
I think there should be a strong presumption that the allocation of a large philanthropic portfolio in the development space should not be 100 percent proven cost effective linear interventions and to identifying and proving the effectiveness of new innovative linear interventions. Just as with financial portfolio allocations the right allocation depends on the magnitude, the horizon, the individual’s risk tolerance, but it seems to be that a large share should be devoted to non-linear, potentially transformative agendas, in national development (including economic growth). At the very least, this debate is interesting and important.