- by Don Wong
Why? Why do people give? That is the question I've been asking myself recently after receiving an unusually high number of e-mail, snail mail, and personal solicitations over the past few weeks. I was reminded of a New York Times article I had read a year ago entitled: "What Makes People Give?"
The article reports on two economists - John List and Dean Karlan, experts in the field of philanthropy economics - who have conducted a series of field experiments to learn what motivates people to give charitably. For the vast majority of charities, those that do not simply operate on the spending afforded by an endowment's investment income, this question remains the holy grail of fund-raising, operational budgets, and how successful the charity is at achieving its mission statement.
List and Karlan set out to gather "empirical evidence to support the strategies employed by most fund-raisers." In essence, they wanted to understand better what motivates people to give so that charities could focus their fund-raising efforts on those strategies that are most effective. What the two learned from their experiments is that much of what we fund-raisers cling to as gospel is, in fact, inaccurate or simply wrong.
Yes, many of the reasons for giving "to make the world a better place, to see your name printed in the back of an annual report, and the like" are valid and accurate, but they are not very helpful in that they do not address or take into account the often complex reasons that influence a donor giving. The article points out that there is very little research on the subject of philanthropy economics, but that there exists a "growing group of donors, like Bill and Melinda Gates, who are interested in bringing some of the quantitative rigor of big business to philanthropy."
List and Karlan looked at specific, traditional fundraising "methods" and tested their validity. In one experiment, List and Karlan helped a charity develop different solicitation letters to help them determine the efficacy of matching gifts. "In one letter, sent to the control group, there was no match. Another letter said that a donor had agreed to match any gift, dollar for dollar. In a third, the match was increased to two to one, and in a fourth it was three to one." The economic analysis behind matching gifts is straight-forward: matching gifts effectively increase the value of one's gift, or decrease the cost of making a gift. Either way you look at it, the conventional wisdom is that matching gifts are an effective way to motivate giving. What the two found is that although the existence of a matching gift did impact the number of people who responded to the solicitation letter (2.2 percent of people receiving a letter mentioning a match v. 1.8 percent for the control group), the size of the match had no bearing (one-to-one match recipients "gave just as often, and just as much, as those responding to the three-to-one offer").
The article discusses other studies and experiments performed by behavioral economists who explore the motivations for giving; discuss the notion of "warm-glow" theory (people give money for the cause they're supporting, and the feeling - the warm-glow - they get from giving); and talk about "impure altruism" (giving isn't always predictably rational, despite people's general tendency to want to do what's best for themselves). The article reports on research that compares the results of seed money (campaigns that announce money that has already been raised for a goal) with matching gifts, examines the language used with donors during pledge drives, and explores differences in giving between the genders.
But maybe more importantly (especially in light of the global economic crisis that occurred since the article was published), the article sheds light on understanding human behaviors as they apply to things like the effect of employer matches on employee contributions to retirement plans, and the impacts of changes to tax codes on charitable giving. For example:
"Each year, the federal government subsidizes charitable donations to the tune of about $50 billion a year. That is the value of tax deductions that the government gives out in exchange for donations. It's a huge amount of money, more than enough to pay for, say, universal preschool for all 3- and 4-year olds. There are several reasons to question whether a subsidy of this size is such a good idea. Deductions of any kind complicate the tax code. This particular deduction disproportionately benefits the affluent, who have done quite well on their own in recent years. It also adds to the government's long-term budget deficit. In an ideal world, the government would figure out a way to recoup some of this money without causing charitable giving to plummet.
"So what if it were possible to design a tax policy for charitable giving that wasn't quite as generous as the current one but still led people to give nearly as much as they're giving now? It might be possible and the potential benefits would be enormous."
Interesting questions, to say the least. Has your charity done any research on why your donors contribute? As a donor, have you thought about what it is that motivates you to give?
