Impact Markets: The Annoying Concept, 7/20
What good is philanthropy?
there are two kinds of revolutionaries: technological and political. And there are two kinds of backers of these revolutionaries: venture capitalists and philanthropists. The backers seek out the founders, the ambitious leaders of new technology companies and new political movements. And that is the market for revolutionaries.
…There aren’t term sheets between political philanthropists and their young proteges, there aren’t “exits” to the tune of billions of dollars
Scott Alexander wants to “fix” that.
impact certificates are like a VC funding ecosystem for charity. Charity founders with good ideas sell shares in their proposed projects. Profit-seeking investors buy shares of (“invest in”) projects that they expect to succeed. This funds the project; if it does succeed, altruistic people/foundations (“final oracular funders”) buy the impact, compensating the investors.
Profit-seeking investment is driven ultimately by what consumers want. Philanthropy is driven ultimately by what donors want. Unless you think that donors are morally superior to the rest of us, you should not be rooting for more philanthropy.
One can speculate that one of the causes of increased social tension is the rise in philanthropy. Our “cold civil war” is funded by George Soros, Peter Thiel, Tom Steyer, and the like. Universities are among the most popular “charitable causes,” and their bloated administrations are the shock troops of the culture war.
We are better off with Soros was speculating on currencies and Thiel trying to take businesses from zero to one. We are better off when university alumni invest their money in search of profit.
Businesses are bad at producing public goods like helping poor people without much money, solving existential risks, and promoting forms of research that can't internalize profits. I'm sure you know all of this, so write your article and I'll see if there's still something worth disagreeing about.
This is an attempt to make charity more accountable - maybe not to the people being helped directly, but to donors who care about those people.
As if philanthropists all had worthy goals to fill in the gaps that markets leave.
A lot of philanthropy goes to colleges and universities. Much of this goes to fancy new buildings. I think that Scott would agree that this does not help poor people. But were the donors who funded buildings trying to help the poor but lacking skills at effective altruism? Obviously not.
The challenge is not to make philanthropists more efficient at getting performing-arts centers and sports complexes built on campus. The challenge is to change the focus of donors toward something more worthwhile.
On the other hand, over the years Wal-Mart has hired many low-skilled workers and lowered the cost of living in many poor rural areas. Wal-Mart did not set out to help poor people, but that was the result.
More generally, markets have been shown over time and across countries to reduce poverty. The market does not produce the results of a benevolent omniscient quasi-deity. But donors themselves are neither benevolent, omniscient, nor quasi-deities.
I think that there is too much money to be made nowadays in non-profits dedicated to causes. Think of people making money as “activists.” I worry that “impact markets” could lead to even greater investment in arms races between opposing advocacy groups.
I understand the theory that businesses will not receive feedback about public goods that they fail to supply. But at least if a business has an offering that people neither want nor need, it typically gets feedback in the form of losses and has to exit. If a donor has a cause that people neither want nor need, there is no equivalent form of feedback. And in my opinion, a huge chunk of philanthropic resources are devoted to causes that people neither want nor need. So making that process more efficient does not sound like a step forward.
Also on the topic of effective altruism (EA), Infovores interviews the pseudonymous ColdButtonIssues. On the case for EA’s joining the GOP, the latter says,
in a way the case just gets stronger the worse you think the GOP is—almost by definition doing the most good means effectively targeting whatever is most pressing, persistent, and bad! Republicans are going to win a lot of elections essentially no matter what you do, so improving the party to be even slightly less bad [again, from that point of view] seems like a big improvement.
This sounds to me as though he is coming from a position of certainty. I think that in a politically diverse country it is dangerous to believe that you certainly have the right point of view, and your task is to straighten out the other side. Inside every EA who believes this is a totalitarian screaming to get out.
I think that the conceit of the EA movement is that a donor can overcome uncertainty, complexity, ego distortions, and ignorance with metrics. I think that is hubris.
I'm sure there are people who aren't going to want to hear this but this is why people over history have used governments and religious organizations to supply public goods, not individual philanthropists. All governments, even the most totalitarian, must have at least the grudging consent of the governed providing the feedback you talked about above. Religious organizations generally have the same need or desire to build wide popular support. In the absence of a profit motive or a need to have a broad base of support to keep the lights on, what gets built are totalitarian feifs. The EAs are not proposing some new form of enlightened gifting but providing a justification for keeping in place what we can already see is largely not working for society but does work to give ultra-wealthy donors outsized influence. It probably bought a Presidential election.
Once your charitable work tries to expand out beyond your own locality, it is far more likely to fail than to succeed. The information problem is unsolvable beyond that level. Donate to your local foodbanks/goods bank, but do it with actual food and goods, not cash. Contact your local private schools and donate to them specifically to pay the tuition of students by economic class. Do the same with your local colleges and universities. Contact your local medical facilities and offer to pay for necessary medical interventions for people without insurance. Or start your very own food banks, schools, and medical facilities that give away goods and services for free on demonstrated economic need.
Keep it simple, keep it local.