Charitable Giving Seen As Subjective Decision Even In The Face Of Objective Information

By Shalina Omar

When it comes to charitable giving, the heart rules the head. That’s what four researchers have found in a joint study on altruism and giving coming out of the London Business School, NYU Stern School of Business, the University of Chicago Booth School of Business, and the University of Pennsylvania. The studies show that people will still choose more personally gratifying charities to donate to over more effective ones. The researchers found that this pattern was only disrupted in two situations: if the donor occupied some role of responsibility, such as being responsible for allocating official funds, or if the donor was choosing between charities that supported the same cause.

Alixandra Barasch

This research explores effective altruism, a movement that centers on the idea that welfare is something that should be approached using reason and evidence in order to maximize benefits. In the same way that an investor makes decisions that maximize the financial returns of every dollar invested, donors should do the same with their charitable giving. The study examines whether people are “distorted altruists” who would be effective altruists if only they had the information available to them to make comparisons across charities. If this is true, the solution would be to provide them with information about which charities are the most effective.

However, this latest study shows that people will still choose charities based on their personal preferences, even when presented with definitive information about effectiveness.

Key Findings

Deborah Small

Researchers Jonathan Berman, Alixandra Barasch, Emma Levine, and Deborah Small conducted a series of five studies to explore how people make charitable giving decisions as well as how people view charity and make judgments about others’ decisions.

The results from these studies suggest that individuals view charity as a particularly subjective decision relative to other personal decisions. Participants said that objectivity was valuable when choosing a cellphone, an investment, or a medical treatment, but considered personal preference to be more important when it comes to choosing a charity.

Throughout the studies, the participants prioritized emotional connection over welfare maximization in choosing a charity. In contrast, participants regularly chose the option with the greatest returns when choosing a financial investment. When it comes to charitable giving, people believe that feeling passionate about a cause is more important than how much bang you get for your buck, licensing people to choose a charity they’re more connected to even if it is a less effective option.

However, there are two conditions in which charity effectiveness guided how people thought about donations.

Emma Levine

One condition is when all the options have the same guiding cause. Although people go for emotional connection when given the choice among a diverse selection of charities, they will give more importance to objective outcomes once a single cause has been identified. For example, if the choice is between saving one child with leukemia or five children with leukemia, then people will maximize welfare by saving the five children.

Another condition is if the decision maker is in a position of responsibility. Researchers found that once the decision maker has the power to allocate funds for a larger system, such as a medical center president, people find it less acceptable to choose personal preference over welfare maximization.

Implications

People tend to use their feelings as a guide when it comes to charitable giving, but this doesn’t mean that they entirely disregard objective information about a charity’s effectiveness. The number of people selecting the more effective charities is still greater than chance, which means that providing this kind of information does have an effect on donors. Additionally, the research shows that there are situations in which donors pay more attention to objective measures.

Jonathan Berman

This research helps us understand how and why donors make the decisions that they do. These insights have implications for foundations and nonprofits, whether you want to change donor behavior or learn how better to court potential donors. Because people prioritize their personal preferences when giving to charity, it may be fruitful to appeal to donors’ emotional connections with your cause. Additionally, the research shows that people take effectiveness measures into account when comparing within a single cause, which is useful information if you want your organization to stand out among other similar organizations.[1] 

To understand donor behavior, it is crucial that we first understand how people view charitable giving. If the goal is to further the effective-altruism movement and maximize welfare, providing more information may not be enough to change how people choose to spend their money on charities. The key may lie in altering how people think about charity altogether.


Shalina Omar is pursuing a Master’s of Arts Degree in English with a concentration in Sociolinguistics at NC State University. She is currently an intern to the Philanthropy Journal and a teaching assistant in the NCSU linguistics department.


Alixandra Barasch joined New York University Stern School of Business as an Assistant Professor of Marketing in July 2016. Professor Barasch’s research examines social aspects of consumption, such as the implications of focusing on oneself versus others, judgments and inferences about others and decisions to share information or resources. She received her B.S. in psychology with a minor in chemistry from Duke University. She holds a Ph.D. in Marketing from the Wharton School of the University of Pennsylvania. 

Emma Levine is an assistant professor of behavioral science and the Charles E. Merrill Faculty Scholar at the University of Chicago Booth School of Business. She earned a Ph.D. in decision processes from the Wharton School, University of Pennsylvania.

Deborah Small is the Laura and John J. Pomerantz Professor of Marketing and Psychology at the Wharton School and the Psychology Department of the University of Pennsylvania.  Her research examines fundamental processes that underlie human judgment and decision making. She received her PhD in Psychology and Behavioral Decision Research from Carnegie Mellon University and her BS from the University of Pennsylvania. She resides in Philadelphia with her husband and two children. 

Jonathan Berman is an Associate Professor of Marketing in the London Business School. His research focuses on the intersection of personal financial decision-making and charitable giving, examining how consumers can best manager their resources to do the most good with their money.

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