Philanthropy 101: What every do-gooder should know about rationality before becoming one

Charity and volunteerism have become trends in what we call the elite world these days. Every college around the world has thousands of charitable organizations of every scale, serving all kinds of causes. A search on google returns thousands of spoon-fed programs for volunteering at the fingertips of the high-schoolers seeking an experience for Common Apps essay. Never have we seen such a high spirit for volunteerism and activism in the society. Yet, even if we make the outrageous assumption that all such acts are done out of altruism, this question remains: does good intention justifies all the outcome, when many of the volunteers are neither trained nor experienced with their benefactors? In fact, they most likely have got the benefactors’ rationality all wrong.

In the modern world where economics has become dinner-table talk, many have heard of an idea from the 18th century of an economy model where every man is for himself, yet the society still holds together and thrives. The man behind the seemingly simple but world-changing idea is Adam Smith, the father of economics. He introduces the idea of a Homo Economicus, an Economic Human, whose rationality ensures that he will always make the choice that benefits him most. The beauty of the idea lies in the fact that (a) it allows for society development and (b) it actually works (compared to, for example, communism, where the beautiful theory of society breaks down as it comes to practice). Selfish as men seem, the fact that everyone tries to act in their benefit ensures that no individual can get all the benefit to oneself, and therefore no one can inhibit others’ wellbeing (at least not in the long run, economists believe). However, the constant yearning of man to excel and earn more profit is the incentive for innovation and progression. This beautiful theory is the base of economics on which many other models have been developed and applied to the real world today.

Much as the idea of rationality is more or less universal, we usually fall short on understanding that rationale is not. While all of us try to make the choices that serve us best, we all have different reasoning of what is the best. In the book “Poor Economics”, Abhijit Banerjee and Esther Duflo present the case of relieving malaria Mali and Kenya. To reduce the transmission of the disease, giving people free mosquito net seems to be in the best interest of everyone, except that it is not. Surprisingly, people tend to use the mosquito nets that they spent some money on more often than those that they get for free. It turns out that the rationality of using the net does not simply come from preventing malaria but also comes from the fact that people have to spend money for it. As a result, having policies to encourage purchases of mosquito nets will do more good to the local people than providing the nets for free. Rationality can sometimes be that counter-intuitive, and the only way that we can do good is to understand these rationales so different from ours.

Picture credit: http://www.charitybanners.com/

Understanding people’s rationales also helps us do better with less amount of service. One of my favorite charitable organizations is Habitat for Humanity (and Fuller Centre for Housing, which is a similar model on a smaller scale). There are many reasons for one to support those organizations, but the selling point for me is that they do NOT provide free housing. Instead, the staff work with the poor to come up with a feasible housing plan and help them cut construction cost by finding cheap-material suppliers, providing low-interest or interest-free loan, and bringing in volunteers to cut labor cost. More than being an economical solution, the approach has a deeper meaning to those in need of housing. A house brings much more joy to people than a shelter. It carries the values of a family experience, of love and memories. Furthermore, it can be the biggest property that some have ever had in their whole life. Working hard to build the house brings them joy of achievement and ownership, in addition to having a place to get by. It is a win-win situation where the benefactors receive more, and the program saves money to be able to help more people in need.

Indeed, as a complicated emotional being, humans have many more needs than material ones. In another example from Poor Economics, a study found out that while they lack food, many poor people choose to buy television and spend a lot of money on funerals. This choice is clearly not the best for the poor, given that their productivity is reduced significantly with poor nutrition. However, as Cass Sunstein and Richard Thaler put it in their book titled “Nudge”, people fail to make rational decision in the lack of immediate effect. To fight the boredom of living in remote areas, people choose any type of entertainment available to them over food. To understand this choice better, we also need to consider that many poor have lived in the same standard of living all their life, and cannot envision escaping poverty in the near future. Therefore, they would rather do all they can to make each day a little more enjoyable than thinking about long-run solutions. Understanding this helps us understand human rationality in different situations, allowing us to pinpoint the real problem before seeking solution.

With other people’s situations in mind, sometimes just a small change in how we do things can bring remarkable results. For example, many would think improving the college enrollment rate requires tons of money to improve living and schooling standards. Turns out, all it takes is for universities to make the extra effort to come recruit in high schools and letting students take standardized tests there, as another experiment in Nudge shows us. Pursuing tertiary education seems to be a rational choice for most, given its proven positive effects on future incomes and social status. However, without a little, inexpensive nudge, the number of students going to college in San Marcos High, Texas wouldn’t have increased a whole 11 percentage points in one year.

On the other hand, the intervention of an alien country may cause opposing reaction from the indigenous population. Boko Haram, the terrorist group active in Nigeria from 2012, formed to resist Western cultural imperialism, as suggested by its name (Boko Haram means that Western education is a sin). Even though nothing can justify the terrorists’ acts, one may argue that if the Westerners who were making impact in Nigeria and other countries had understood better the local rationality (their religious need, traditions, conservative ideologies and so forth), there may have not been such extreme oppositions from the locals, causing yet more chaos and sins in the countries.

One of the reasons why charitable activities are so popular in the first place is because they expose us to people living a very different life from us. Understanding their choices enriches us. We come to understand more the complicated being of human and develop skills we would never have the chance to gain otherwise. All of this is true, given that we use more of our good intention to educate ourselves of different ways of living, not to feel good about our altruism (and for some of us, to write application essays).

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