Friday, December 7, 2012
Freakonomics: Charitable Giving: Why Fewer Is More:
As any 10-year-old can tell you, multiplication is commutative: 2 x $70 is the same as 70 x $2.
But not in charitable giving, it turns out. Making two donations of $70 is a good deal more valuable to charity than making 70 donations of $2.
The reason lies in the fixed transaction costs. Many charities (unavoidably) get charged a fee for each deposit into their bank account. So two large donations create only two dollops of that fee, whereas 70 smaller donations attract 70 dollops. ...
Research by the U.S. Center for Effective Philanthropy shows that these transaction costs are much higher if the foundation makes several small grants than if it makes a few large ones of the same total value:
Median time which charities spend applying & reporting on a grant of:
Amount raised per hour spent
No. hours work in raising & managing $100,000
120 (three weeks)
27 (less than four days)
So when you’re choosing charities to support this Christmas, divide your total giving between fewer charities, whatever the scale of your giving.