Tuesday, January 01, 2008

Giving to Charity is Profitable?


I have barely read the entire article, let alone tried to find holes in their statistics/logic, but I find the possibility intriguing.

It reminds me of an article I read not too long ago that looked at the differences between the way the rich give and the way poor and middle class people give. The basic premise was that rich people give to preserve their way of life (e.g., symphony and museums) while middle class and poor tend to give to help others with more immediate/tangible needs. Sadly, I don't have a link to that article to see if there is any overlap and perhaps there wouldn't be, since the first study also looked at the giving of time (in addition to money) to see if the correlation held.


1 comment:

Kevin said...


Thanks for sharing the article and motivating me to study theories of statistics (I'm still struggling to understand it :)). I think that the argument for causality is fascinating and not unreasonable from a Judeo-Christian perspective, given that the Bible suggests similar relationships.

However, I don't quite understand their derivation of causality. Granted, I am a novice and my engineering stats courses did not prepare me for determining the likelihood of causality through instrumental variables (IV) and vector autoregression.

But it seems that using Volunteering as the IV may rely upon the assertion that volunteering is not directly affected by income given that "While people have differing amounts of money, they all have the same amount of time." That seems flawed to me since it does not consider the presumably more pertinent question of whether everyone has the same amount of "free" time to volunteer which does seem fairly likely to be affected by income.

Increased charity increasing GDP makes a bit more sense to me.

That said, it does seem reasonable that there would be some positive statistical effects, given that charity is neurologically good for us, and that witnessing charity increases estimation (of leadership) of the giver.

I also think you're right to consider what is meant by "charity", as some charity might actually amount to a sort of investment. This is not to imply a nefarious intent but it would result in a more direct relationship between charity and returns.