(this is rehash of a comment I made on the original post, feel free to delete if not allowed)
I'm still surprised none of these comments have mentioned:
1. Difficulty of value capture (free rider problems, diffuse gains, etc.)
2. Market inefficiencies/failures
Market solutions are well known to _not_ work in these circumstances! Charities / government would be better here. Even the (non-crazy) staunchest libertarians I know agree that we need governments involved for many kinds of problems. I would assume we also need charities for similar reasons.
What you call near mode in section 1 would typically be called acting "on the margin" by an economist. I think that's often a good mindset to have, and in the context of EA it mostly makes sense. But capitalism's contribution is systemic in essence and thus sort of undefined on the margin, which makes it really hard to answer your challenge sensibly.
Furthermore, as we've seen with the SBF fallout, someone's actions are marginal until they suddenly aren't. I contend that this is a possible failure mode of EA in its current form.
"The company has a certain profit margin (let’s say 10%), so you’re donating 10% of the money directly to Amalgamated Kenyan Wells, and the rest is going into the ground to become wells. ... I think you could still argue that investing directly in the company has more effect."
Also: "So if your alternative was to give the money to a profitable and successful company in the Third World...."
Can you clarify if you mean "invest directly" versus "give the money" as 2 diff things?
(Maybe I'm being dense here).
If AKW is capital constrained, then an investment of $1 million in exchange for TK% equity (fair market value) is interesting. They'd probably take the $ only if it could be productively deployed as growth.
If AKW is simply given $1 million, however, isn't the most likely scenario they do a one-time distribution to the owners?
"My wife, Magatte Wade, is working to bring Prospera to Africa because of this."
I have to sit back and contemplate the lapidary elegance of this for a bit, because I am too overcome to corral my thoughts. Let's just say the three zillion ways this can turn into the mutant offspring of Lovecraft and Conrad are casting so many shadows into my poor brain, I am muffled in blackest night.
Bringing Prospera to Africa. Bringing. Prospera. to Africa.
Some of Africa? All of Africa? Which parts of Africa? That pie is so stuffed with plums to be pulled out, it's gargantuan enough for Godzilla to have as an amuse-bouche.
As a child in the 60s/70s, I sort of remember hearing about Kenya as being a shining hope for a modern African nation with an industrialised economy and thriving urban centres. Now some of the citizens are doing this.:
I hope Prospera en Afrique is fully stocked up with replacement electrical parts! And they're careful about where they buy their cooking oil!
"The most successful example is the Dubai International Financial Centre, where a common law legal system was placed in a 110 acre zone within UAE sharia law. It led to Dubai becoming a top global financial center in twenty years."
Yes, because Dubai is definitely in the top ten of places that spring to my mind when considering "Where seems like a good place to live?" and global financial centres are not often rather.... shady.
From my perspective, we are going to hit a wall as far as capitalism goes. We don’t have infinite resources ( unless something drastically changes and we find new planet). I believe it’s important to acknowledge that not an entire population can be “productive” in the way capitalism defines it. We will always have people who need help and support, and I’m okay with that. As someone who works in public health, we’re also seeing significant impacts to human health due to increased cheap agricultural practices. We’re getting cheap chickens, but also seeing significant disease outbreaks that impact the environment and our health. I believe it takes a balance of both.
Why is charity separated from capitalism in the first place? Satisfying your altruistic desires is part of the marketplace. Capitalism would suggest that you should choose the amount and where to give according to your individual desires.
You write: "Let’s say they hire Amalgamated Kenyan Wells. Then the money ends up in Amalgamated Kenyan Wells, presumably a profitable and successful company in the Third World, and this is no worse than donating to the company directly."
The historical pattern is that Amalgamated Wells is really good at getting contracts. At building wells, not so much. Meanwhile the We-Dig-It company is good at building wells. Amalgamated Wells notices, and gets the government to pass a bunch of laws or create a lot of new regulations, the purpose of which is to make it impossible for We-Dig-It to eat their lunch. We-Dig-It goes out of business. Capitalism fails to ignite, again.
>Velveteen protests that I haven’t proven this and don’t even have a model showing it’s a sane order-of-magnitude estimate. I accept this. I don’t think anyone has proven the opposite either. I’m going entirely off total guesses. It would be worthwhile for someone to try to calculate this but it would be a very big project, and a half-baked version would be worse than the total guesses.
Look, I'm a radical capitalist compared to the normal population (though I guess not in here). But anyone can see how the burden of proof here lies in the side with the galaxy brained take of: "no, no. spending money directly on the thing you want is stupid and inefficient. Just spend on other stuff and magically it will turn into charity."
Sometimes the galaxy brain take is right! I'm confused and don't have a strong opinion either way. My bias/priors is that actually capitalism is awesome so that makes me not reject it outright.
But come on. We need those studies to prove investing in "capitalism" is actually better.
"It would be worthwhile for someone to try to calculate this but it would be a very big project, and a half-baked version would be worse than the total guesses."
Can't we easily calculate this by looking at GDP/capita forecasts in countries where EA charities are doing the most interventions? If you save a person in Ethiopia today, we have reasonably good forecasts on the total economic value that person will likely produce during their lifetimes. Do that and then compare it to expected S&P500 returns.
I.e. for Ethiopia we have the following numbers:
- Current GDP/capita: $1,000
- Average inflation-adjusted GDP/capita growth rate: 3%
- Assuming we save a child today and assuming compounding GDP growth, they will produce $141k of economic value between the ages of 18 and 60.
For the S&P500, assuming a growth rate of 10% that same $1,000 will result in $304k of value, beating the output of the person saves in Ethiopia by a factor of 2.
I think the answer to VelveteenAmbush's objection is essential empirical. "If you feed poor people, you will just create more starving poor people" is one of those ideas that sounds like it could be true but mercifully isn't. The evidence is pretty clear that fertility rates drop as mortality drops, which is why most countries on earth have <2 fertility rates at this point. I think the argument is that if people are confident their children will survive to adulthood, they consciously choose to have fewer of them.
Africa's growth rate (3.7% in '23, not an outlier) appears to be higher than the standard rate of developed economies
Comparing preventing malaria in someone who will then have a lifetime of input to an also growing economy versus going on an extra vacation appears to be clearly well defined in the terms of the infinite future growth argument
This is a tough problem. I don’t have an analysis, but one company that seems to do a lot of good as a for-profit is Zipline. They deliver medical supplies via drone in Africa. They’re private, so not necessarily easy to invest in on the margin.
I was very much looking forward to this "highlights", and I am not disappointed. - Kinda sad, it seems so hard. - Is there a charity/company walking the poor parts of the world, testing people and offering the 0.1%-3% smartest infovores among them a wonderful deal - full board education and deployment/visa assistance (for a share of future earnings if commercial)? Should there be one? (I am still thinking about the girl young Scott met in Cambodia in 2008). https://web.archive.org/web/20131230133858/http://squid314.livejournal.com/2008/04/28/
"It is relatively easy for me to ignore the plight of poor foreigners, as long as I assume they're dumb (and I start with the assumption that most people, foreign or otherwise, are). But smart people are for me what Americans are for those America-first people; I can bring myself to not care about a lot of people, but I can't bring myself to not care about them. They matter to me, in the way that everyone should matter to me but can't because I don't have enough emotional resources. In fact, all day I found myself worrying about her, and hoping she manages to get out of the selling-postcards-at-Angkor-Wat business and to a decent school at some point, even though I haven't spared a thought all day for any of the multiple-amputees I've seen wandering around. Not sure how I feel about that."
So I'm confused by the whole discussion. Scott, you're a libertarian. Did it occur to you to, I dunno, get involved in libertarian activism, or at least check out what libertarian advocacy groups were out there?
This has been my beef against EA from day 1. As you say, no charity can ever have the long-term impact that more capitalism can have. So libertarian activism (whether it calls itself "libertarian" or not) seems like the most effective way to make a positive difference in the world.
Donate to Libertarian, or libertarian-leaning, candidates. Donate to Students for Liberty. They do a lot of good work. Or The Advocates for Self-Government. Or the Foundation for Economic Education. Or the International Society for Individual Liberty. I would add the Libertarian Party, but they're a mess right now—check back in a year or two. But how about Libertarian Parties in *other* countries? Or State LPs?
Perhaps none of these really fit your flavor of libertarianism (likely ISIL does not, for sure). But then maybe the Reason Foundation? Cato? Cato's probably the most effective, and most inoffensive option. Even if none of these fit, there's almost certainly something out there that does. And if not, I will personally work with you to help create it.
You seem to want something measurable, where you can have some notion of how much good your money is doing. And that's a good question! Attempting to find an answer to that question would take a lot of work, but before anyone even tries, you've got to acknowledge that this category is something that might work for you.
Honestly this whole thing sounds like a question for Bryan Caplan, or maybe Robin Hanson. Or anybody at Econlib.
> There's a reason why stuff like water dispensers to save lives are going to developing countries with no market economy
This is such an obviously bizarre statement I am having a hard time processing its existence. Do people think Kenya or Uganda or Sierra Leone don't... Have markets??
What am I missing here? Why is this not a clearly ridiculous statement?
I get that in these circles, bringing up that colonialism has consequences is not something people like to do, but to claim that places with publicly-funded better infrastructure don't need charity to get that infrastructure because they "have a market economy" seems too obviously ridiculous.
I mean, don't wealthy "market economies" have those problems too, when their publicly funded infrastructure breaks down? Wasn't that the whole Flint, Michigan thing? "We need help re: clean water because our public infrastructure failed"? Does Flint have different "markets" than any other random place in Michigan, or America for that matter?
The zoomed out question is something like "the world has a lot of big problems that require smart people to solve, wouldn't it be good if we had the smartest of an extra billion people to help us solve them?" The zoomed in version is "if Jean in Burundi attends more school instead of being home with diarrhoea with his older sibling also home from school looking after him, how much does that add, including downstream effects like the effects on their kids, relative to the investment of the water dispenser?" I think it's really important.
I would love someone with a better sense of the numbers than me to make up some numbers here - or point me there if someone else has. My sense is that it's an incredibly good "investment" in terms of compounded value created per dollar spent.
Velveteen's entire line of argument seems to cash out in a fundamental value difference about how much more valuable (if at all) saving existing lives is to creating new valuable lives. I don't think the value of "awakening the dead matter of the cosmos"-blah-blah-blah is zero, per se, but it's just an aesthetically pleasing thing to do, not a moral imperative — so if anything *that* is the "consumption" path, which we should only get to if we've already fulfilled our moral duty to safeguard all existing lives and taking a good stab at fulfilling *their* preferences.
"I’m not running a Moral Worth Tournament where I match concepts against each other and decide which deserves more credit for good things."
Fair enough, but perhaps some of the confusion was driven by your chosen post title: "Does Capitalism Beat Charity?," which sure SOUNDS like a moral worth tournament.
"I’m not running a Moral Worth Tournament where I match concepts against each other and decide which deserves more credit for good things. I’m discussing the Near Mode situation where some specific person (eg you) has some specific amount of money (eg $1,000) and wants to use it to improve human welfare."
Thank you for this clarification. Maybe I'm an idiot, but this wasn't clear to me in the original post.
"This isn’t a gotcha or a rhetorical question, I think these could really change my mind."
In my model this decision comes down more to time discounting. What is the rate of return of an investment? How much do you discount future consumption (by poor charity recipients) compared to their immediate consumption? If you think that saving 1 person today and saving 1 person in 10 years are similarly valuable, then you should probably invest. If you think saving 11 people then is as valuable as saving 10 now, then you should compare the implied rate of discount to the rate of return of an investment.
Perhaps the most effective charity would be helping people more to economies that are in better condition. After all, giving poor people money can be effective, and one of the things poor people spend money on is emigrating, frequently as great risk.
Following the logic, it might be effective charity to finance illegal immigration.
Seems to me that, in general, markets will roughly approximate the optimal solutions. But there are well-known market failure modes (information asymmetries, monopolies, and notably for this discussion, cases where some people’s utility is poorly measured by their monetary ability to pay) and in those cases, charity (or government regulation, or whatever) can be better. You stacked the deck by choosing the well-being of the worst off, which is one of the well-known market failures. (And an important one!)
I'm surprised that nobody seems to have suggested donations for basic scientific research (or for killer asteroid detection, pandemic security, etc.) as an alternative to donations meeting the immediate needs of poor people.
It's debatable which of these options would benefit humanity more in the long run, but at least they compare as apples to apples. "Don't spend anything and put your money in the stock market" seems like a category error, for the reasons Scott points out.
More and more I've come to think that the unit of importance are whole economies. If you want people to be better off in a sustainable way, giving to specific organizations, profit or non, isn't the best way to do that, unless someone has comprehensively assessed the local economy and concluded that certain specific types of organizations would be excellent starter seeds. It's equally possible, however, that such an assessment would conclude that no one type of organization is going to make any difference. that what people in that region really need is a plethora of economic infrastructure. Unfortunately, that probably isn't possible without the active and skilled cooperation of the local government, and in many areas, that's a problem (maybe *the* problem).
If the question must be restricted to "Doing the most good my money can buy", then the criteria of "good" seems so subjective that no objectively valid answer is available. I'm not going to donate a kidney to a compete stranger because I do not value the lives of complete strangers enough to do that (I'm just being brutally honest). I'm not donating a tenth of my income to charity because I'm not that well off, and I have a family to support, and that matters more to me. It seems to me that there is a dichotomy between systemic approaches to social problems that affect all of us (which we might expect some consensus on) and individual investment decisions which are as idiosyncratic as who your friends are or what you do for a living.
i also suspect that, to do the most good for other people, it's probably necessary to understand what *they** value and want. Do we know that, if we asked, the people receiving the malarial nets would choose to spend the money that way? To assume that we know best how money should be spent on other people seems to me like it's on the slope toward some sort of paternalism. I can't help thinking that some sort of two way communication is required, so that potential recipients can say what they want the money for and potential donors can decide if that's what they want their money to do.
So, to the question "What should I do with my $1000?" perhaps the best answer is "Accept applications from poor and needy people, and award it to the one with the best investment plan." Or maybe someone out there already does this?
> Now I’m really not sure how to think about this. I think the answer is something like - the company has a certain profit margin (let’s say 10%), so you’re donating 10% of the money directly to Amalgamated Kenyan Wells, and the rest is going into the ground to become wells. So I agree that there’s some aspect of supporting capitalism here - maybe even one that’s better than giving to the company directly because it forces the company to demonstrate usefulness - but I think you could still argue that investing directly in the company has more effect.
I was responding specifically to the version of the argument that says you can "donate to capitalism" by just buying whatever you want like a new car or a pair of expensive shoes. (I fully admit this is the weakest version of the arguments but I think it's still at least worth getting it out of the way). In this case the company also only retains a percentage equal to their profit margin and the rest goes to whatever good you want to consume so the only difference is whether you end up with a new car or new wells in africa.
I'm sorry, maybe I just have very different views from a lot of the people on this blog but VelveteenAmbush's comment just seems evil. We shouldn't bother saving the lives of people who are dependent or unproductive because wealth is the most important thing? I'm sorry but this is completely backwards. And the stuff about "awaken the cosmos" and "awaken the dead matter of the cosmos into flourishing sentience" is just utopian bullshit. But people always need a big utopian goal in the future to justify their evil in the present.
It's not a good idea to think of money as "going back into the system." Money isn't really a conserved good like energy. If you think of it that way there's a bunch of classic mistakes you make like, "Wal-Mart takes money out of the community". The better way to think about it is to imagine spending money as getting a bunch of people to spend their time doing something. Because that's actually what's happening.
Let's suppose we have a guy, Bob. Bob's good at making wells of all kinds and offers his services for those that need it. In June, Bob gets hired to make some oil wells in Texas. In July, a charity you gave money to hires Bob to make water wells in Kenya. In August, Bob makes some water wells in Saudi Arabia. If you hadn't given the charity money to get the wells done in Kenya, Bob would have made wells elsewhere. If charities were to start asking for wells all the time, Bob would get his friend, Alice, who just graduated, to help him make some more wells. If Bob hadn't had all this well-making demand, Alice would have done something else after graduation. Once the charities finish making the wells, Alice will probably go do something else, since Bob doesn't have as much work for her; she's not really as into wells as Bob. The charitable contribution you made didn't really add or subtract money to the economy: it redirected some labor. Specifically, it redirected Alice's labor. Or maybe the charitable money wouldn't have been big enough to redirect Alice, in which case it would redirect Bob: Bob might have worked a bit more and had a bit more money, in which case his spending of that money might further redirect other people's labor. There was also some redirection of materials, but materials are really just solidified labor: steel is labor to take iron out of the ground, mix it with carbon, and transport it to where it is needed. Sometimes, of course, the labor goes to waste: it is redirected into the creation of something useless, or bad. Sometimes people disagree about the value of its products. But that's it. There's nothing else to money except redirecting human action. Saved money is really just human action that you haven't yet decided to direct. Invested money is really money that you've given to someone else to direct human action with, in the hope that the resulting human action, and capacity for this new human action, is so valuable that lots of people will want to pay a lot more than it cost to set up to have that action repeated. Sometimes this is because the investment is into something that simply couldn't be done before, like cure a disease, or something nobody thought to do before, like your own Lorien Psychiatry. Or it might just be to do more of a thing that's known to be good: build another factory that makes stuff people like, or another store that sells food people like.
Thinking about it in this way will help your reasoning a lot, and will help you avoid mistakes like Michael Duggan's.
I want to agree with Michael Druggan's point re: donating to charities being similar to "donating" to companies.
I run a nonprofit that works in west Africa. The donations we receive are used to deliver our programming, which entails paying local staff, purchasing materials, etc. All of the money we receive is "reinvested" into the economy in some way, whether through paying for salaries or material costs; none of it "disappears."
Scott, you contend that only the profit margin goes back into the economy; that doesn't seem right to me. Why are the salary costs paid to healthcare workers who work for a non-profit any less real than the salary costs paid to healthcare workers at a for-profit? For that matter, why are they any less real than the value paid to drivers for Instacart?
In my mind, Michael's right: whether it's Instacart or a nonprofit that builds wells, money is equally flowing through the orgs and being reinvested into the economy; the only difference is that in one case you have a product that's more socially useful.
There's a broader point here. In a capitalist economy, very little money "disappears"; rather, it's constantly being recycled into different forms of value. You get paid a salary, which you use to pay for groceries, which is used to pay the cashier and the farmworkers and banana PR people, who use it to buy food, etc. Sure, some of that money creates more or less surplus value -- my guess is that money invested into R&D is particularly useful -- but it all goes somewhere, even money "in" the bank; the only way to opt out of this system is to bury your money in a hole or something. This arg for capitalism over nonprofit thus seems moot to me, unless your real argument is that value is massively unevenly distributed amongst for-profits (i.e. way more in innovation, R&D, etc.), which I can see.
Does anybody know how Zwi Mowshowitz thinks about this? I know he once wrote "Amazon is the best charity in the world" and that he does not identify as EA. If anybody can link to blog posts of his regarding the topic, I would be grateful!
I'm confused (my natural state of being). Isn't the dilemma you posit addressed by creating a foundation that invests the principal, grows over time, and donates some of its profits periodically to the charity? Doesn't that help the greatest number of people over time? Or invest in companies whose research will lead to helping millions or hundreds of millions of people, like the agricultural revolution of the 20th century that began with the discovery of how to synthesize ammonia and continued with the development of seeds that could greatly increase the yield of crops in a given area. Or have I missed something?
On pure aesthetics, I enjoyed VelveteenAmbush's comment immensely. Maybe sometimes we really do ventriloquise the geists, because I haven't heard a purer voice of capitalism in a long time.
Death, disease, gravity wells - skivers' loopholes. When that dead matter of the universe awakens, it, too, better show up for work.
> Once you consider how much human effort it took raise and educate 2,000 eighteen-year-olds, and how much you can get done with a 2,000-person labor force, then letting those 2,000 people die starts to feel like a giant economic waste
Even if we look at the places were people live on $1 a day, and suppose they only have 30 years of economically productive life because of all the wars and sickness, 30×365×$1 = $11k. If you can save their lives for let's say $5k per capita, if makes good sense even from a heartless economical perspective.
> It's the "give a man to fish" vs. "teach a man to fish" principle. While I in no way wish to denigrate the value of saving lives with better water... once you do that, then what? You have people who are alive, and still in the same situation they were in before.
This is true under the assumption that they are going to stay in the same situation forever.
But if they are in a situation where they are growing the local economy, and it's just that today that they happen to have a problem with the water, building the wells gives them extra time. Perhaps 20 years later they will be able to build the wells using their own money, just like we do.
> Maybe you have an answer for this, but if it involves “Spend the rest of your life creating this hard-to-create institution from the ground up”, then I, personally, am not going to do this. I would prefer something more like a Bitcoin address I can send money to.
It's not going to work like that for any significant values of the product of (money donated) x (time you're doing it). If you want charity done properly, you will have to involve yourself personally. If you limit yourself to donating money, organizations you are donating to will quickly evolve into grifts. If you rely on existing social status management mechanisms to keep people you donate to honest, organizations you are donating your status-time to (i.e. attending and not attending lunches or inviting and not inviting people to your parties and making sure others know why) will evolve into vehicles for high status people to maintain their status and manage their taxes. Riis (1890) noted this about late XIX c NYC social housing: it was okay as long as their charitable investors kept up personal involvement, but quickly degenerated as soon as they checked out. This phenomenon is not specific to charity: nation and democracy also requires personal involvement (sometimes very onerous) to keep in shape, or its politics degenerates into a mass of grifts and vehicles for high status people to maintain their status and manage their taxes. The market economy escapes from this trap only because it reduces the value of goods and services exchanged to money, and you cannot reduce the value of people (which is what charity, nation and democracy all work with) to money. QED.
Thanks for the interesting discussion Scott. I'm not getting the whole capitalism vs. charity. When you give money to poor people they go and buy products or services with the money. So you are still getting both - you get capitalism and in addition you are getting charity by slightly redistributing wealth in the short term.
Are there any EA charities which instead of water wells or insect nets etc just creating more people to live in same difficult situation, select the high IQ individuals among the already alive ones and send them to good education schools and direct them to STEM? That would help the entirety of the world.
> whatever else is bad about an 18 year old dying, you've lost ~50 years worth of productive labor that you invested eighteen years building up. Once you consider how much human effort it took raise and educate 2,000 eighteen-year-olds,
FWIW most e.g., Malaria deaths are sub 5 years old, maybe even sub 2.
I'd observe that the arguments in favor of investing money to use for good later tend to overlook the fact that utility is sublinear in money and the world is getting richer over time.
Yes, the market gives a good estimate of the time value of money in terms of consumption today vs tomorrow but it doesn't take into account the sublinear nature of utility so we should expect investing to yield less utility than direct intervention.
I have recently started a research project to discover the formula for which charity currently provides the best value to the world. My bitcoin address is a4o0wh4tD1dyOuTh1nkthi$w45G0ingT0b3R3aL?
I don't think anyone is talking enough about the positive knock-on effects of charity in terms of setting the area up for capitalistic progress. Detractors of charity seem to completely ignore the fact that covering basic human needs in underdeveloped countries is exactly what’s needed to get the flywheel of development (read: capitalism, if you wish) working there. They view saving lives in subsaharan Africa as consumption, simply prolonging miserable lives. I’m not sure what other intervention they would prescribe to get a market economy and development going in such places, but data from GiveDirectly show that their grants are often used for things with positive knock-on effects like better nutrition (which improves IQ), school tuition, and starting businesses. If capitalism is the natural engine that brings people out of poverty, maybe jump-starting capitalism might require some institutional change, but I think it’s more likely that an influx of, well, capital is enough to get the capitalism ball rolling.
GiveDirectly aside, saving lives with water or malaria vaccines or vitamin A supplements will have major positive effects. There is an implicit (or sometimes explicit) Malthuian undertone in criticisms of human development charity, believing that saving the worst off lives will actually generate more strife and keep investment per person low. The good news is that Malthus was wrong even in these societies. Development data show that parents tend to have extra children to make up for child mortality to ensure that some remain alive to aid their elderly parents. Reducing child mortality actually reduces the total number of children per family in the long run as parents adapt their decision making, allowing them to invest more per child and set more up for long term success and socioeconomic mobility.
Further, each life saved from polluted water or malaria or vitamin A deficiency also avoids many other issues along the spectrum from near-misses to minor annoyances, all of which are factors that will make a life less productive and therefore less likely to lead to lasting change and economic advancement. The seeds of positive change exist in every community, held back by myriad hurdles, and removing even some of those hurdles will result in some people being able to economically specialize and advance; effective human development charity creates marginal capitalists as well as marginal lives saved.
Is the thing you’re talking about with Michael Druggan like the Multiplier Effect from the Circular Flow model?
Also if the well-making company’s profit is 10% wouldn’t most of the 90% not be going into the ground? All of the not-profit money had to be spent somewhere e.g. paying workers, paying local concrete makers, so the money then transfers to them and they can do things with it and so on and so on.
My shaky understanding of what I thought people thought is this ends up bottoming out in two concepts:
a) The Velocity of Money
b) The expansion/contraction of the money supply
Would appreciate anyone who feels like they have a better grasp of how these concepts connect chiming in.
> Suppose that eg the US government decided to give everyone free health care by taxing people and spending it on health care. It seems like this should have tradeoffs or hurt the economy somehow. But you could argue that the health care money just goes to doctors and nurses and so on, who would then spend it on normal economy stuff, so the non-health-care economy is just as big as always.
It is generally understood that there is an economic multiplier on government spending - that, far from having some kind of economic drawback, it helps the economy more than the amount of money being spent. https://www.investopedia.com/terms/m/multipliereffect.asp
So no, a program like that doesn't necessarily have (net negative) tradeoffs or hurt the economy somehow. I suppose it could be designed so poorly that it did, but it seems improbable.
To take that specific example, the current American healthcare system is so staggeringly inefficient, that you could fund universal healthcare for all for about half of total US healthcare spending (e.g. Canada does this - per capita health expenditure is about half of America's for a universal system), which would free up half of that money (which is currently being used unproductively on rent-seeking, overhead, etc.) for productive uses. Universal healthcare might be a potential government program with one of the highest multipliers, actually.
More broadly speaking, there are sectors of the economy where markets work well, and areas where they work poorly. Televisions and other discretionary consumer goods are delivered very well by markets. Things like healthcare, which are not discretionary, or natural monopolies like telecoms, roads, etc., are delivered very poorly by markets, and you can make the economy much more efficient and effective by nationalizing them.
Capitalism isn't some kind of cure-all answer to everything that always works best. Markets and capitalism are one tool in the economic toolbox, to be deployed where it makes sense.
I feel like this is maybe an obvious comment, so I am surprised it didn't come up. In a capitalista business, the business and investors capture at least part of the total return. As long as there are opportunities to create $X value by spending Y$, with x>y, the market correctly incentives this transaction to happen. They will borrow or raise money or reinvest profits and reap the rewards. So you should expect that giving some money to a business will generate about the market rate of return.
The main difference with charity is that this system does not work. AMF can't go to a bank and ask for however many millions and show that they will generate much more than that in returns, because they do not appropriate these returns, so they won't be able to pay back. Therefore, you should expect that great opportunities can continue to exist unexplored for quite a while.
Feels like I'm stating something kind of obvious, and there are certain subtleties and ways this can be not quite true, but I think this is approximately true and very relevant.
It would seem like Velveteen's idea would prevent Africa from ever developing at all. Developed countries just keep reinvesting in themselves. The gap between the efficacy of investment would either grow or stay the same (if there were diminishing returns, then we should have already started to see them, but apparently there aren't, because the poorer places are necessarily those where investment is slow, rather than places where wealth was destroyed or never invested in the past. This all seems very circular to me).
But the fastest growing places are actually very poor. There are very obviously diminishing returns here. That doesn't mean that you can invest just any random poor place--the slowest growing places are also poor (rich countries are in the middle). So if you can identify poor countries with high potential growth, like South Korea in 1950, then you can get a high rate of return *and* help very poor people.
A while ago, I mentioned that the reason I drifted away from most of the Less Wrong/Rationalist areas, but kept up with Scott, is because I had this deep down feeling that Scott would definitely want to model what would happen if you killed all the poor* (this would be useful and interesting information about the model, and possibly about the impact of various factors in the world), but no matter what the computer said Scott would never actually dream of killing all the poor or supporting it in any way. And I felt that many other Rationalists, faced with numbers and logic suggesting that killing all the poor would lead to greater economic growth, or a world full of happy people, or a single hyper-intelligent entity that consumes all matter and knows all, or whatever they have decided is the best possible outcome… many others in the community would endorse killing all the poor as the obviously rational choice, and work towards it as a goal.
I feel uncomfortably as if I am watching this play out, in some of the comments.
*This is, of course, a reference to the famous Mitchell and Webb sketch, which I think is often quoted by people who interpret it rather differently to me.
>"...whatever else is bad about an 18 year old dying, you've lost ~50 years worth of productive labor..."
It really depends on *which* 18 year old. In the stereotypical EA-targeted regions, there are enough other problems that there's unlikely to be 50 additional years of life expectancy at age 18 even post-intervention, and what labor is gained is likely to be barely above subsistence (the baseline against which "productive" should be measured).
Taking VelveteenAmbush's argument to its logical extreme, the most effective charity goes around administering IQ and "grit" tests to everybody, and then taking away and intensively educating in STEM those who score over 145 IQ and high levels of grit. That would best help the long-run future of humanity.
For myself, though, I believe in moral equality and hyperbolic discounting. All souls are weighed in the same scales on the Day Of Judgement, and you can't get to the long run without helping people through the short run.
re: Velveteen - why do we say "consumption money" if money aren't burned, but keeping circulating in the economy?
What will a nursing home spend the money on to save lives? Doctors and equipment. Who does that benefit? Doctors, their families, companies that produce medical equipment, their employees, families of their employees, everyone who these families buy things from etc. A lot of these people are good people, some of them might also donate part of their income, furthering the effect of that initial donation.
Why don't we count this as a part of infinite-order effects? Are charities excluded from being part of the capitalism, while existing in a capitalist society?
Taking a look at the Copenhagen Consensus group's figures in the book "Best Things First" by Bjorn Lomborg I see that they propose that $40 billion of costs for the 12 best initiatives would deliver $1.1 trillion of economic benefits and save 4.2 million lives valued at $1 trillion, annually. The figures are based on peer reviewed articles by economists
Seeing that GiveWell rates it as costing about $5000 to save a life for their best charities I see this pencils out to a little under $10,000 per life. Accounting for the direct economic benefits it seems these are equal, if true. It seems like it would be a spectacular addition to human well being if the effect of the best charities could be roughly matched by a project at the tens of billions of dollars scale
I think an extremely high value use of time would be to promote to politicians that they seriously consider aligning their foreign aid to the top priorities that the Copenhagen Consensus group identifies
VelveteenAmbush's comment is 100% correct. That's the right way to frame the issue and the fact that Scott doesn't acknowledge that makes me think he's not arguing in good faith. His objections are terrible.
>at some point all of this has to bottom out in consumption
No it doesn't and I flat-out don't understand how anyone - much less someone as smart as our Beloved Leader - could say this with a straight face. Theoretical society X generates $1M of surplus every year. There is nothing stopping them from using 100% of that money to build infrastructure, upgrade their supercollider magnets, or finance a new biotech hub. The only wealth that _must_, in principle, be consumed is the baseline required to keep everyone fed, houses warm, and car batteries charged. Any spending beyond that is discretionary. That will be true for as long as there are things to discover.
>If you donate to charity, you will create less numerical wealth, but it will go to people who need it more. Which matters more?
Investing in productive technological development matters more. How is this even a question? I mean, what do you want more of: physics breakthroughs than enable world-improving technology, or starving third world subsistence farmers? Invest in the thing you want more of. Again, why does this need to be explained?
>I think the diminishing marginal utility of money case makes it likely that they produce more utility-adjusted wealth.
This is wrong. Exponential growth will always swamp the utility-adjustment effect in the long run. That's because even though you adjust the utility of your charitable transfer upwards, it's one-time adjustment on a fixed amount of money. It doesn't compound. Or, at least, it doesn't compound as quickly as it would otherwise and optimizing for the rate of exponential growth will always dominate all other considerations. EVEN IF you optimize for number of lives saved you can trivially see the advantage of investment via the Robin Hanson argument: you can always save twice as many lives if you just wait 7 years and invest. Scott is just flat wrong here. Unless he's using an explicit moral discount rate on the value of a life, he's obviously, unarguably, mathematically-provably wrong.
Love Scott but this is honestly his worst take (well, other than "Categories Were Made for Man") in the 8 years I've been reading. I suspect it's because he's so emotionally invested in the EA/Rationality movement that he's unable to objectively evaluate good criticisms of the ideology. This fits the pattern of him having a logic-defying take on transgenderism while he was in a relationship with a nonbinary. His achilles heel is his need for acceptance from his social circle and his inability to tolerate conflict in that context.
I subscribe to Peter Buffet’s view that the Charitable Industrial Complex is fundamentally flawed. It’s a self sustaining business that is responsible for supporting jobs of all kinds of Charity Aid workers rather than achieving permanent change. Therefore I’m solidly down on the social enterprise or social charitable community organisation model which are established to deliver services for the community for a profit reinvested back into the organisation. Call it social capitalism if you will. This means you avoid the idea of a donation and invest in an idea and can expect/demand performance.
Scott, I think your argument against Velveteen's argument is not very strong. I say this as someone inclined to agree with you but I think V's math makes more sense, even if it is uncomfortable. V's point about human capital is that if you want to make an argument about someone's life having compounding benefit to others, you have to be willing to quantify what they can and will do for others, which in the case of somebody very poor is almost always being severely undermined by the systems around them, usually by some kind of organized violence or tyranny. So yes, they might be able to stay alive and go to school for some single or double digit factor cheaper than someone in a rich country (though not more than that) but their impact on others' lives could be much less than an investment in making the things everyone depends on (including them) much cheaper and better. Even if you *only* care about the welfare of the poorest, pushing down the price of solar, smartphones, starlink, vaccines, watermakers (or filters for as long as that's even cheaper), ebikes, US/EU visas, flights, online classes, and so on could actually have a much bigger impact on the most oppressed than saving whatever number of lives you can would. (Not to mention the huge impact on the majority with average resource access.) One example: Industrial production of clothing reaches almost everyone in the world and is cheap enough to be accessible to everyone. Even in situations where people face unimaginable violence and oppression, they have clothes, because clothes are so cheap relative to the human need for clothes. Why can't investing in technical problem solving make the Internet that cheap? And food, and a house, and college? Once it does, the same horrific violence and oppression will probably fail to keep out those things too (or it will have a much harder time doing so.) Your instacart argument is somewhat persuasive in that some investments will yield somewhat useless products (though I'm not sure time savers like instacart are so useless because time saved compounds too) but you can build an investment strategy focused on big leaps or areas close to primary human needs and capabilities, mostly avoid this problem, and do well as an investor. (Just as you can choose not to invest in tobacco companies or gambling websites.) Ultimately I think political change to oppose violence and tyranny and build good institutions bring even bigger returns than charity or capitalism, but I agree they're harder to evaluate, especially when you are a non-participant with a day job in another field. I'm optimistic that retroactive funding with tradeable impact certificates could make evaluation less a problem when giving to efforts to end violence and oppression but it's a big problem now for sure. Lots of activism and political change is super speculative or snake oil.
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I will give it a try on your request 2 (an analysis with real numbers demonstrating that capitalist charities are more effective.) First of all, it is hard to be certain that an enterprise with fuzzy society-wide aims is working at all - a capitalist charity may be demonstrated to be succesfull on a narrow goal (such as changing the system of taxation or establishing a legal framework) but it is hard to demonstrate a causal link from a narrow aim to a clearly beneficial broad one, such as faster economic growth. This is usually impossible even ex-post with full and certain information on the narrow goal.
However, if we think that capitalist charities work at all, their potential benefits dwarf anything else. US GDP has been growing by about 2.2% in real terms for the last 20 years, with a standard deviation of quarterly growth of 5.54%. If a successfull charity manages to accelerate this growth by a statistically imperceptible 1/50th of standard deviation or 0.10% per annum, US GDP in 2034 will be 1.2% higher than on the current trajectory. This extra 1.2% is equivalent to $280Bn in todays money. If just 50% of this value add is captured for effective altruism, that gives $140Bn a year to spend on african children. At the current Givewell estimates of $4500 per life saved, this would be enough to save over 30,000,000 lives just in 2034, and more than 350,000,000 lives between 2024 and 2034. I am pretty sure this beats any other charitable projects.
Velveteen is obviously wrong because they fail to account for the value of the lives themselves. One QALY is probably worth ~$100,000 to the recipient (economic value of a life is around $8m, divided by 80 years for a full lifespan). If you can save 50 QALYs for $5000 (I haven't looked at Against Malaria Foundation's recent numbers but I'm assuming this is the ballpark), then that's 200*50=10,000 QALYs for $1m. So around a billion dollars of value over 50 years, not counting any value those individuals create for others. Clearly superior to the S&P 500 unless the positive externalities of the S&P 500 are very very very large compared to those of the charity.
Scott, why don't you go around distributing heroine to addicts?
All your reasons for not doing that apply doubly to charity to Africa or other poor countries. The worst an addict can do when given extra drugs can do is little. A country with access to graft can cause a huge war.
Is there anything here on "bridling" capitalism? Or Cipolla's idea of intelligence versus being a bandit? Smith's butcher brought value to us and benefited himself. Pharmacy Benefit Managers bring no value yet take billions in fees and kickbacks to put sometimes even more expensive therapies higher on formulary. Ticketmolestor is another example. They bring very little value and exploit the market place. I pay $400 for a concert ticket and $100 goes to my fave artist, $80 to Ticketmolestor and $220 to scalpers. How do we strengthen anti-trust and reward companies that add wealth and value and regulate PBMs, Ticketmolestor and their ilk out of existence?
(this is rehash of a comment I made on the original post, feel free to delete if not allowed)
I'm still surprised none of these comments have mentioned:
1. Difficulty of value capture (free rider problems, diffuse gains, etc.)
2. Market inefficiencies/failures
Market solutions are well known to _not_ work in these circumstances! Charities / government would be better here. Even the (non-crazy) staunchest libertarians I know agree that we need governments involved for many kinds of problems. I would assume we also need charities for similar reasons.
What you call near mode in section 1 would typically be called acting "on the margin" by an economist. I think that's often a good mindset to have, and in the context of EA it mostly makes sense. But capitalism's contribution is systemic in essence and thus sort of undefined on the margin, which makes it really hard to answer your challenge sensibly.
Furthermore, as we've seen with the SBF fallout, someone's actions are marginal until they suddenly aren't. I contend that this is a possible failure mode of EA in its current form.
You write:
"The company has a certain profit margin (let’s say 10%), so you’re donating 10% of the money directly to Amalgamated Kenyan Wells, and the rest is going into the ground to become wells. ... I think you could still argue that investing directly in the company has more effect."
Also: "So if your alternative was to give the money to a profitable and successful company in the Third World...."
Can you clarify if you mean "invest directly" versus "give the money" as 2 diff things?
(Maybe I'm being dense here).
If AKW is capital constrained, then an investment of $1 million in exchange for TK% equity (fair market value) is interesting. They'd probably take the $ only if it could be productively deployed as growth.
If AKW is simply given $1 million, however, isn't the most likely scenario they do a one-time distribution to the owners?
"My wife, Magatte Wade, is working to bring Prospera to Africa because of this."
I have to sit back and contemplate the lapidary elegance of this for a bit, because I am too overcome to corral my thoughts. Let's just say the three zillion ways this can turn into the mutant offspring of Lovecraft and Conrad are casting so many shadows into my poor brain, I am muffled in blackest night.
Bringing Prospera to Africa. Bringing. Prospera. to Africa.
Some of Africa? All of Africa? Which parts of Africa? That pie is so stuffed with plums to be pulled out, it's gargantuan enough for Godzilla to have as an amuse-bouche.
As a child in the 60s/70s, I sort of remember hearing about Kenya as being a shining hope for a modern African nation with an industrialised economy and thriving urban centres. Now some of the citizens are doing this.:
https://www.kenyanews.go.ke/transformer-vandals-in-laikipia-put-on-notice/
I hope Prospera en Afrique is fully stocked up with replacement electrical parts! And they're careful about where they buy their cooking oil!
"The most successful example is the Dubai International Financial Centre, where a common law legal system was placed in a 110 acre zone within UAE sharia law. It led to Dubai becoming a top global financial center in twenty years."
Yes, because Dubai is definitely in the top ten of places that spring to my mind when considering "Where seems like a good place to live?" and global financial centres are not often rather.... shady.
>My biggest update is that I learned what Instacart’s business model actually is. Otherwise, not much, sorry.
Scott (and others), have you looked into Amazon Fresh? It's 5-10% cheaper than Instacart and IMO more reliable in terms of delivery times.
From my perspective, we are going to hit a wall as far as capitalism goes. We don’t have infinite resources ( unless something drastically changes and we find new planet). I believe it’s important to acknowledge that not an entire population can be “productive” in the way capitalism defines it. We will always have people who need help and support, and I’m okay with that. As someone who works in public health, we’re also seeing significant impacts to human health due to increased cheap agricultural practices. We’re getting cheap chickens, but also seeing significant disease outbreaks that impact the environment and our health. I believe it takes a balance of both.
Why is charity separated from capitalism in the first place? Satisfying your altruistic desires is part of the marketplace. Capitalism would suggest that you should choose the amount and where to give according to your individual desires.
You write: "Let’s say they hire Amalgamated Kenyan Wells. Then the money ends up in Amalgamated Kenyan Wells, presumably a profitable and successful company in the Third World, and this is no worse than donating to the company directly."
The historical pattern is that Amalgamated Wells is really good at getting contracts. At building wells, not so much. Meanwhile the We-Dig-It company is good at building wells. Amalgamated Wells notices, and gets the government to pass a bunch of laws or create a lot of new regulations, the purpose of which is to make it impossible for We-Dig-It to eat their lunch. We-Dig-It goes out of business. Capitalism fails to ignite, again.
>Velveteen protests that I haven’t proven this and don’t even have a model showing it’s a sane order-of-magnitude estimate. I accept this. I don’t think anyone has proven the opposite either. I’m going entirely off total guesses. It would be worthwhile for someone to try to calculate this but it would be a very big project, and a half-baked version would be worse than the total guesses.
Look, I'm a radical capitalist compared to the normal population (though I guess not in here). But anyone can see how the burden of proof here lies in the side with the galaxy brained take of: "no, no. spending money directly on the thing you want is stupid and inefficient. Just spend on other stuff and magically it will turn into charity."
Sometimes the galaxy brain take is right! I'm confused and don't have a strong opinion either way. My bias/priors is that actually capitalism is awesome so that makes me not reject it outright.
But come on. We need those studies to prove investing in "capitalism" is actually better.
"It would be worthwhile for someone to try to calculate this but it would be a very big project, and a half-baked version would be worse than the total guesses."
Can't we easily calculate this by looking at GDP/capita forecasts in countries where EA charities are doing the most interventions? If you save a person in Ethiopia today, we have reasonably good forecasts on the total economic value that person will likely produce during their lifetimes. Do that and then compare it to expected S&P500 returns.
I.e. for Ethiopia we have the following numbers:
- Current GDP/capita: $1,000
- Average inflation-adjusted GDP/capita growth rate: 3%
- Assuming we save a child today and assuming compounding GDP growth, they will produce $141k of economic value between the ages of 18 and 60.
For the S&P500, assuming a growth rate of 10% that same $1,000 will result in $304k of value, beating the output of the person saves in Ethiopia by a factor of 2.
I think the answer to VelveteenAmbush's objection is essential empirical. "If you feed poor people, you will just create more starving poor people" is one of those ideas that sounds like it could be true but mercifully isn't. The evidence is pretty clear that fertility rates drop as mortality drops, which is why most countries on earth have <2 fertility rates at this point. I think the argument is that if people are confident their children will survive to adulthood, they consciously choose to have fewer of them.
Africa's growth rate (3.7% in '23, not an outlier) appears to be higher than the standard rate of developed economies
Comparing preventing malaria in someone who will then have a lifetime of input to an also growing economy versus going on an extra vacation appears to be clearly well defined in the terms of the infinite future growth argument
This is a tough problem. I don’t have an analysis, but one company that seems to do a lot of good as a for-profit is Zipline. They deliver medical supplies via drone in Africa. They’re private, so not necessarily easy to invest in on the margin.
I was very much looking forward to this "highlights", and I am not disappointed. - Kinda sad, it seems so hard. - Is there a charity/company walking the poor parts of the world, testing people and offering the 0.1%-3% smartest infovores among them a wonderful deal - full board education and deployment/visa assistance (for a share of future earnings if commercial)? Should there be one? (I am still thinking about the girl young Scott met in Cambodia in 2008). https://web.archive.org/web/20131230133858/http://squid314.livejournal.com/2008/04/28/
"It is relatively easy for me to ignore the plight of poor foreigners, as long as I assume they're dumb (and I start with the assumption that most people, foreign or otherwise, are). But smart people are for me what Americans are for those America-first people; I can bring myself to not care about a lot of people, but I can't bring myself to not care about them. They matter to me, in the way that everyone should matter to me but can't because I don't have enough emotional resources. In fact, all day I found myself worrying about her, and hoping she manages to get out of the selling-postcards-at-Angkor-Wat business and to a decent school at some point, even though I haven't spared a thought all day for any of the multiple-amputees I've seen wandering around. Not sure how I feel about that."
So I'm confused by the whole discussion. Scott, you're a libertarian. Did it occur to you to, I dunno, get involved in libertarian activism, or at least check out what libertarian advocacy groups were out there?
This has been my beef against EA from day 1. As you say, no charity can ever have the long-term impact that more capitalism can have. So libertarian activism (whether it calls itself "libertarian" or not) seems like the most effective way to make a positive difference in the world.
Donate to Libertarian, or libertarian-leaning, candidates. Donate to Students for Liberty. They do a lot of good work. Or The Advocates for Self-Government. Or the Foundation for Economic Education. Or the International Society for Individual Liberty. I would add the Libertarian Party, but they're a mess right now—check back in a year or two. But how about Libertarian Parties in *other* countries? Or State LPs?
Perhaps none of these really fit your flavor of libertarianism (likely ISIL does not, for sure). But then maybe the Reason Foundation? Cato? Cato's probably the most effective, and most inoffensive option. Even if none of these fit, there's almost certainly something out there that does. And if not, I will personally work with you to help create it.
You seem to want something measurable, where you can have some notion of how much good your money is doing. And that's a good question! Attempting to find an answer to that question would take a lot of work, but before anyone even tries, you've got to acknowledge that this category is something that might work for you.
Honestly this whole thing sounds like a question for Bryan Caplan, or maybe Robin Hanson. Or anybody at Econlib.
> There's a reason why stuff like water dispensers to save lives are going to developing countries with no market economy
This is such an obviously bizarre statement I am having a hard time processing its existence. Do people think Kenya or Uganda or Sierra Leone don't... Have markets??
What am I missing here? Why is this not a clearly ridiculous statement?
I get that in these circles, bringing up that colonialism has consequences is not something people like to do, but to claim that places with publicly-funded better infrastructure don't need charity to get that infrastructure because they "have a market economy" seems too obviously ridiculous.
I mean, don't wealthy "market economies" have those problems too, when their publicly funded infrastructure breaks down? Wasn't that the whole Flint, Michigan thing? "We need help re: clean water because our public infrastructure failed"? Does Flint have different "markets" than any other random place in Michigan, or America for that matter?
The zoomed out question is something like "the world has a lot of big problems that require smart people to solve, wouldn't it be good if we had the smartest of an extra billion people to help us solve them?" The zoomed in version is "if Jean in Burundi attends more school instead of being home with diarrhoea with his older sibling also home from school looking after him, how much does that add, including downstream effects like the effects on their kids, relative to the investment of the water dispenser?" I think it's really important.
I would love someone with a better sense of the numbers than me to make up some numbers here - or point me there if someone else has. My sense is that it's an incredibly good "investment" in terms of compounded value created per dollar spent.
Velveteen's entire line of argument seems to cash out in a fundamental value difference about how much more valuable (if at all) saving existing lives is to creating new valuable lives. I don't think the value of "awakening the dead matter of the cosmos"-blah-blah-blah is zero, per se, but it's just an aesthetically pleasing thing to do, not a moral imperative — so if anything *that* is the "consumption" path, which we should only get to if we've already fulfilled our moral duty to safeguard all existing lives and taking a good stab at fulfilling *their* preferences.
"I’m not running a Moral Worth Tournament where I match concepts against each other and decide which deserves more credit for good things."
Fair enough, but perhaps some of the confusion was driven by your chosen post title: "Does Capitalism Beat Charity?," which sure SOUNDS like a moral worth tournament.
"I’m not running a Moral Worth Tournament where I match concepts against each other and decide which deserves more credit for good things. I’m discussing the Near Mode situation where some specific person (eg you) has some specific amount of money (eg $1,000) and wants to use it to improve human welfare."
Thank you for this clarification. Maybe I'm an idiot, but this wasn't clear to me in the original post.
"This isn’t a gotcha or a rhetorical question, I think these could really change my mind."
In my model this decision comes down more to time discounting. What is the rate of return of an investment? How much do you discount future consumption (by poor charity recipients) compared to their immediate consumption? If you think that saving 1 person today and saving 1 person in 10 years are similarly valuable, then you should probably invest. If you think saving 11 people then is as valuable as saving 10 now, then you should compare the implied rate of discount to the rate of return of an investment.
Am I wildly off base?
Perhaps the most effective charity would be helping people more to economies that are in better condition. After all, giving poor people money can be effective, and one of the things poor people spend money on is emigrating, frequently as great risk.
Following the logic, it might be effective charity to finance illegal immigration.
Seems to me that, in general, markets will roughly approximate the optimal solutions. But there are well-known market failure modes (information asymmetries, monopolies, and notably for this discussion, cases where some people’s utility is poorly measured by their monetary ability to pay) and in those cases, charity (or government regulation, or whatever) can be better. You stacked the deck by choosing the well-being of the worst off, which is one of the well-known market failures. (And an important one!)
https://apple.news/A5ftZcPAPQuGQVnxepCpOLw
Scott, you have execrable taste in hamburgers.
I'm confused. It seems to me that Bob Frank and VelveteenAmbush were saying exactly the same thing.
I'm surprised that nobody seems to have suggested donations for basic scientific research (or for killer asteroid detection, pandemic security, etc.) as an alternative to donations meeting the immediate needs of poor people.
It's debatable which of these options would benefit humanity more in the long run, but at least they compare as apples to apples. "Don't spend anything and put your money in the stock market" seems like a category error, for the reasons Scott points out.
More and more I've come to think that the unit of importance are whole economies. If you want people to be better off in a sustainable way, giving to specific organizations, profit or non, isn't the best way to do that, unless someone has comprehensively assessed the local economy and concluded that certain specific types of organizations would be excellent starter seeds. It's equally possible, however, that such an assessment would conclude that no one type of organization is going to make any difference. that what people in that region really need is a plethora of economic infrastructure. Unfortunately, that probably isn't possible without the active and skilled cooperation of the local government, and in many areas, that's a problem (maybe *the* problem).
There are NGOs that focus on fighting corruption (for example: https://www.transparency.org/en/), but I know little about them or how effective per dollar they might be (this article casts some doubts on that: https://blogs.worldbank.org/governance/anticorruption-agencies-are-they-effective-reducing-corruption-risks).
If the question must be restricted to "Doing the most good my money can buy", then the criteria of "good" seems so subjective that no objectively valid answer is available. I'm not going to donate a kidney to a compete stranger because I do not value the lives of complete strangers enough to do that (I'm just being brutally honest). I'm not donating a tenth of my income to charity because I'm not that well off, and I have a family to support, and that matters more to me. It seems to me that there is a dichotomy between systemic approaches to social problems that affect all of us (which we might expect some consensus on) and individual investment decisions which are as idiosyncratic as who your friends are or what you do for a living.
i also suspect that, to do the most good for other people, it's probably necessary to understand what *they** value and want. Do we know that, if we asked, the people receiving the malarial nets would choose to spend the money that way? To assume that we know best how money should be spent on other people seems to me like it's on the slope toward some sort of paternalism. I can't help thinking that some sort of two way communication is required, so that potential recipients can say what they want the money for and potential donors can decide if that's what they want their money to do.
So, to the question "What should I do with my $1000?" perhaps the best answer is "Accept applications from poor and needy people, and award it to the one with the best investment plan." Or maybe someone out there already does this?
> Now I’m really not sure how to think about this. I think the answer is something like - the company has a certain profit margin (let’s say 10%), so you’re donating 10% of the money directly to Amalgamated Kenyan Wells, and the rest is going into the ground to become wells. So I agree that there’s some aspect of supporting capitalism here - maybe even one that’s better than giving to the company directly because it forces the company to demonstrate usefulness - but I think you could still argue that investing directly in the company has more effect.
I was responding specifically to the version of the argument that says you can "donate to capitalism" by just buying whatever you want like a new car or a pair of expensive shoes. (I fully admit this is the weakest version of the arguments but I think it's still at least worth getting it out of the way). In this case the company also only retains a percentage equal to their profit margin and the rest goes to whatever good you want to consume so the only difference is whether you end up with a new car or new wells in africa.
I'm sorry, maybe I just have very different views from a lot of the people on this blog but VelveteenAmbush's comment just seems evil. We shouldn't bother saving the lives of people who are dependent or unproductive because wealth is the most important thing? I'm sorry but this is completely backwards. And the stuff about "awaken the cosmos" and "awaken the dead matter of the cosmos into flourishing sentience" is just utopian bullshit. But people always need a big utopian goal in the future to justify their evil in the present.
Late to the party, but I’m very confused. It seems we are mixing up several very different goals:
1. Increasing global wealth
2. Reducing poverty
3. Saving lives
4. Spending money to serve humanity in a ratioanal way
If someone’s explicit goal is to increase global wealth because that will eventually reduce poverty, well, capitalism is the best game in town.
If your goal is to spend money on the most rationally-supported life improvement activities, well duh, EA is the right choice.
Oddly, neither of those seems directly concerned with “ending poverty” -- which I thought was the whole premise of this discussion.
Am I missing something?
It's not a good idea to think of money as "going back into the system." Money isn't really a conserved good like energy. If you think of it that way there's a bunch of classic mistakes you make like, "Wal-Mart takes money out of the community". The better way to think about it is to imagine spending money as getting a bunch of people to spend their time doing something. Because that's actually what's happening.
Let's suppose we have a guy, Bob. Bob's good at making wells of all kinds and offers his services for those that need it. In June, Bob gets hired to make some oil wells in Texas. In July, a charity you gave money to hires Bob to make water wells in Kenya. In August, Bob makes some water wells in Saudi Arabia. If you hadn't given the charity money to get the wells done in Kenya, Bob would have made wells elsewhere. If charities were to start asking for wells all the time, Bob would get his friend, Alice, who just graduated, to help him make some more wells. If Bob hadn't had all this well-making demand, Alice would have done something else after graduation. Once the charities finish making the wells, Alice will probably go do something else, since Bob doesn't have as much work for her; she's not really as into wells as Bob. The charitable contribution you made didn't really add or subtract money to the economy: it redirected some labor. Specifically, it redirected Alice's labor. Or maybe the charitable money wouldn't have been big enough to redirect Alice, in which case it would redirect Bob: Bob might have worked a bit more and had a bit more money, in which case his spending of that money might further redirect other people's labor. There was also some redirection of materials, but materials are really just solidified labor: steel is labor to take iron out of the ground, mix it with carbon, and transport it to where it is needed. Sometimes, of course, the labor goes to waste: it is redirected into the creation of something useless, or bad. Sometimes people disagree about the value of its products. But that's it. There's nothing else to money except redirecting human action. Saved money is really just human action that you haven't yet decided to direct. Invested money is really money that you've given to someone else to direct human action with, in the hope that the resulting human action, and capacity for this new human action, is so valuable that lots of people will want to pay a lot more than it cost to set up to have that action repeated. Sometimes this is because the investment is into something that simply couldn't be done before, like cure a disease, or something nobody thought to do before, like your own Lorien Psychiatry. Or it might just be to do more of a thing that's known to be good: build another factory that makes stuff people like, or another store that sells food people like.
Thinking about it in this way will help your reasoning a lot, and will help you avoid mistakes like Michael Duggan's.
I want to agree with Michael Druggan's point re: donating to charities being similar to "donating" to companies.
I run a nonprofit that works in west Africa. The donations we receive are used to deliver our programming, which entails paying local staff, purchasing materials, etc. All of the money we receive is "reinvested" into the economy in some way, whether through paying for salaries or material costs; none of it "disappears."
Scott, you contend that only the profit margin goes back into the economy; that doesn't seem right to me. Why are the salary costs paid to healthcare workers who work for a non-profit any less real than the salary costs paid to healthcare workers at a for-profit? For that matter, why are they any less real than the value paid to drivers for Instacart?
In my mind, Michael's right: whether it's Instacart or a nonprofit that builds wells, money is equally flowing through the orgs and being reinvested into the economy; the only difference is that in one case you have a product that's more socially useful.
There's a broader point here. In a capitalist economy, very little money "disappears"; rather, it's constantly being recycled into different forms of value. You get paid a salary, which you use to pay for groceries, which is used to pay the cashier and the farmworkers and banana PR people, who use it to buy food, etc. Sure, some of that money creates more or less surplus value -- my guess is that money invested into R&D is particularly useful -- but it all goes somewhere, even money "in" the bank; the only way to opt out of this system is to bury your money in a hole or something. This arg for capitalism over nonprofit thus seems moot to me, unless your real argument is that value is massively unevenly distributed amongst for-profits (i.e. way more in innovation, R&D, etc.), which I can see.
Does anybody know how Zwi Mowshowitz thinks about this? I know he once wrote "Amazon is the best charity in the world" and that he does not identify as EA. If anybody can link to blog posts of his regarding the topic, I would be grateful!
I'm confused (my natural state of being). Isn't the dilemma you posit addressed by creating a foundation that invests the principal, grows over time, and donates some of its profits periodically to the charity? Doesn't that help the greatest number of people over time? Or invest in companies whose research will lead to helping millions or hundreds of millions of people, like the agricultural revolution of the 20th century that began with the discovery of how to synthesize ammonia and continued with the development of seeds that could greatly increase the yield of crops in a given area. Or have I missed something?
On pure aesthetics, I enjoyed VelveteenAmbush's comment immensely. Maybe sometimes we really do ventriloquise the geists, because I haven't heard a purer voice of capitalism in a long time.
Death, disease, gravity wells - skivers' loopholes. When that dead matter of the universe awakens, it, too, better show up for work.
> Once you consider how much human effort it took raise and educate 2,000 eighteen-year-olds, and how much you can get done with a 2,000-person labor force, then letting those 2,000 people die starts to feel like a giant economic waste
Even if we look at the places were people live on $1 a day, and suppose they only have 30 years of economically productive life because of all the wars and sickness, 30×365×$1 = $11k. If you can save their lives for let's say $5k per capita, if makes good sense even from a heartless economical perspective.
> It's the "give a man to fish" vs. "teach a man to fish" principle. While I in no way wish to denigrate the value of saving lives with better water... once you do that, then what? You have people who are alive, and still in the same situation they were in before.
This is true under the assumption that they are going to stay in the same situation forever.
But if they are in a situation where they are growing the local economy, and it's just that today that they happen to have a problem with the water, building the wells gives them extra time. Perhaps 20 years later they will be able to build the wells using their own money, just like we do.
> Maybe you have an answer for this, but if it involves “Spend the rest of your life creating this hard-to-create institution from the ground up”, then I, personally, am not going to do this. I would prefer something more like a Bitcoin address I can send money to.
It's not going to work like that for any significant values of the product of (money donated) x (time you're doing it). If you want charity done properly, you will have to involve yourself personally. If you limit yourself to donating money, organizations you are donating to will quickly evolve into grifts. If you rely on existing social status management mechanisms to keep people you donate to honest, organizations you are donating your status-time to (i.e. attending and not attending lunches or inviting and not inviting people to your parties and making sure others know why) will evolve into vehicles for high status people to maintain their status and manage their taxes. Riis (1890) noted this about late XIX c NYC social housing: it was okay as long as their charitable investors kept up personal involvement, but quickly degenerated as soon as they checked out. This phenomenon is not specific to charity: nation and democracy also requires personal involvement (sometimes very onerous) to keep in shape, or its politics degenerates into a mass of grifts and vehicles for high status people to maintain their status and manage their taxes. The market economy escapes from this trap only because it reduces the value of goods and services exchanged to money, and you cannot reduce the value of people (which is what charity, nation and democracy all work with) to money. QED.
Thanks for the interesting discussion Scott. I'm not getting the whole capitalism vs. charity. When you give money to poor people they go and buy products or services with the money. So you are still getting both - you get capitalism and in addition you are getting charity by slightly redistributing wealth in the short term.
Are there any EA charities which instead of water wells or insect nets etc just creating more people to live in same difficult situation, select the high IQ individuals among the already alive ones and send them to good education schools and direct them to STEM? That would help the entirety of the world.
> whatever else is bad about an 18 year old dying, you've lost ~50 years worth of productive labor that you invested eighteen years building up. Once you consider how much human effort it took raise and educate 2,000 eighteen-year-olds,
FWIW most e.g., Malaria deaths are sub 5 years old, maybe even sub 2.
https://en.wikipedia.org/wiki/Mobile_technology_in_Africa
I'd observe that the arguments in favor of investing money to use for good later tend to overlook the fact that utility is sublinear in money and the world is getting richer over time.
Yes, the market gives a good estimate of the time value of money in terms of consumption today vs tomorrow but it doesn't take into account the sublinear nature of utility so we should expect investing to yield less utility than direct intervention.
Consider the law of effect: https://winwenger.org/essays/winsights/part-12/
I have recently started a research project to discover the formula for which charity currently provides the best value to the world. My bitcoin address is a4o0wh4tD1dyOuTh1nkthi$w45G0ingT0b3R3aL?
I don't think anyone is talking enough about the positive knock-on effects of charity in terms of setting the area up for capitalistic progress. Detractors of charity seem to completely ignore the fact that covering basic human needs in underdeveloped countries is exactly what’s needed to get the flywheel of development (read: capitalism, if you wish) working there. They view saving lives in subsaharan Africa as consumption, simply prolonging miserable lives. I’m not sure what other intervention they would prescribe to get a market economy and development going in such places, but data from GiveDirectly show that their grants are often used for things with positive knock-on effects like better nutrition (which improves IQ), school tuition, and starting businesses. If capitalism is the natural engine that brings people out of poverty, maybe jump-starting capitalism might require some institutional change, but I think it’s more likely that an influx of, well, capital is enough to get the capitalism ball rolling.
GiveDirectly aside, saving lives with water or malaria vaccines or vitamin A supplements will have major positive effects. There is an implicit (or sometimes explicit) Malthuian undertone in criticisms of human development charity, believing that saving the worst off lives will actually generate more strife and keep investment per person low. The good news is that Malthus was wrong even in these societies. Development data show that parents tend to have extra children to make up for child mortality to ensure that some remain alive to aid their elderly parents. Reducing child mortality actually reduces the total number of children per family in the long run as parents adapt their decision making, allowing them to invest more per child and set more up for long term success and socioeconomic mobility.
Further, each life saved from polluted water or malaria or vitamin A deficiency also avoids many other issues along the spectrum from near-misses to minor annoyances, all of which are factors that will make a life less productive and therefore less likely to lead to lasting change and economic advancement. The seeds of positive change exist in every community, held back by myriad hurdles, and removing even some of those hurdles will result in some people being able to economically specialize and advance; effective human development charity creates marginal capitalists as well as marginal lives saved.
Is the thing you’re talking about with Michael Druggan like the Multiplier Effect from the Circular Flow model?
Also if the well-making company’s profit is 10% wouldn’t most of the 90% not be going into the ground? All of the not-profit money had to be spent somewhere e.g. paying workers, paying local concrete makers, so the money then transfers to them and they can do things with it and so on and so on.
My shaky understanding of what I thought people thought is this ends up bottoming out in two concepts:
a) The Velocity of Money
b) The expansion/contraction of the money supply
Would appreciate anyone who feels like they have a better grasp of how these concepts connect chiming in.
https://en.m.wikipedia.org/wiki/Fiscal_multiplier
https://www.investopedia.com/terms/circular-flow-of-income.asp
> Suppose that eg the US government decided to give everyone free health care by taxing people and spending it on health care. It seems like this should have tradeoffs or hurt the economy somehow. But you could argue that the health care money just goes to doctors and nurses and so on, who would then spend it on normal economy stuff, so the non-health-care economy is just as big as always.
It is generally understood that there is an economic multiplier on government spending - that, far from having some kind of economic drawback, it helps the economy more than the amount of money being spent. https://www.investopedia.com/terms/m/multipliereffect.asp
So no, a program like that doesn't necessarily have (net negative) tradeoffs or hurt the economy somehow. I suppose it could be designed so poorly that it did, but it seems improbable.
To take that specific example, the current American healthcare system is so staggeringly inefficient, that you could fund universal healthcare for all for about half of total US healthcare spending (e.g. Canada does this - per capita health expenditure is about half of America's for a universal system), which would free up half of that money (which is currently being used unproductively on rent-seeking, overhead, etc.) for productive uses. Universal healthcare might be a potential government program with one of the highest multipliers, actually.
More broadly speaking, there are sectors of the economy where markets work well, and areas where they work poorly. Televisions and other discretionary consumer goods are delivered very well by markets. Things like healthcare, which are not discretionary, or natural monopolies like telecoms, roads, etc., are delivered very poorly by markets, and you can make the economy much more efficient and effective by nationalizing them.
Capitalism isn't some kind of cure-all answer to everything that always works best. Markets and capitalism are one tool in the economic toolbox, to be deployed where it makes sense.
I feel like this is maybe an obvious comment, so I am surprised it didn't come up. In a capitalista business, the business and investors capture at least part of the total return. As long as there are opportunities to create $X value by spending Y$, with x>y, the market correctly incentives this transaction to happen. They will borrow or raise money or reinvest profits and reap the rewards. So you should expect that giving some money to a business will generate about the market rate of return.
The main difference with charity is that this system does not work. AMF can't go to a bank and ask for however many millions and show that they will generate much more than that in returns, because they do not appropriate these returns, so they won't be able to pay back. Therefore, you should expect that great opportunities can continue to exist unexplored for quite a while.
Feels like I'm stating something kind of obvious, and there are certain subtleties and ways this can be not quite true, but I think this is approximately true and very relevant.
It would seem like Velveteen's idea would prevent Africa from ever developing at all. Developed countries just keep reinvesting in themselves. The gap between the efficacy of investment would either grow or stay the same (if there were diminishing returns, then we should have already started to see them, but apparently there aren't, because the poorer places are necessarily those where investment is slow, rather than places where wealth was destroyed or never invested in the past. This all seems very circular to me).
But the fastest growing places are actually very poor. There are very obviously diminishing returns here. That doesn't mean that you can invest just any random poor place--the slowest growing places are also poor (rich countries are in the middle). So if you can identify poor countries with high potential growth, like South Korea in 1950, then you can get a high rate of return *and* help very poor people.
(Source for the U shape: I can't find a great primary source. https://dergipark.org.tr/tr/download/article-file/8402 mentions it, and you can sort of see it in https://ourworldindata.org/economic-growth-since-1950, although it's not great for this purpose since the average growth rate is distance above and to the left of the diagonal line, rather than being on the y-axis).
A while ago, I mentioned that the reason I drifted away from most of the Less Wrong/Rationalist areas, but kept up with Scott, is because I had this deep down feeling that Scott would definitely want to model what would happen if you killed all the poor* (this would be useful and interesting information about the model, and possibly about the impact of various factors in the world), but no matter what the computer said Scott would never actually dream of killing all the poor or supporting it in any way. And I felt that many other Rationalists, faced with numbers and logic suggesting that killing all the poor would lead to greater economic growth, or a world full of happy people, or a single hyper-intelligent entity that consumes all matter and knows all, or whatever they have decided is the best possible outcome… many others in the community would endorse killing all the poor as the obviously rational choice, and work towards it as a goal.
I feel uncomfortably as if I am watching this play out, in some of the comments.
*This is, of course, a reference to the famous Mitchell and Webb sketch, which I think is often quoted by people who interpret it rather differently to me.
>"...whatever else is bad about an 18 year old dying, you've lost ~50 years worth of productive labor..."
It really depends on *which* 18 year old. In the stereotypical EA-targeted regions, there are enough other problems that there's unlikely to be 50 additional years of life expectancy at age 18 even post-intervention, and what labor is gained is likely to be barely above subsistence (the baseline against which "productive" should be measured).
Taking VelveteenAmbush's argument to its logical extreme, the most effective charity goes around administering IQ and "grit" tests to everybody, and then taking away and intensively educating in STEM those who score over 145 IQ and high levels of grit. That would best help the long-run future of humanity.
For myself, though, I believe in moral equality and hyperbolic discounting. All souls are weighed in the same scales on the Day Of Judgement, and you can't get to the long run without helping people through the short run.
Should I use my twopence to feed the birds (or enable an old lady's consumption), or invest to build railroads in Africa? https://youtu.be/Hk23s4hh8M8?si=KAqtUJH32fOQJ7H_
re: Velveteen - why do we say "consumption money" if money aren't burned, but keeping circulating in the economy?
What will a nursing home spend the money on to save lives? Doctors and equipment. Who does that benefit? Doctors, their families, companies that produce medical equipment, their employees, families of their employees, everyone who these families buy things from etc. A lot of these people are good people, some of them might also donate part of their income, furthering the effect of that initial donation.
Why don't we count this as a part of infinite-order effects? Are charities excluded from being part of the capitalism, while existing in a capitalist society?
Taking a look at the Copenhagen Consensus group's figures in the book "Best Things First" by Bjorn Lomborg I see that they propose that $40 billion of costs for the 12 best initiatives would deliver $1.1 trillion of economic benefits and save 4.2 million lives valued at $1 trillion, annually. The figures are based on peer reviewed articles by economists
Seeing that GiveWell rates it as costing about $5000 to save a life for their best charities I see this pencils out to a little under $10,000 per life. Accounting for the direct economic benefits it seems these are equal, if true. It seems like it would be a spectacular addition to human well being if the effect of the best charities could be roughly matched by a project at the tens of billions of dollars scale
I think an extremely high value use of time would be to promote to politicians that they seriously consider aligning their foreign aid to the top priorities that the Copenhagen Consensus group identifies
VelveteenAmbush's comment is 100% correct. That's the right way to frame the issue and the fact that Scott doesn't acknowledge that makes me think he's not arguing in good faith. His objections are terrible.
>at some point all of this has to bottom out in consumption
No it doesn't and I flat-out don't understand how anyone - much less someone as smart as our Beloved Leader - could say this with a straight face. Theoretical society X generates $1M of surplus every year. There is nothing stopping them from using 100% of that money to build infrastructure, upgrade their supercollider magnets, or finance a new biotech hub. The only wealth that _must_, in principle, be consumed is the baseline required to keep everyone fed, houses warm, and car batteries charged. Any spending beyond that is discretionary. That will be true for as long as there are things to discover.
>If you donate to charity, you will create less numerical wealth, but it will go to people who need it more. Which matters more?
Investing in productive technological development matters more. How is this even a question? I mean, what do you want more of: physics breakthroughs than enable world-improving technology, or starving third world subsistence farmers? Invest in the thing you want more of. Again, why does this need to be explained?
>I think the diminishing marginal utility of money case makes it likely that they produce more utility-adjusted wealth.
This is wrong. Exponential growth will always swamp the utility-adjustment effect in the long run. That's because even though you adjust the utility of your charitable transfer upwards, it's one-time adjustment on a fixed amount of money. It doesn't compound. Or, at least, it doesn't compound as quickly as it would otherwise and optimizing for the rate of exponential growth will always dominate all other considerations. EVEN IF you optimize for number of lives saved you can trivially see the advantage of investment via the Robin Hanson argument: you can always save twice as many lives if you just wait 7 years and invest. Scott is just flat wrong here. Unless he's using an explicit moral discount rate on the value of a life, he's obviously, unarguably, mathematically-provably wrong.
Love Scott but this is honestly his worst take (well, other than "Categories Were Made for Man") in the 8 years I've been reading. I suspect it's because he's so emotionally invested in the EA/Rationality movement that he's unable to objectively evaluate good criticisms of the ideology. This fits the pattern of him having a logic-defying take on transgenderism while he was in a relationship with a nonbinary. His achilles heel is his need for acceptance from his social circle and his inability to tolerate conflict in that context.
I subscribe to Peter Buffet’s view that the Charitable Industrial Complex is fundamentally flawed. It’s a self sustaining business that is responsible for supporting jobs of all kinds of Charity Aid workers rather than achieving permanent change. Therefore I’m solidly down on the social enterprise or social charitable community organisation model which are established to deliver services for the community for a profit reinvested back into the organisation. Call it social capitalism if you will. This means you avoid the idea of a donation and invest in an idea and can expect/demand performance.
Scott, I think your argument against Velveteen's argument is not very strong. I say this as someone inclined to agree with you but I think V's math makes more sense, even if it is uncomfortable. V's point about human capital is that if you want to make an argument about someone's life having compounding benefit to others, you have to be willing to quantify what they can and will do for others, which in the case of somebody very poor is almost always being severely undermined by the systems around them, usually by some kind of organized violence or tyranny. So yes, they might be able to stay alive and go to school for some single or double digit factor cheaper than someone in a rich country (though not more than that) but their impact on others' lives could be much less than an investment in making the things everyone depends on (including them) much cheaper and better. Even if you *only* care about the welfare of the poorest, pushing down the price of solar, smartphones, starlink, vaccines, watermakers (or filters for as long as that's even cheaper), ebikes, US/EU visas, flights, online classes, and so on could actually have a much bigger impact on the most oppressed than saving whatever number of lives you can would. (Not to mention the huge impact on the majority with average resource access.) One example: Industrial production of clothing reaches almost everyone in the world and is cheap enough to be accessible to everyone. Even in situations where people face unimaginable violence and oppression, they have clothes, because clothes are so cheap relative to the human need for clothes. Why can't investing in technical problem solving make the Internet that cheap? And food, and a house, and college? Once it does, the same horrific violence and oppression will probably fail to keep out those things too (or it will have a much harder time doing so.) Your instacart argument is somewhat persuasive in that some investments will yield somewhat useless products (though I'm not sure time savers like instacart are so useless because time saved compounds too) but you can build an investment strategy focused on big leaps or areas close to primary human needs and capabilities, mostly avoid this problem, and do well as an investor. (Just as you can choose not to invest in tobacco companies or gambling websites.) Ultimately I think political change to oppose violence and tyranny and build good institutions bring even bigger returns than charity or capitalism, but I agree they're harder to evaluate, especially when you are a non-participant with a day job in another field. I'm optimistic that retroactive funding with tradeable impact certificates could make evaluation less a problem when giving to efforts to end violence and oppression but it's a big problem now for sure. Lots of activism and political change is super speculative or snake oil.
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If you talk about market failures, are you also obliged to discuss whether government or some other organization can do better?
I will give it a try on your request 2 (an analysis with real numbers demonstrating that capitalist charities are more effective.) First of all, it is hard to be certain that an enterprise with fuzzy society-wide aims is working at all - a capitalist charity may be demonstrated to be succesfull on a narrow goal (such as changing the system of taxation or establishing a legal framework) but it is hard to demonstrate a causal link from a narrow aim to a clearly beneficial broad one, such as faster economic growth. This is usually impossible even ex-post with full and certain information on the narrow goal.
However, if we think that capitalist charities work at all, their potential benefits dwarf anything else. US GDP has been growing by about 2.2% in real terms for the last 20 years, with a standard deviation of quarterly growth of 5.54%. If a successfull charity manages to accelerate this growth by a statistically imperceptible 1/50th of standard deviation or 0.10% per annum, US GDP in 2034 will be 1.2% higher than on the current trajectory. This extra 1.2% is equivalent to $280Bn in todays money. If just 50% of this value add is captured for effective altruism, that gives $140Bn a year to spend on african children. At the current Givewell estimates of $4500 per life saved, this would be enough to save over 30,000,000 lives just in 2034, and more than 350,000,000 lives between 2024 and 2034. I am pretty sure this beats any other charitable projects.
Velveteen is obviously wrong because they fail to account for the value of the lives themselves. One QALY is probably worth ~$100,000 to the recipient (economic value of a life is around $8m, divided by 80 years for a full lifespan). If you can save 50 QALYs for $5000 (I haven't looked at Against Malaria Foundation's recent numbers but I'm assuming this is the ballpark), then that's 200*50=10,000 QALYs for $1m. So around a billion dollars of value over 50 years, not counting any value those individuals create for others. Clearly superior to the S&P 500 unless the positive externalities of the S&P 500 are very very very large compared to those of the charity.
Scott, why don't you go around distributing heroine to addicts?
All your reasons for not doing that apply doubly to charity to Africa or other poor countries. The worst an addict can do when given extra drugs can do is little. A country with access to graft can cause a huge war.
No developed country benefited from removing selection pressures.
Is there anything here on "bridling" capitalism? Or Cipolla's idea of intelligence versus being a bandit? Smith's butcher brought value to us and benefited himself. Pharmacy Benefit Managers bring no value yet take billions in fees and kickbacks to put sometimes even more expensive therapies higher on formulary. Ticketmolestor is another example. They bring very little value and exploit the market place. I pay $400 for a concert ticket and $100 goes to my fave artist, $80 to Ticketmolestor and $220 to scalpers. How do we strengthen anti-trust and reward companies that add wealth and value and regulate PBMs, Ticketmolestor and their ilk out of existence?