Finding The Warm Glow

I write to highlight the work of my friend and colleague, Turinawe Samson, who runs a small NGO in Uganda called Universal Love Alliance and who recently had an opinion piece in the Washington Blade that describes the current plight of LGBTIQ people and what ULA is doing to help them. (In the interest of full disclosure, I help ULA as their ghostwriter. I am also the Treasurer of the ULA Foundation that does fundraising on behalf of ULA.)

ULA’s approach is a finger-in-the-dike way to help LGBTIQ people survive now, hoping that other forces will be brought to bear that will do the heavy lifting. Even with that, ULA is desperate for more revenues to sustain the current effort.

This brings me to consider potential donors, who might help ULA. Yet to make this essay of general interest, I want to think through the problem a potential donor solves, regardless of the organization that might be the funding target. With this I have my experience as potential donor in addition to a reasonably good understanding of the economics involved.

Let’s consider whether the potential donor perceives the donation to matter. Some years ago I wrote a blog post called Mattering Bias, where I was trying to reconcile why some very rich potential donors willingly signed up for The Giving Pledge yet were notoriously anti-tax. Mattering requires the scale of the gift to be in line with the scale of operation of the recipient organization. Scaling of this sort does not hold with government spending, particularly at the federal level, where most people’s attitudes toward taxation might then be described by what economists call the free-rider problem.

What if the potential donor is not a member of the uber rich, will the donation then be consigned to not matter? No, but then the scale of the recipient organization must be smaller, to again come in line with the size of the donation. I can assert that a $5,000 donation made on behalf of ULA would matter, a lot. Those who are financially comfortable can afford to make such donations. This would greatly expand the pool of potential donors beyond the uber rich. Are such people willing to make donations of this magnitude? And, if so, how do they identify candidate recipient organizations?

Even if the donation does not matter, in the sense discussed in the previous paragraphs, some people will make the donation because it is the right thing to do. Microeconomic modeling being what it is, theoretically the donor is assumed to receive some psychic benefit from making the donation. This is the warm glow, as mentioned in the essay title. The idea stems from the late 1980s and the work of the economist, James Andreoni. If motivated purely by the warm glow and able to make a donation that is very modest in size, then much of the population can participate in charitable giving.

At the time of Andreoni’s work, email was in its infancy and most people had never heard of the Internet. Solicitations for funding were mainly by direct mail, which in addition to the postage carried the cost of preparing the mail message to be delivered. Thirty plus years later the cost of such messaging is considerably less. How has that impacted things?

Nowadays we all suffer from information overload, filtering out much of the messaging we receive without learning its contents. And in some cases, we do learn the contents but aren’t persuaded by them. Collectively this makes for a kind of market failure, as each solicitation sent weakens the possible impact of other solicitations. The net result is to condition us into becoming free riders, this even when we’d want to experience the warm glow, if only we didn’t feel so vulnerable and exposed by contributing in response to a decent solicitation. Is there a way out of this dilemma?

My answer is to ignore solicitations entirely and instead search for the organization to receive the donation. One issue is that not all organizations are on the up and up. How does one avoid being taken in? Large organizations generally face greater scrutiny and that may offer some reassurance. Alternatively, there are micro grant organizations. Two I know of are Spirit In Action and Amistad International. One might donate directly to them. Alternatively, seeing the organizations they support that have received multiple rounds of funding should offer assurance that the organizations are trustworthy. Yet another alternative is to focus on local organizations, where the word-of-mouth information flows are more reliable.

None of these are perfect solutions. But if the warm glow would fill some of the emptiness so many of us now feel, can we afford not to give it a try?