How to be smart when giving away money

Flickr user Julien Harneis
Flickr user Julien Harneis

A lot of ‘doing good’ doesn’t do anything.

‘Many donors and organizations assume: doing good helps, no matter what. But that’s not true, unfortunately. A lot of ‘doing good’ doesn’t do anything. Some helps a little. Some helps a lot’, argues economist Kellie Liket (Erasmus School of Economics) in an interview with NRC Handelsblad.

Liket (30) pleads for helping as many people as possible – but on the basis of ratio and scientific proof, not on the basis of what feels good. Unfortunately, she says, that still happens a lot. Her example: the PlayPump, a water pump for African villages that’s designed like a merry-go-round that children can push around to pump up water. Sounds like fun! But in reality, the children miss out on school because of the intensive pumping and it’s too difficult and humiliating for elderly people. Plus they are more expensive than regular pumps. ‘Destruction of capital’, says Liket. ‘And the worst thing is: they’re still being installed.’

Liket decided to dedicate herself to ‘effective altruism’, a turn in philanthropy that wants to make sure donations are well spent. At the Eramus University she researched how the impact of charities can be measured, and she founded, a community of funds and philanthropists who want their money to make a real difference.

‘Effective altruism’, Liket explains, ‘assumes that you handle doing good the same way as booking a holiday or buying a washing machine.’ That means spending time on searching and comparing charities rationally. ‘The most important thing is that you don’t use your intuition’, says Liket; instead, use websites like Give Well, that analyzes charities on their effectivity.

And knowing that your money is spent effectively, helps. ‘You choose between what you spend on yourself and on someone else. The choice to spend it on someone else gets less and less attractive as your idea of how effective it is decreases.’

Source: NRC Handelsblad

More information

Watch this video in which Liket explains her theory