JDB Donates a Great Idea

Former guest contributor and lifelong Coarse Evaluations fan JDB makes a great observation regarding charity fundraising.

After class this morning, I walked to the book store to pick up a couple of case studies. On my way there, I noticed five fraternity members collecting donations for a South American charity. They had big empty water jugs for people to slip their spare coins and cash into. I wondered if their time could be better spent.

How much do you think they collect per hour? In other words, what are they getting paid per hour? I started to think that, if their ultimate goal is to raise the maximum amount possible for the charities, there has to be better alternatives. For example, I suggest they donate a couple of work hours to the cause. Instead of standing in the cold for 3 hours, they could ask their boss to pay the charity for three hours of their work. This would be a tax benefit for the employer (less payroll, less corporate tax) and the charity would be getting more money since the money is coming from the individual before it is taxed for FICA etc. Would five fraternity members earn more money for the charity by working their jobs for 3 hours or standing on the sidewalk?

I honestly don’t know what the numbers would say. I hypothesize that working their jobs (donating the money that would have been earned for those hours) would make more money for charity. If my hypothesis is correct, knowing that we live in a rational world, why are fraternity members still standing on sidewalks instead of going to their jobs?

Some initial ideas—

1. They get a good feeling from raising money for a charity in a very visible way, in the public eye. Do I even need to state that this is definitely worth something?
   
2. They know the payoff by going to work. They don’t know the payoff of standing on the sidewalk, although. There is chance that they could strike it big with a large donation. Since they do not assume any personal risk of loss for standing on the sidewalk, it is easy to take that risk.
   
3. Fraternity members hate their jobs and would rather collect donations.
   
4. Maximizing donations for the charity does not carry enough weight to trump other goals of the charity drive, ie—promoting the fraternity, building the brotherhood bonds, etc.

Does JD’s analysis get it right? For individuals, I think the warm glow of (1) is especially strong. I also suspect that (3) is an important motivator—hanging out, bullshatting with your buddies is a lot more fun than yard work. For organizations, I think it would be easy to underestimate the value of (4)--especially for nonprofits the publicity and potential to attract long-term donors likely provides the greater return.

I would also add that many charity solicitation efforts demonstrate an utter lack of creativity. Standing around outside the mall is just lazy. Perhaps this illuminates (2). Often the goal is not necessarily to maximize donations; it is to just do *something.*

Personally, I believe donations are optimally solicited in exchange for some small service. Carwashes, raking leaves and other activities are likely the most efficient and welfare maximizing means of fundraising. This general idea also inspires my response to the homeless and to street performers. I have some opinions about Girl Scout Cookies too. Come to think of it, those Thin Mints should be here any day.

Thanks JD!