Hey, great news! Your uncle just died (don't worry you didn't like him very much1) and left you a nice chunk of money in his will. You decided the best way to honour the old bastard is by burning through some of his well earned cash on some new shit for your flat.
You’ve had your eye on a new set of speakers for a while now and decide they’re a good place to start.
- You head into town and find that the speakers you want are being sold in a few different shops. After a number of hours of looking you find yourself in a shop where the speakers are $100. This is a good price but earlier in the day you saw them in another store for $70. The other store would be a 30 minute detour on your way home.
The next day you decide that your uncle needs more honouring so you keep the shopping spree going, this time you head into town to buy a new laptop.
- The laptop you want is being sold in a few shops. After a number of hours of looking you find yourself in a shop where the laptop is $1000. This is a good price but earlier in the day you saw it in another store for $970. The other store would be a 30 minute detour on your way home.
On both days of shopping you could have saved $30 by spending another 30 minutes to travel to the other store, so logically the amount you stand to save is the same. But do the two scenarios feel the same?
This is a summary of a study outlined in the book Scarcity: Why Having Too Little Means So Much by Eldar Shafir and Sendhil Mullainathan (apart from the dead uncle bit, that was my lovely addition). They suggest people are more inclined to to take the detour for the speaker example, but less so for the laptop. And I have to agree, the detour feels more important for the speakers than it does for the laptop2.
Us humans are not at our best when it comes to thinking logically about money. We’re less good with absolutes value, and far better at thinking in terms of proportional losses and gains.
I often need to remind myself of the power that money in absolute terms can hold, and that a small absolute amounts of money, from my perspective, can have a massive proportional effect on others.
The charity GiveDirectly brings this emotional impact I can have on another individual into full focus.
The GiveDirectly approach is:
- Locate extremely poor communities all over the world
- Send field staff to the communities to collect data and enroll recipients
- Verify the financial status of enrolled individuals
- Transfer around $1000 (approximately one years budget for a household) to their bank account (usually through a text message and collection in a local village) across a number of payments.
- Verify collection and ask for feedback on what the money has been spent on
As such this is a charity that effectively double the income of an individual for a year at a cost of around £60 per month.
Imagine how you would feel if your current income would suddenly double, imagine how many problems that would solve for you and how much more secure you would feel. Through donating to GiveDirectly it is possible to give that same feeling to another individual halfway around the world for what likely amounts to a tiny relative fraction of your income here in the UK.
So if you’re income does suddenly doubles please consider double the income of many others through GiveDirectly. If you would like to see why GiveDirectly is currently rated as one of the worlds most effective charities I suggest visiting their evaluation page on GiveWell. If you would like to donate they also accept Bitcoin, Ripple and Ethereum.
Footnote
1 Also sorry if you’re uncle just died in real life and this post caught you off guard. This possibility is genuinely something that worries me when posting this.
2 Although the authors do go on to talk about if this is a result of the fact that money may be more disposable if you have more of it to spend, but that ruined my point here so hopefully you’re happy to just go with me on this.
About me
My name is Richard, I blog under the name of @nonzerosum. I’m a PhD student at the London School of Hygiene and Tropical Medicine. I write mostly on Global Health, Effective Altruism and The Psychology of Vaccine Hesitancy. If you’d like to read more on these topics in the future follow me here on steemit or on twitter @RichClarkePsy.
For both situations I'd find myself traveling to save the money. Aside from some investing much of it I'd try to stretch the money my uncle gave me as far as I could.
I like that the recipients get the money to put towards things they need. I didn't read too into it and this may sound terrible but I hope they'd be vetted well before becoming a recipient. Its hard not to think about how we often tend to squander money away on frivolous things and let more important things suffer.
I'm going to continue to investigate this GiveDirectly organization. Thanks for the great post.
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Yes, to be honest as I was writing this I became less and less confident with the example I gave here. It might work better with the price of a house, but either way there are far too many confounders in this for my liking.
I have a feeling GiveDirectly gets this kind of concern a lot, to the extent that the first point they make on their faq’s is “No, they don’t just blow it on booze.” I used to have this view, maybe not booze but not spending it as well as they could, but I’m now of the opinion that it’s not really our place to say what is and is not a good use of money. If you’re poor you likely know what you need better than me and I’m more than happy to trust you on that. And from what I can tell this shows through in the data.
Thanks for the comment! If you get a chance, check out more to do with effective altruism definitely a good overlap with Skepticism.
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I get what you're saying about people knowing what they need. I guess I'm looking at it as, I'm giving you money in hopes that that money helps meet an important need you have. I look at it as an investment in that persons well being. If my investment goes sour, i.e. that money is used for some extraneous things, I feel my investment would be better spent elsewhere meeting real needs.
Effective Altruism: Read your post and will look into it more. The SITP thing blows me away. I have to search here in North Carolina for a group that does that. I could sit there all day listening...and tossing my measly 2 cents in. Thanks for the info.
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Evidence can really help build confidence in that respect. That's why I personally would not donate (or more likely GiveWell would not recommend) if it wasn't for the feedback step at the end. Charities that record data on the effectiveness on of their intervention always get a lot of love from me.
Yes we are extremely lucky to have a network such as SITP here in the UK. Science, skepticism, a couple of pints and some excellent chat. What could be better! The Skeptics with a K podcast is our equivalent of The skeptics guide to the universe if you're ever looking for more content to fill your ears.
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