Surplus Money

Let's define "surplus money" as being money that will increase utility more if donated to charity than if spent on ourselves. Here, we make a first, albeit crude, attempt at identifying a "gold standard" organization (Oxfam America) that will increase utility most efficiently, i.e. more per dollar, than any other organization. We also identify a "silver standard" organization (UNICEF USA) as a backup should the gold standard's ability to use money efficiently diminish. The gold standard provides us with a gauge to determine if we should make any particular expenditure on ourselves or if we should donate it to charity. It also tells us which charity we should donate our surplus money to.

While, as we will see, there exists great opportunity to increase utility by donating to charity, we often should spend some money on ourselves, even if only for food, clothing, and shelter. Without such purchases, not only would our own utility be greatly diminished, but our capacity to increase the utility of others would be diminished too. Furthermore, it is at least plausible that experiencing enough discomfort might dissuade us or those around us from utilitarianism, thereby reducing utility. However, even after spending some money on ourselves, we often have surplus money.

Of course, we might also find ourselves with surplus oranges or surplus shoes. However, due to money's near-perfect liquidity and near-universal acceptance, it receives special treatment here.

What should we do with surplus money? For now, we'll assume the money should be donated, instead of being invested in order to generate more money to donate in the future. This matter was touched on briefly in the section on "Critics vs. Warren Buffett" in the post Modeling Choice With Utility Curves and will be returned to in greater detail. We'll also assume that the best thing to do with the money is to donate it to a non-profit organization, instead of giving it directly to someone in need. This is because our ability to donate to non-organizations is about the same, whereas not all of us know individuals in need who can use the money more efficiently than the organizations. Any opportunity to use our money more efficiently than our gold standard should be taken.

I am not aware of any comparison of non-profits based on anything resembling how efficiently they increase utility. The existing comparisons of non-profits are generally based on financial statistics such as what percent of the charity's budget is spent on charitable work and how efficient the fundraising is. This includes the two main online charity comparisons, the American Institute of Philanthropy Charity Watch and Charity Navigator. (Here are links to Charity Watch's methodology and Charity Navigator's methodology.)

We don't need a complete comparison of organizations; we only need to know the best one, as long as it can use all of our donations more efficiently than any other. If this gold standard organization ever becomes so flush with cash that its ability to use money efficiently is diminished, then we'll need a second or third organization to donate to, which we'll call the "silver standard" and "bronze standard". While, at present, this scenario is very unlikely, it can't hurt to have a backup. We'll use Oxfam America as our gold standard and UNICEF USA as our silver standard, neglecting to identify a bronze standard.

Why Oxfam America? It's an organization large enough to handle all but the very largest donation amounts. It's also very stable, so it's unlikely to significantly change its operations any time soon, except perhaps to make incremental improvements. It has sister organizations around the world which offer similar donation opportunities. Finally, both Peter Singer and I like it. Singer also likes UNICEF; I am less familiar with this organization but find it comparable.

I like Oxfam because it's a very smart and effective global poverty relief organization. I find global poverty relief to be the best cause to donate money to because a large portion of money donated goes directly towards very significant quality of life increases for, making for a very high utility increase per dollar ratio. For other important matters such as politics or climate change, I prefer non-monetary actions such as advocating for candidates, raising awareness, and reducing my own energy consumption. Are these choices correct? Perhaps not. I hope over time this matter will be investigated more thoroughly, either here or elsewhere. Certainly, if you are aware of any work to this effect, please point me to it. In the meantime, we have a very reasonable starting point.

Both organizations provide breakdowns of what our donations can buy. (Here are links to Oxfam's breakdown and UNICEF's breakdown.) While funds donated to Oxfam or UNICEF do not necessarily go to specific items, these breakdowns provide us with a simple rule of thumb for deciding whether to spend the money on ourselves or to donate it. Oxfam's breakdown is copied here:

$20 Buys enough maize to feed a family of four in the Rift Valley of Ethiopia for six months.

$30 Buys books to help 10 girls in Afghanistan learn to read and write.

$50 Grows substantially more crops in a region of scarce resources, harsh terrain, and prevalent malnutrition in Peru.

$100 Provides a young student living in poverty in Mali with the vocational training and financial support necessary to start her own weaving business.

$200 Provides disaster preparedness training and technical support to two families in El Salvador.

$500 Secures a small loan for five rural women in Cambodia to start their own fish farms.

$700 Helps to rebuild a house destroyed by earthquake in El Salvador.

$1,000 Brings potable water to 22 families in the Rift Valley of Ethiopia.

$2,000 Provides technical assistance and the business skills needed to better market their produce to 45 farmers in the highlands of Guatemala.

This is, of course, very striking to me and probably most readers. It's not uncommon to spend $20 or more for entertainment in one evening. Whatever increase in utility this entertainment provides seems to pale in comparison to the utility increase provided by having food for 24 months. I probably cannot justify such entertainment expenditures in terms of its increase in my own utility. Can I justify them in terms of making utilitarianism more attractive? I don't know. Fortunately, however, there often are less expensive entertainment options.