Wow! This is an order of magnitude larger than I expected. What’s the source of the overhead here?
Here is my rough fermi:
My guess is that there is about one full-time person working on the logistics of EA Grants, together with about half of another person lost in overhead, communications, technology (EA Funds platform) and needing to manage them.
Since people’s competence is generally high, I estimated the counterfactual earnings of that person at around $150k, with an additional salary from CEA of $60k that is presumably taxed at around 30%, resulting in a total loss of money going to EA-aligned people of around ($150k + 0.3 * $60k) * 1.5 = $252k per year [Edit: Updated wrong calculation]. EA Funds has made less than 100 grants a year, so a total of about $2k - $3k per grant in overhead seems reasonable.
+ 0.3 * $60k) * 1.5 = $252k
To be clear, this is average overhead. Presumably marginal overhead is smaller than average overhead, though I am not sure by how much. I randomly guessed it would be about 50%, resulting in something around $1k to $2k overhead.
If one person-year is 2000 hours, then that implies you’re valuing CEA staff time at about $85/hour. Your marginal cost estimate would then imply that a marginal grant takes about 12-24 person-hours to process, on average, all-in.
This still seems higher than I would expect given the overheads that I know about (going back and forth about bank details, moving money between banks, accounting, auditing the accounting, dealing with disbursement mistakes, managing the people doing all of the above). I’m sure there are other overheads that I don’t know about, but I’m curious if you (or someone from CEA) knows what they are?
[Not trying to imply that CEA is failing to optimize here or anything—I’m mostly curious plus have a professional interest in money transfer logistics—so feel free to ignore]
I actually think the $10k grant threshold doesn’t make a lot of sense even if we assume the details of this “opportunity cost” perspective are correct. Grants should fulfill the following criterion:
“Benefit of making the grant” ≥ “Financial cost of grant” + “CEA’s opportunity cost from distributing a grant”
If we assume that there are large impact differences between different opportunities, as EAs generally do, a $5k grant could easily have a benefit worth $50k to the EA community, and therefore easily be worth the $2k of opportunity cost to CEA. (A potential justification of the $10k threshold could argue in terms of some sort of “market efficiency” of grantmaking opportunities, but I think this would only justify a rigid threshold of ~$2k.)
IMO, a more desirable solution would be to have the EA Fund committees factor in the opportunity cost of making a grant on a case-by-case basis, rather than having a rigid “$10k” rule. Since EA Fund committees generally consist of smart people, I think they’d be able to understand and implement this well.
This sounds pretty sensible to me. On the other hand, if people are worried about it being harder for people who are already less plugged in to networks to get funding, you might not want an additional dimension on which these harder-to-evaluate grants could lose out compared to easier to evaluate ones (where the latter end up having a lower minimum threshold).
It also might create quite a bit of extra overhead for granters having to decide the opportunity cost case by case, which could reduce the number of grants they can make, or again push towards easier to evaluate ones.
I tend to think that the network constraints are better addressed by solutions other than ad-hoc fixes (such as more proactive investigations of grantees), though I agree it’s a concern and it updates me a bit towards this not being a good idea.
I wasn’t suggesting deciding the opportunity cost case by case. Instead, grant evaluators could assume a fixed cost of e.g. $2k. In terms of estimating the benefit of making the grant, I think they do that already to some extent by providing numerical ratings to grants (as Oliver explains here). Also, being aware of the $10k rule already creates a small amount of work. Overall, I think the additional amount of work seems negligibly small.
ETA: Setting a lower threshold would allow us to a) avoid turning down promising grants, and b) remove an incentive to ask for too much money. That seems pretty useful to me.
It’s not at all clear to me why the whole $150k of a counterfactual salary would be counted as a cost. The most reasonable (simple) model I can think of is something like: ($150k * .1 + $60k) * 1.5 = $112.5k where the $150k*.1 term is the amount of salary they might be expected to donate from some counterfactual role. This then gives you the total “EA dollars” that the positions cost whereas your model seems to combine “EA dollars” (CEA costs) and “personal dollars” (their total salary).
Hmm, I guess it depends a bit on how you view this.
If you model this in terms of “total financial resources going to EA-aligned people”, then the correct calculation is ($150k * 1.5) plus whatever CEA loses in taxes for 1.5 employees.
If you want to model it as “money controlled directly by EA institutions” then it’s closer to your number.
I think the first model makes more sense, which does still suggest a lower number than what I gave above, so I will update.
I don’t particularly want to try to resolve the disagreement here, but I’d think value per dollar is pretty different for dollars at EA institutions and for dollars with (many) EA-aligned people . It seems like the whole filtering/selection process of granting is predicated on this assumption. Maybe you believe that people at CEA are the type of people that would make very good use of money regardless of their institutional affiliation?
 I’d expect it to vary from person to person depending on their alignment, commitment, competence, etc.
I think you have some math errors:
$150k * 1.5 + $60k = $285k rather than $295k
Presumably, this should be ($150k + $60k) * 1.5 = $315k ?
Ah, yes. The second one. Will update.