my example was merely trying to show that if patient philanthropy is preferred, then a wait and donate strategy is better than relying on inter-generational transfers.
we have to assume that for some arbitrary reason we do not care about the first three generations of poor people at all, only about the poor people in 100 years’ time
No, we don’t. We merely have to believe (in expectation) that our marginal money is better spent a few generations in the future than on the current generation. This is of course contested but there are plenty of non-arbitrary reasons to believe it. For example, if you doubt catch-up growth, and you think there will still be some very poor (in absolute terms) countries around a few generations in the future, then a few generations the future you will expect to have
more money, due to compound returns of your savings
a population of people that are about as easy to help as they are now
So you can help people more then than you can now. (this is obviously glossing over a ton of details like those covered in Trammel’s report but I think it helps get at the intuition).
Most individual-level income gains like we see from tin roofs do not compound across generations at anything like market rates (we can see inter-generational income elasticity is far less than 1 in low-income countries which implies income gains to one generation get diluted over time).
Sure, your example showed that if one irrationally disregards earlier generations and focuses purely on the needs of cohort P, Option B is a clear winner. If one doesn’t, we agree that it’s actually pretty darn complicated to estimate the total welfare impact of donating now versus donating a larger nominal sum on equivalent problems (assuming they still exist) in future, which requires a lot of contestable counterfactual assumptions,[1] as well as choice of discount rates, PPP and money nonlinearity assumptions and decisions about whether any value is attached to economic stimulus to non-recipients in developing countries and keeping marginal NGOs alive. (Donations to things other than poverty relief have their own idiosyncracies: hopefully the number of ITNs needed to prevent malaria deaths by ~2050 will be zero.)
The intergenerational elasticity point is an interesting one, but intergenerational income elasticities are higher in less developed countries (and the higher incomes are partially inherited by more people in later generations, assuming they continue to reproduce above replacement rate). And under normal assumptions we care about the earlier generations helped at least as much as the later ones, so you’ve already helped many more people than the direct recipients by the time the patient philanthropy fund is investigating how many more people accrued compound interest will let them help. Plus in the specific example of the roof we’re talking about wealth, and you’d have to invest very well in stocks and shares to beat the imputed 20% annual returns on a tin roof, even over time spans that extend beyond its serviceability.
Catchup growth definitely exists, the only question is whether more marginal economies will be excluded from it.[2] There are many reasons for economic stagnation in poorer regions (most obviously terrible governance), but it’s certainly not independent from whether philanthropic funds for economic growth and poverty alleviation decide that in the near term they should shift towards promoting the economic development of the stock market in their own country instead.[3] Too much patience is probably worse for developing countries than the opposite extreme of too much philanthropic cash chasing too few viable opportunities.
You also have to make assumptions about the philanthropists of the future as well: I’m not as rosy on near future technology-enabled post scarcity societies as some people on here, but if we trend in that direction maybe your nominally larger funds are a lot less relevant in future than that now
Never mind the Asian Tiger economies, even some conflict-ridden impoverished backwaters like Burkina Faso have seen average growth rates comparable to US stocks over extended periods of time, and even without wild technological optimism it’ll probably be fairly hard to find people living under the new $3 per day (2025 PPP) poverty threshold in 2075
Makes wayyy more sense for funds to keep most of the funds invested in domestic stocks when they’re endowments ring fenced for specific things like selective scholarships or maintenance of a facility than funds for promoting economic growth and poverty alleviation
my example was merely trying to show that if patient philanthropy is preferred, then a wait and donate strategy is better than relying on inter-generational transfers.
No, we don’t. We merely have to believe (in expectation) that our marginal money is better spent a few generations in the future than on the current generation. This is of course contested but there are plenty of non-arbitrary reasons to believe it. For example, if you doubt catch-up growth, and you think there will still be some very poor (in absolute terms) countries around a few generations in the future, then a few generations the future you will expect to have
more money, due to compound returns of your savings
a population of people that are about as easy to help as they are now
So you can help people more then than you can now. (this is obviously glossing over a ton of details like those covered in Trammel’s report but I think it helps get at the intuition).
Most individual-level income gains like we see from tin roofs do not compound across generations at anything like market rates (we can see inter-generational income elasticity is far less than 1 in low-income countries which implies income gains to one generation get diluted over time).
Sure, your example showed that if one irrationally disregards earlier generations and focuses purely on the needs of cohort P, Option B is a clear winner. If one doesn’t, we agree that it’s actually pretty darn complicated to estimate the total welfare impact of donating now versus donating a larger nominal sum on equivalent problems (assuming they still exist) in future, which requires a lot of contestable counterfactual assumptions,[1] as well as choice of discount rates, PPP and money nonlinearity assumptions and decisions about whether any value is attached to economic stimulus to non-recipients in developing countries and keeping marginal NGOs alive. (Donations to things other than poverty relief have their own idiosyncracies: hopefully the number of ITNs needed to prevent malaria deaths by ~2050 will be zero.)
The intergenerational elasticity point is an interesting one, but intergenerational income elasticities are higher in less developed countries (and the higher incomes are partially inherited by more people in later generations, assuming they continue to reproduce above replacement rate). And under normal assumptions we care about the earlier generations helped at least as much as the later ones, so you’ve already helped many more people than the direct recipients by the time the patient philanthropy fund is investigating how many more people accrued compound interest will let them help. Plus in the specific example of the roof we’re talking about wealth, and you’d have to invest very well in stocks and shares to beat the imputed 20% annual returns on a tin roof, even over time spans that extend beyond its serviceability.
Catchup growth definitely exists, the only question is whether more marginal economies will be excluded from it.[2] There are many reasons for economic stagnation in poorer regions (most obviously terrible governance), but it’s certainly not independent from whether philanthropic funds for economic growth and poverty alleviation decide that in the near term they should shift towards promoting the economic development of the stock market in their own country instead.[3] Too much patience is probably worse for developing countries than the opposite extreme of too much philanthropic cash chasing too few viable opportunities.
You also have to make assumptions about the philanthropists of the future as well: I’m not as rosy on near future technology-enabled post scarcity societies as some people on here, but if we trend in that direction maybe your nominally larger funds are a lot less relevant in future than that now
Never mind the Asian Tiger economies, even some conflict-ridden impoverished backwaters like Burkina Faso have seen average growth rates comparable to US stocks over extended periods of time, and even without wild technological optimism it’ll probably be fairly hard to find people living under the new $3 per day (2025 PPP) poverty threshold in 2075
Makes wayyy more sense for funds to keep most of the funds invested in domestic stocks when they’re endowments ring fenced for specific things like selective scholarships or maintenance of a facility than funds for promoting economic growth and poverty alleviation