Differences in impact
Around 700 million people still live in poverty, mostly in low-income countries. Efforts to help them—by policy reform, cash transfers, or provision of health services—can be incredibly effective.
Alongside investigating this issue, we also discuss how much more effective some interventions are than others, and we introduce a simple tool for estimating important figures.
Key concepts from this session include:
Differences in impact: It appears that some of our options to help do many times more good than others. People generally don’t appreciate this, and so miss out on significant opportunities to help.
The importance, neglectedness, tractability framework: The most important problems generally affect a lot of people (importance or scale), are relatively under-invested in (neglectedness), and can be meaningfully improved with a reasonable amount of work (tractability).
Thinking on the margin: If you’re donating $1, you should give that extra $1 to the intervention that can most cost-effectively improve the world. There are many great initiatives with a very high average impact per dollar that will have a low marginal impact because they can’t get the same efficiency at scale (they display “diminishing marginal returns”).
Fermi estimates: When you’re trying to make a decision, it can be useful to make a rough calculation for which option is best. Even if there’s a lot of uncertainty, this can give you a rough answer, and can tell you which things are most important to estimate next.
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A clarification/example from the 80,000 hours AI bot regarding diminishing marginal returns I found helpful:
“The key idea is that a charity’s average impact per dollar isn’t the same as what your next dollar achieves.
Concrete example: imagine a program distributing vitamin supplements in one region.
First $100k: reaches the villages closest to the road, with the worst deficiencies. Massive impact per dollar.
Next $500k: reaches more remote villages — more spent on transport, populations slightly less in need. Still good, but less per dollar.
Next $1M: the neediest people are already covered; now it’s trucking supplements to areas with milder deficiency at high logistical cost. Much weaker per dollar.
The charity’s average looks great — because the early dollars did so much. But your donation is the last dollar in, funding the marginal (weakest remaining) activity. That’s “diminishing marginal returns”: each additional dollar tends to buy less than the one before, because organisations naturally do the cheapest, highest-impact things first.
So the smart question isn’t “which charity has the best track record per dollar?” but “where will one more dollar do the most?” — which might be a smaller org that hasn’t yet exhausted its best opportunities, rather than a famous one that has.”
- And there will be more on marginal impact a few pages further in the handbook!
Because resources are scarce, it is essential to direct them toward initiatives that address significant challenges, receive insufficient attention, and can be effectively improved through targeted action
Well said
This reading relates to our economy because resources are limited in our country. If we choose the most effective programs, such as health and social support, we can help more people and reduce poverty more quickly. Some actions help many more people than others, so thinking carefully about where support goes can make a bigger difference.
Charities, aids, interventions, humanitarian assistance or any other names it can be called has done a tremendous and unquantifiable help in Africa, but we are like Oliver Twist we still need more. The seat of power or capital of poverty is in our continent.
The importance of charities cannot be overemphasized,as this also needs to be channeled on basis were priority,so that , maximum impact and value could be attained,as against engaging on options,which might not aid the attainment of a higher level of utility