I’m not advocating it because of the fiscal multiplier. That would be the cherry on the cake.
The first simple step is simply to say don’t cut back expenditure because shrinking and regrowing an organisation is costly. Most charities (though EA ones are somewhat atypical) see their income reduced during bad times. And since most charities think in bland terms of x months of reserves, this means their expenditure fluctuates as well. This is an not efficient way to manage an organisation. In good times, build a buffer, so you can keep going during bad times. Just keeping expenditure flat would be a major step in the right direction.
Of course you can take it a step further. There is another cost argument, which is that it is cheaper to do stuff during bad times. When unemployment is high, you can get talented people more easily. So even if the benefits are the same, the benefit/cost is higher. The fact the benefits may be higher, not just that the fiscal multiplier may be higher, but that fulfillment of basic human needs may be worse, is a bonus, though it probably only applies to Global Health and Development causes. I wouldn’t use a Keynesian altruism strategy simply for this.
Yep that sounds good, non-profits should aim to have fairly stable expenditure over the business cycle.
I think I was thrown off your true motivation by the name ‘Keynesian altruism’. It might be wise to rename it ‘countercyclical’ so it doesn’t carry the implication that you’re looking for an economic multiplier.
I wonder if exchange rates volatility during global recessions (usually, the US$ dollar and the Euro rise in relation to national currencies in developing countries) would add another point, at least for charities located in the developing world. (Personally, since my job is very stable and opportunities for investments scarce, I have been increasing my own donations to account for my declining consumption)
That’s a very interesting point I hadn’t considered. Yes, if the expenditure is in emerging markets, your money likely goes even further during global recessions
Thanks for your comment.
I’m not advocating it because of the fiscal multiplier. That would be the cherry on the cake.
The first simple step is simply to say don’t cut back expenditure because shrinking and regrowing an organisation is costly. Most charities (though EA ones are somewhat atypical) see their income reduced during bad times. And since most charities think in bland terms of x months of reserves, this means their expenditure fluctuates as well. This is an not efficient way to manage an organisation. In good times, build a buffer, so you can keep going during bad times. Just keeping expenditure flat would be a major step in the right direction.
Of course you can take it a step further. There is another cost argument, which is that it is cheaper to do stuff during bad times. When unemployment is high, you can get talented people more easily. So even if the benefits are the same, the benefit/cost is higher. The fact the benefits may be higher, not just that the fiscal multiplier may be higher, but that fulfillment of basic human needs may be worse, is a bonus, though it probably only applies to Global Health and Development causes. I wouldn’t use a Keynesian altruism strategy simply for this.
Yep that sounds good, non-profits should aim to have fairly stable expenditure over the business cycle.
I think I was thrown off your true motivation by the name ‘Keynesian altruism’. It might be wise to rename it ‘countercyclical’ so it doesn’t carry the implication that you’re looking for an economic multiplier.
I wonder if exchange rates volatility during global recessions (usually, the US$ dollar and the Euro rise in relation to national currencies in developing countries) would add another point, at least for charities located in the developing world.
(Personally, since my job is very stable and opportunities for investments scarce, I have been increasing my own donations to account for my declining consumption)
That’s a very interesting point I hadn’t considered. Yes, if the expenditure is in emerging markets, your money likely goes even further during global recessions