The Against Malaria Foundation is described as about 5-23x more cost-effective than cash transfers in GiveWell’s calculations, while Founders Pledge thinks StrongMinds is about 6x more cost-effective.
But this seems kind of weird. What are people buying with their cash transfers? If a bednet would be 20x more valuable, than why don’t they just buy that instead? How can in-kind donations (goods like bednets or vitamins) be so much better than just giving poor people cash?
I can think of four factors that might help explain this.
Lack of information. Perhaps beneficiaries aren’t aware of the level of malaria risk they face, or aren’t aware of the later-life income benefits GiveWell models. Or perhaps they are aware but irrationally discount these benefits for whatever reason.
Lack of markets. Cash transfer recipients usually live in poor, rural areas. Their communities don’t have a lot of buying power. So perhaps it’s not worth it for, e.g., bednet suppliers to reach their area. In other words, they would purchase the highly-valuable goods with their cash transfers, but they can’t, so they have to buy less valuable goods instead.
Economies of scale. Perhaps top-rated charities get a big discount on the goods they buy because they buy so many. This discount could be sufficiently large that, e.g., bednets are the most cost-effective option when they’re bought at scale, but not the most cost-effective option for individual consumers.
Externalities. Perhaps some of the benefits of in-kind goods flow to people who don’t receive cash transfers, such as children. These could account for their increased cost-effectiveness if cash transfer recipients don’t account for externalities.
I think each of these probably plays a role. However, a 20x gap in cost-effectiveness is really big. I’m not that convinced that these factors are strong enough to fully explain the differential. And that makes me a little bit suspicious of the result.
I’d be curious to hear what others think. If others have written about this, I’d love to read it. I didn’t see a relevant question in GiveWell’s FAQs.
Meta-level: Great comment- I think we should be starting more of a discussion around theoretical high-level mechanisms of why charities would be effective in the first place—I think there’s too much emphasis on evidence of ‘do they work’.
I think the main driver of the effectiveness of infectious disease prevention charities like AMF and deworming might be that they solve coordination/ public goods problems, because if everyone in a certain region uses a health intervention it is much more effective in driving down overall disease incidence. Because of the tragedy of the commons, people are less likely to buy bed nets themselves.
For micronutrient charities it is lack of information and education—most people don’t know about and don’t understand micronutrients.
Lack of information / markets
Flagging that that there were charities—DMI and Living Goods—which address these issues, and so, if these turn out to explain most of the variance in differences in cost-effectiveness you highlight then these need to be scaled up. I never quite understood why a DMI-like charity with ~zero marginal cost-per-user couldn’t be scaled up more until it’s much more cost-effective than all other charities.
That first factor isn’t just “lack of information,” it is also the presence of cognitive biases in risk assessment and response. Many people—in both higher- and lower-income countries—do not accurately “price” risks of unlikely but catastrophic-to-them/their-family risks. This is also true on a societal level. Witness, for instance, how much the US has spent on directly and indirectly reducing the risk of airplane hijackings over the last 20 years vs. how much we spent on pandemic preparedness.
The Against Malaria Foundation is described as about 5-23x more cost-effective than cash transfers in GiveWell’s calculations, while Founders Pledge thinks StrongMinds is about 6x more cost-effective.
But this seems kind of weird. What are people buying with their cash transfers? If a bednet would be 20x more valuable, than why don’t they just buy that instead? How can in-kind donations (goods like bednets or vitamins) be so much better than just giving poor people cash?
I can think of four factors that might help explain this.
Lack of information. Perhaps beneficiaries aren’t aware of the level of malaria risk they face, or aren’t aware of the later-life income benefits GiveWell models. Or perhaps they are aware but irrationally discount these benefits for whatever reason.
Lack of markets. Cash transfer recipients usually live in poor, rural areas. Their communities don’t have a lot of buying power. So perhaps it’s not worth it for, e.g., bednet suppliers to reach their area. In other words, they would purchase the highly-valuable goods with their cash transfers, but they can’t, so they have to buy less valuable goods instead.
Economies of scale. Perhaps top-rated charities get a big discount on the goods they buy because they buy so many. This discount could be sufficiently large that, e.g., bednets are the most cost-effective option when they’re bought at scale, but not the most cost-effective option for individual consumers.
Externalities. Perhaps some of the benefits of in-kind goods flow to people who don’t receive cash transfers, such as children. These could account for their increased cost-effectiveness if cash transfer recipients don’t account for externalities.
I think each of these probably plays a role. However, a 20x gap in cost-effectiveness is really big. I’m not that convinced that these factors are strong enough to fully explain the differential. And that makes me a little bit suspicious of the result.
I’d be curious to hear what others think. If others have written about this, I’d love to read it. I didn’t see a relevant question in GiveWell’s FAQs.
Meta-level: Great comment- I think we should be starting more of a discussion around theoretical high-level mechanisms of why charities would be effective in the first place—I think there’s too much emphasis on evidence of ‘do they work’.
I think the main driver of the effectiveness of infectious disease prevention charities like AMF and deworming might be that they solve coordination/ public goods problems, because if everyone in a certain region uses a health intervention it is much more effective in driving down overall disease incidence. Because of the tragedy of the commons, people are less likely to buy bed nets themselves.
For micronutrient charities it is lack of information and education—most people don’t know about and don’t understand micronutrients.
Flagging that that there were charities—DMI and Living Goods—which address these issues, and so, if these turn out to explain most of the variance in differences in cost-effectiveness you highlight then these need to be scaled up. I never quite understood why a DMI-like charity with ~zero marginal cost-per-user couldn’t be scaled up more until it’s much more cost-effective than all other charities.
That first factor isn’t just “lack of information,” it is also the presence of cognitive biases in risk assessment and response. Many people—in both higher- and lower-income countries—do not accurately “price” risks of unlikely but catastrophic-to-them/their-family risks. This is also true on a societal level. Witness, for instance, how much the US has spent on directly and indirectly reducing the risk of airplane hijackings over the last 20 years vs. how much we spent on pandemic preparedness.