Executive summary: Founders Pledge uses inconsistent assumptions about diminishing marginal utility of income in their cost-effectiveness analyses, which leads to counterintuitive valuations and may significantly impact charity prioritization.
Key points:
Current framework uses different utility functions for comparing interventions (η=1) vs. comparing benefits over time (η≥1.59).
This inconsistency can lead to valuing income doublings for richer people more than for poorer people in some cases.
Adopting a consistent η value would substantially impact charity prioritization (e.g. doubling cost-effectiveness of some interventions).
Options are to use η=1.87 everywhere (requiring accounting for absolute income levels) or η=1 everywhere (reducing discount rate to 1.4%).
Further research and input is needed to determine the most appropriate η value to use consistently.
The “compounding non-monetary benefits” factor in the discount rate likely reflects diminishing marginal utility, but this is uncertain.
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Executive summary: Founders Pledge uses inconsistent assumptions about diminishing marginal utility of income in their cost-effectiveness analyses, which leads to counterintuitive valuations and may significantly impact charity prioritization.
Key points:
Current framework uses different utility functions for comparing interventions (η=1) vs. comparing benefits over time (η≥1.59).
This inconsistency can lead to valuing income doublings for richer people more than for poorer people in some cases.
Adopting a consistent η value would substantially impact charity prioritization (e.g. doubling cost-effectiveness of some interventions).
Options are to use η=1.87 everywhere (requiring accounting for absolute income levels) or η=1 everywhere (reducing discount rate to 1.4%).
Further research and input is needed to determine the most appropriate η value to use consistently.
The “compounding non-monetary benefits” factor in the discount rate likely reflects diminishing marginal utility, but this is uncertain.
This comment was auto-generated by the EA Forum Team. Feel free to point out issues with this summary by replying to the comment, and contact us if you have feedback.