That’s a good point! While UK and US interest rates do differ, the interest rates are much lower now because of the COVID-19 economic situation. We used the latest Form 990 data from 2018 and 2019 and the associated interest rates from those years to calculate the prior-year opportunity costs as accurately as possible, which is a separate calculation than estimating the forward-looking counterfactual impact. We chose the federal funds rate because there’s a lot more granular and historical data on it and it’s one of the most conservative rates possible. There’s a link in my article explaining its association with savings account yields. If you look at my EA Forum post from 2019 I was referencing savings account rates of 2.4% which was the same or higher than the federal funds rate at the time.
In my talk earlier this year I listed savings account yields at banks that were around 1% even as the federal funds rate was plummeting to 0%. That’s why I used a more conservative 1% interest rate in my five-year opportunity cost calculation for GiveWell (estimated at $4 million), which aligns with the lower UK interest rate of 0.9% you mentioned.
That’s a good point! While UK and US interest rates do differ, the interest rates are much lower now because of the COVID-19 economic situation. We used the latest Form 990 data from 2018 and 2019 and the associated interest rates from those years to calculate the prior-year opportunity costs as accurately as possible, which is a separate calculation than estimating the forward-looking counterfactual impact. We chose the federal funds rate because there’s a lot more granular and historical data on it and it’s one of the most conservative rates possible. There’s a link in my article explaining its association with savings account yields. If you look at my EA Forum post from 2019 I was referencing savings account rates of 2.4% which was the same or higher than the federal funds rate at the time.
In my talk earlier this year I listed savings account yields at banks that were around 1% even as the federal funds rate was plummeting to 0%. That’s why I used a more conservative 1% interest rate in my five-year opportunity cost calculation for GiveWell (estimated at $4 million), which aligns with the lower UK interest rate of 0.9% you mentioned.
Ah I see, thanks for clarifying!