You talk about ‘Net Present Value’ here, but not in a way I’m familiar with. Normally if I see NPV calculations for moving money from one person to another, I get an NPV of zero. I only add net benefits to society that go beyond simple redistribution. Can you explain what you’ve done here?
Thanks Hauke. I spoke to an economist friend who explained you’re using the formula for a business, while I’m thinking of the one for government. In government, we’d consider the money you crowdfunded a cost to society as well. (I’d argue mine is more appropriate for a fundraising charity, but at least I understand the difference now!)
In government, we’d consider the money you crowdfunded a cost to society as well.
I’d argue mine is more appropriate for a fundraising charity, but at least I understand the difference now!
Yes, I agree that for all non-profits or public benefit companies a net present value analysis from a societal perspective would be optimal and what we ultimately care about. However, I feel like my analysis is good approximation: of course, the money I crowdfund is a cost to society given the opportunity costs, but the implicit assumption here is that the donor’s money would counterfactually be spent on conspicuous consumption or perhaps ineffective charities. If this is the case, then because the value of increasing consumption in advanced economies is comparatively small and the cost-effectiveness analysis is relatively insensitive to whether we count this, then the business analysis is a good approximation for the societal value and it’s ok to leave it out for simplicity’s sake.
Fundraising charities routinely use “fundraising ratios”, which are benefit-cost ratios and similar to net values, so this seems standard practise.
In the future, I might look more into the true counterfactual societal net value and see whether some of the money donated would have gone to similarly effective charities in the future.
Maybe I am extending Khorton’s point but in addition to this simple calculation it might be interesting to consider the marginal counterfactual impact of your operations. I imagine that most of the $300k raised would have been raised for other longtermist causes like the EA long term future fund or similar donation opportunities.
Do you have some reasonable evidence for actually having “grown the pie” and added to the overall donation volume?
Otherwise your marginal impact would be the expected value difference to other donation opportunities like EA funds, which I expect to be somewhat close to zero (e.g., you make the analogy to EA funds yourself in the post).
This is a really hard analysis to do because it’s very hard to assess what the money would have been spent on counterfactually- see my comment above to Khorton.
My subjective impression is that the $75k for the Better Science campaign was heavily skewed towards EA donors and would have gone to EA causes anyway. However, assuming returns to research this might have still improved the quality of donation within the EA community, which counterintuitively can sometimes be more effective than growing the pie.
However, the $200k raised for the climate change campaign was heavily skewed towards non-EA donor and perhaps the counterfactual here were less effective charities or even conspicuous consumption.
I imagine that most of the $300k raised would have been raised for other longtermist causes
Certainly this is true of some of the money raised, but much of it came through us getting exposure to the broader public (read: non-EAs) on Vox; it’s not likely that those funds were otherwise destined for longtermist causes.
I’ll come back to you with a more detailed breakdown of donors by source.
You talk about ‘Net Present Value’ here, but not in a way I’m familiar with. Normally if I see NPV calculations for moving money from one person to another, I get an NPV of zero. I only add net benefits to society that go beyond simple redistribution. Can you explain what you’ve done here?
Yes, absolutely.
One year ago I’ve gotten $40k from the EA community, these are the cost to society, because I’ve spent this money on Let’s Fund operations.
Then, on average roughly 1 year later, I’ve crowdfunded $300k for my campaigns (these are the benefits).
The benefits minus the costs are the also called the net value, which are then simply $260k. But if you discount the costs at 5% with the formula:
=NPV(0.05,(40*-1),300)
then you get a net present value of 234.
Does that make sense?
Thanks Hauke. I spoke to an economist friend who explained you’re using the formula for a business, while I’m thinking of the one for government. In government, we’d consider the money you crowdfunded a cost to society as well. (I’d argue mine is more appropriate for a fundraising charity, but at least I understand the difference now!)
Yes, I agree that for all non-profits or public benefit companies a net present value analysis from a societal perspective would be optimal and what we ultimately care about. However, I feel like my analysis is good approximation: of course, the money I crowdfund is a cost to society given the opportunity costs, but the implicit assumption here is that the donor’s money would counterfactually be spent on conspicuous consumption or perhaps ineffective charities. If this is the case, then because the value of increasing consumption in advanced economies is comparatively small and the cost-effectiveness analysis is relatively insensitive to whether we count this, then the business analysis is a good approximation for the societal value and it’s ok to leave it out for simplicity’s sake.
Fundraising charities routinely use “fundraising ratios”, which are benefit-cost ratios and similar to net values, so this seems standard practise.
In the future, I might look more into the true counterfactual societal net value and see whether some of the money donated would have gone to similarly effective charities in the future.
I think EAF did a good job at this where they estimated the money they raised that would not have been donated otherwise.
Maybe I am extending Khorton’s point but in addition to this simple calculation it might be interesting to consider the marginal counterfactual impact of your operations. I imagine that most of the $300k raised would have been raised for other longtermist causes like the EA long term future fund or similar donation opportunities.
Do you have some reasonable evidence for actually having “grown the pie” and added to the overall donation volume?
Otherwise your marginal impact would be the expected value difference to other donation opportunities like EA funds, which I expect to be somewhat close to zero (e.g., you make the analogy to EA funds yourself in the post).
Yes, excellent question.
This is a really hard analysis to do because it’s very hard to assess what the money would have been spent on counterfactually- see my comment above to Khorton.
My subjective impression is that the $75k for the Better Science campaign was heavily skewed towards EA donors and would have gone to EA causes anyway. However, assuming returns to research this might have still improved the quality of donation within the EA community, which counterintuitively can sometimes be more effective than growing the pie.
However, the $200k raised for the climate change campaign was heavily skewed towards non-EA donor and perhaps the counterfactual here were less effective charities or even conspicuous consumption.
Certainly this is true of some of the money raised, but much of it came through us getting exposure to the broader public (read: non-EAs) on Vox; it’s not likely that those funds were otherwise destined for longtermist causes.
I’ll come back to you with a more detailed breakdown of donors by source.