I follow the logic, but I think the logic of the contrived example actually exposes general weaknesses in patient philanthropy (i.e. for example B to be clearly better we have to assume that for some arbitrary reason we do not care about the first three generations of poor people at all, only about the poor people in 100 years’ time, who are sufficiently far removed for us not to even know how poor they will be)
Once we relax that assumption and assume that poor people today are at least equally deserving as hypothetical poor people in the future, Option B starts looking rather good. [1]The first generation get helped to the extent they need, their descendants may benefit directly to some extent but also may be better able to help themselves, and for big enough donations there is some sort of compounding return in the wider poor country. In some plausible circumstances even the return to the grandchildren is greater than the sum of money you donated (ceteris paribus being born poor but obtaining a scholarship paid for by a foreign foundation isn’t a better situation than being born into the middle class and having education paid for by the grandparent who received the foreign-funded scholarship and was able to earn much better for fifty years as a result)
It then becomes a debate on whether poor people can achieve better returns than index investments in Western stocks, and whilst poor people aren’t sophisticated investors and are often subject to all sorts of negative economic shocks, they are often in a position to dramatically improve their livelihood (RCTs on cash transfers suggested the annual return on a long lived tin roof that didn’t need replacing every two years was at least 19%, for example) and then there’s whether to take into account the nonlinearity of money returns to the poorest people living on $2 per day (2025 USD PPP) now and the poorest people [most likely, based on current trends] earning >$2 per day (2025 USD PPP) 50 years in the future.
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The exception might be in cases where your target population has very little capacity to improve their own situation right now, relative to those in future and so most of your money just gets wasted or stolen. I’m unconvinced this applies to people in poverty in general, but it might if you wanted to maximise the positive impact on a population of Palestinians in Gaza specifically, for example.
Sure, your example showed that if one irrationally disregards earlier generations and focuses purely on the needs of cohort P, Option B is a clear winner. If one doesn’t, we agree that it’s actually pretty darn complicated to estimate the total welfare impact of donating now versus donating a larger nominal sum on equivalent problems (assuming they still exist) in future, which requires a lot of contestable counterfactual assumptions,[1] as well as choice of discount rates, PPP and money nonlinearity assumptions and decisions about whether any value is attached to economic stimulus to non-recipients in developing countries and keeping marginal NGOs alive. (Donations to things other than poverty relief have their own idiosyncracies: hopefully the number of ITNs needed to prevent malaria deaths by ~2050 will be zero.)
The intergenerational elasticity point is an interesting one, but intergenerational income elasticities are higher in less developed countries (and the higher incomes are partially inherited by more people in later generations, assuming they continue to reproduce above replacement rate). And under normal assumptions we care about the earlier generations helped at least as much as the later ones, so you’ve already helped many more people than the direct recipients by the time the patient philanthropy fund is investigating how many more people accrued compound interest will let them help. Plus in the specific example of the roof we’re talking about wealth, and you’d have to invest very well in stocks and shares to beat the imputed 20% annual returns on a tin roof, even over time spans that extend beyond its serviceability.
Catchup growth definitely exists, the only question is whether more marginal economies will be excluded from it.[2] There are many reasons for economic stagnation in poorer regions (most obviously terrible governance), but it’s certainly not independent from whether philanthropic funds for economic growth and poverty alleviation decide that in the near term they should shift towards promoting the economic development of the stock market in their own country instead.[3] Too much patience is probably worse for developing countries than the opposite extreme of too much philanthropic cash chasing too few viable opportunities.
You also have to make assumptions about the philanthropists of the future as well: I’m not as rosy on near future technology-enabled post scarcity societies as some people on here, but if we trend in that direction maybe your nominally larger funds are a lot less relevant in future than that now
Never mind the Asian Tiger economies, even some conflict-ridden impoverished backwaters like Burkina Faso have seen average growth rates comparable to US stocks over extended periods of time, and even without wild technological optimism it’ll probably be fairly hard to find people living under the new $3 per day (2025 PPP) poverty threshold in 2075
Makes wayyy more sense for funds to keep most of the funds invested in domestic stocks when they’re endowments ring fenced for specific things like selective scholarships or maintenance of a facility than funds for promoting economic growth and poverty alleviation