Choosing a Charity

(if you don't feel like reading all this, basically I'm just recommending GiveDirectly as a good starting point for being more picky when choosing how to give to charity)...

There's lots of stuff out there aimed at motivating us to give more of our money to others. That's good, but I really believe there's not *nearly* enough emphasis on HOW to give charitably. If the goal is just to pat yourself on the back for making a sacrifice, then maybe it's not necessary to be picky about choosing a charity. But if the goal is to make the world a better place and help people, intentions aren't the only thing that matters.

Likewise, it's good to invest some of your money for retirement. But that doesn't mean you should just buy a random stock and then pat yourself on the back. You're saving/investing money for a goal (retirement), and to actually reach that goal you don't just need the intention to invest. You also need to invest in something that will make money rather than lose money. It's the same thing with charities; if our goal is to help people, we shouldn't just give to a random charity. If you generously give money to Komen's Race for the Cure, but they use it to shut down other charities, you may have actually done more harm than good. If you're at the grocery store, and they ask if you want to give a dollar to some random charity at the cash register, the best response to that feeling of pressure and guilt isn't to give to that charity you know nothing about. The best thing to do is to use that as motivation to carefully select the best charity.

GiveWell, a great (IMO) charity evaluator, puts it best on the problems of not putting enough emphasis on results:

Fundraising often involves social and emotional manipulation, and almost never involves fact-based demonstrations of programs' effectiveness. This means that lots of charities raise money and run programs without ever demonstrating that their programs actually work.

Just like investing money, giving charitably has risk. Someone who receives money may just use it to fuel a drug addiction. A lot of aid to poor countries tries to work through their government, but then corrupt bureaucrats keep it for themselves. If you give a bunch of food to a poor village, the farmers will suffer because the people will need to buy less food from their local markets. Then less people will farm, which leaves that village more vulnerable to food shortages once the aid decreases. That itself is one big problem people often don't consider; when something becomes available for free, it distorts that market and hurts the people who sell that item to make a living, which can end up with much wider consequences.

I've come to believe that the best starting point for giving more effectively is with cash transfer programs like GiveDirectly. It basically makes one-time payments to a random person in poverty. I was very skeptical of that approach at first. The first major concern I had was that the money would be spent poorly. And of course, that can and will happen in some cases. But what I've come to realize is: the only alternative is for someone else to decide what the poor need even though each person is in a unique situation, and so we have that same problem either way. And how much more overhead does it cost in the charity to have employees/volunteers make more decisions for the people we are trying to help? In general, a person in need knows what they need more than some rich person half-way around the world from them.

As an example, let's say you don't trust giving money to a person in need far away, so you give them shoes instead. If they already have shoes that work fine, that was a waste. And if they did want or need new shoes, you may have just made their local shoe seller lose a customer. Imagine being the poor person trying to make a living selling shoes, but then you lose your business because of foreign shoe donations. Each person will have unique needs that we won't be able to guess. With money, regardless of what they spend it on, it will help business in their area instead of hurting it. And that money will continue to circulate among people there through a series of new purchases. There will be some cases where the money is spent on a harmful addiction. But if you give them food or clothes instead, what's to stop them from selling or trading it for drugs? There's no way to guarantee that won't happen no matter what you give someone.

GiveDirectly also avoids the problem of creating dependency. One-time payments made in a random fashion can provide overall help without any person thinking they can rely on it.

Another benefit to cash transfers is scalability; the charity will be less likely to run out of things to do with more money. Many charities just put your money in the bank for a while because their funding needs are already currently met; GiveWell has more on this consideration with charities here.

The other major benefit to GiveDirectly, which every charity should do, is that they are very transparent and are doing careful studies in the areas where they've provided help to evaluate how much good it really does. They are actually making and altering their decisions (such as how much is the optimal amount to give an individual person) based on methodology and facts they are making public. Many charities don't do this; largely because people don't seem too interested in the actual results of a charity.

That being said, the best charity in the world is likely one that is providing something a poor area really needs that its markets aren't providing. For instance, GiveWell's top pick is Against Malaria, which distributes bed nets and teaches people how to use them to stop malaria. I'm not arguing that cash transfers like GiveDirectly are the best possible charity. But I do think they are the best starting point for people looking to give more effectively. We should give money to those in need and let them decide how to spend it unless we're REALLY sure we've found a better alternative. A poor, uneducated person in Kenya may not know the BEST way to spend new money they come across, but you should start off assuming they know what they need better than YOU do. And if they buy something in their own markets with extra money they get a hold of, that doesn't have the same potential for harm and distortion to their local economy like a bad charity does.

One way to improve unemployment

I've blogged before about how, not long into Obama's presidency, the private sector began and has continued job growth, but it's the public sector where we've continued to lose jobs. Since then, I've somewhat-planned to try to do some math with the raw data to see how different the unemployment rate would be if we hadn't cut so many government jobs. Luckily, my procrastination paid off and they did this for me on Wonkblog.

Here's the change in public employment in the last 4 recessions:

And here's the numbers of how today's unemployment rate would be different if we had taken a different policy towards government jobs:

Since Obama was elected, the public sector has lost about 600,000 jobs. If you put those jobs back, the unemployment rate would be 7.8 percent. But what if we did more than that? At this point in George W. Bush’s administration, public-sector employment had grown by 3.7 percent... If you add those hypothetical jobs, the unemployment rate falls to 7.3 percent.

But the unemployment rate would actually be lower than those 2 numbers because, at least in the short term, cutting a government job will also hurt the private sector, and adding a government job will help the private sector (unless you're at full employment, which we clearly are not). Because when you fire a bunch of teachers, cops, etc., they have less money to spend. So they buy less things, which means other companies will make less money due to their lost purchases, so then those companies will have to cut jobs. Likewise, if throughout this recession the govt hired more people, more people would have more money to spend, which would allow other companies to hire more employees to cover their new customers. This is what people are talking about when they say WW2 got us out of the Great Depression.

So it seems like the simplest thing we should have done differently to fight this recession is to, at the very least, hold government employment steady. But unfortunately, the 2010 elections brought in a big push toward "smaller government" (i.e. firing many people who currently work for the government). Regardless of what "size" you think the government should be under normal circumstances, it's pretty clear that it's best to have a temporary increase in government jobs during recessions and then trim those back as the economy recovers. Even if we should reduce the number of people the government employs in the long-run, this is a pretty crappy time to do it.

The Total Taxes People Pay

One of the biggest focuses of political debate is how much taxes people should pay relative to each other in different income brackets and if either the poor or the rich are paying "their fair share". If you just listen to liberal pundits, you may imagine the wealthy are all paying half the taxes the rest of us are. If you just listen to conservative pundits, you might think that the wealthy are paying at least 50% in taxes and almost everyone else pays nothing. That's because a lot of people choose to talk about only specific situations in specific areas of our tax code, not the overall picture. For instance, there's been a lot of talk lately about how around half of Americans pay no federal income taxes. It's true, but people get misled because they think of that as all our taxes, or at least as all the taxes that are deducted from your paycheck, which isn't the case.

So here's an interesting graph on how much the average person in various income groups pays, as a percentage of their income, in total taxes:

It's much more evenly distributed than most would probably guess.


* found this from Wonkblog.

Money & Grades Are Different

Over time, I think I've seen this argument made on facebook by 4 different people now. The argument is that "liberals" who favor wealth redistribution or progressive taxation are contradicting themselves if they don't also think grades should be redistributed in school. And we all agree it'd be ridiculous to redistribute grades, so the conclusion is it must be ridiculous to redistribute wealth (or just tax it differently). But nowhere have I seen anyone even try to make that connection - why are grades and money analogous in this way? You can't just say they are without giving a reason.

The main reason not to take this argument seriously is that nobody believes we should have the same principles about redistribution of grades and money anyway. Maybe you believe the government shouldn't redistribute money at all. But you still believe that *you* can redistribute your money, either by purchasing something or just giving it away. Does that mean you must believe we should be able to redistribute our own grades? If I have a 4.0, can I sell .5 of that to someone? No... there's not a single person who believes money and grades should be treated the same with regards to rules of redistribution. That's not a contradiction - we have different rules for different things because they are ... different things.

Grades and money are both things we invented and use because they make society work better. As our inventions, we get to make up the rules for how they are used. The best rules for each one would just be whatever produces the best results; there's no reason we have to pick one rule to apply to both things. There are valid reasons to believe a variety of things about how best to treat money, but "it must be the same way we treat grades" is just not one of them.

And besides that argument not making any sense, it is also strange to me when people think it's just "liberals" who support wealth redistribution. I've never met anyone who opposes public roads, education, police, national defense, etc. And yet those are things that everyone benefits from regardless of how much you pay for it, if at all. And they are provided to everyone by taking money from some people and giving it to other people. The differences along the political spectrum aren't about whether or not you support any "redistribution", it's just about the amounts and forms of it.

Why We Should Pay Teachers More

Just wanted to write a bit about this while I was starting to read The Great Stagnation by Tyler Cowen. I don't know what fuller picture he'll give of his opinions on what we should do to improve/reform education, if at all, but one point that was made early in this book was that, as measured by a variety of tests, we don't seem to have made much progress in K-12 education since the early 70's even though we've been continuing to spend more money per capita on K-12 education since then. I've heard variations of this before from people basically saying we should cut public education spending, or at least not have increased it. I think that's wrong.

First, I don't want to suggest there are not things that could be cut from public schools that are not worth the amount of money we put towards it. Just think of how much more money some schools are spending on football stadiums and such. And a lot of increased spending over time will just be because we, as a nation, become wealthier, and in proportion to that, people demand "nicer" schools in ways beyond just what is actually providing more education.

But, despite the disheartening statistics that seem to show we've very little gains in K-12 education despite increased spending there, I think it's oversimplifying things to say this means that we shouldn't have spent more. That assumes that if spending had not increased, education results would have stayed the same as they had been. But I think the quality of our education would have decreased had we not spent more...

The main reason comes from this book that I recently blogged about. A few decades ago, if you were a smart, educated woman who wanted to start a career, your options were much more limited than they are today. Because there were only so many jobs that were viewed as "appropriate" for women, in 1970, about half of all college-educated women were teachers. Even though it's never been a high paying job, we were able to get many of the best and brightest women to teach. Today, those cultural barriers are either gone or much weaker, and now 47% of our teachers come from the bottom 1/3 of their college classes. Because of the freedom that women have gained, we can't get away with paying teachers low salaries and expecting as many highly skilled people to do it.

This does not mean sexual discrimination was ever a good thing... likewise, ending slavery made farming more expensive but that doesn't justify slavery at all. And because I know this is coming: no Tracy, what I'm saying should not be interpreted as an insult toward you or any of the teachers you work with. This is about averages, not about every individual teacher. And it would be expected that a high-end district like FISD would have access to the highest quality teachers and therefore wouldn't really be an example of an "average" American school.

So anyway... all things held the same, we should have expected the quality of K-12 education to decrease after 1970. But we haven't seen that, so the extra money we've put into it must have done something right. Paying teachers more is not a waste of money. And if we want a better educated nation, one of the main things to do would be to make teaching a better paying profession!

But more importantly: my wife is a teacher, so if we give teachers a raise, I get a raise!

Policy Contributions to the Deficit

Everyone knows our budget deficits have gotten huge over the past 10 years (after having a surplus in 2001). But one of the things people don't often take into consideration is how much a recession impacts our budget. When the economy takes a hit, that lowers the amount of taxes the government collects; surely the worst recession since the Great Depression is going to be responsible for worse deficits for a while. And part of the reason we went from a surplus under Clinton to deficits under Bush was the stock-bubble-recession when Bush took office.

So ignoring the effect of the economy on our budget in the past 10 years, here's the actual policy contributions to the deficit from Bush and Obama:

I understand being concerned about the national debt. But what blows my mind is how many people consider that a reason to vote Republican. How many Republican congressmen that voted for our biggest budget-busters of the past 10 years are now the same ones feigning concern for the national debt? And how many people are falling for it?

It's also important to remember, when people claim "we have a spending problem not a taxing problem", that the Bush tax cuts are the biggest policy contribution to our deficits. And the graph above only shows their cost within Bush's presidency, not the full long-term cost.

Obamacare's (Un?)Constitutionality

The Supreme Court has started hearing the initial arguments on "Obamacare" this week - the central issue being whether or not the individual mandate (buy health insurance or pay a fee) is constitutional. If you assume pre-Obamacare health care laws are constitutional, I've never understood how you could think Obamacare is not. But this interview with one of the main legal experts opposing the mandate helped me understand that opposition a bit better. Maybe it comes down to a very fundamental difference in thinking...

A health insurance mandate already exists: Medicare. I have to pay for it. With Obamacare, the difference is that it's a private insurance company instead of the government. From the perspective of government power versus individual liberty, they are effectively the same. If anything, Obamacare is less intrusive because there are multiple choices for your insurance plan. The government also already gives tax credits for employers to buy private health insurance, and that's effectively the same as Obamacare's mandate. In both cases, someone has the option of buying insurance or paying extra taxes. This is why I always figured that if existing law is constitutional, then Obamacare must be as well.

But here's what Randy Barnett, the lawyer from the interview, said: "Just because the government does have the power to do x, doesn’t mean they have the power to do y, even if y has the same effect as x." That seems like a simple idea, and the logic is quite basic and valid, yet for some reason it really took me by surprise. In my mind, when 2 things have the same result, I consider the differences to be unimportant - a technicality or semantics. I guess I just need to remember that not everyone thinks that way. Maybe the ultimate divide of opinion on the constitutionality of the mandate can really boil down to whether you focus more on the ends or the means... (though I suspect most people just decide based on whether they like the law).

Anyway, for anyone who thinks our pre-Obamacare health care policy was constitutional but the mandate in Obamacare is not, I'm curious to hear opinions on a couple of things:

1. Instead of making you pay some extra taxes if you don't buy health insurance, what if the bill just raised taxes on everyone and then offered a tax break for those who buy insurance such that the benefit/penalty was the exact same? Would that be constitutional?

2. Would it be constitutional if there were a public option? That way, you don't have to buy something from a private company; you can choose to get it from the government just like you're already forced to do with Medicare.