Epistemic status: 90% confident.
Inspiration: Arjun Narayan, Tyler Cowen.
The noblest charity is to prevent a man from accepting charity, and the best alms are to show and enable a man to dispense with alms.
Background
Effective Altruism (EA) is "a philosophy and social movement that applies evidence and reason to determine the most effective ways to improve the world." Along with the related organisation GiveWell, it often focuses on getting the most "bang for your buck" in charitable donations. Unfortunately, despite their stated aims, their actual charitable recommendations are generally wasteful, such as cash transfers to poor Africans. This leads to the obvious question - how can we do better?
Doing better
One of the positive aspects of EA theory is its attempt to widen the scope of altruism beyond the traditional. For instance, to take into account catastrophic risks, and the far future. However, altruism often produces a far-mode bias where intentions matter above results. This can be a particular problem for EA - for example, it is very hard to get evidence about how we are affecting the far future. An effective method needs to rely on a tight feedback loop between action and results, so that continual updates are possible. At the extreme, Far Mode operates in a manner where no updating on results takes place at all. However, it is also important that those results are of significant magnitude as to justify the effort. EA has mostly fallen into the latter trap - achieving measurable results, but which are of no greater consequence.
The population of sub-Saharan Africa is around 950 million people, and growing. They have been a prime target of aid for generations, but it remains the poorest region of the world. Providing cash transfers to them mostly merely raises consumption, rather than substantially raising productivity. A truly altruistic program would enable the people in these countries to generate their own wealth so that they no longer needed poverty - unconditional transfers, by contrast, is an idea so lazy even Bob Geldof could stumble on it. The only novel thing about the GiveWell program is that the transfers are in cash.
Unfortunately, no-one knows how to turn poor African countries into productive Western ones, short of colonization. The problem is emphatically not a shortage of capital, but rather low productivity, and the absence of effective institutions in which that capital can be deployed. Sadly, these conditions and institutions cannot simply be transplanted into those countries.
A greater charity
However, there do exist countries with high productivity, and effective institutions in which that capital can be deployed. That capital then raises world productivity. As F.A. Harper wrote:
Savings invested in privately owned economic tools of production amount to... the greatest economic charity of all.
That is because those tools increase the productivity of labour, and so raise output. The pie has grown. Moreover, the person who invests their portion of the pie into new capital is particularly altruistic, both because they are not taking a share themselves, and because they are making a particularly large contribution to future pies.
In the same way that using steel to build tanks means (on the margin) fewer cars and vice-versa, using craftsmen to build a new home means (on the margin) fewer factories and vice-versa. Investment in capital is foregone consumption. Moreover, you do not need to personally build those economic tools; rather, you can part-finance a range of those tools by investing in the stock market, or other financial mechanisms.
Now, it's true that little of that capital will be deployed in sub-Saharan Africa at present, due to the institutional problems already mentioned. Investing in these countries will likely lead to your capital being stolen or becoming unproductive - the same trap that prevents locals from advancing equally prevents foreign investors from doing so. However, if sub-Saharan Africa ever does fix its culture and institutions, then the availability of that capital will then serve to rapidly raise productivity and then living standards, much as is taking place in China. Moreover, by making the rest of the world richer, this increases the level of aid other countries could provide to sub-Saharan Africa in future, should this ever be judged desirable. It also serves to improve the emigration prospects of individuals within these countries.
Feedback
Another great benefit of capital investment is the sharp feedback mechanism. The market economy in general, and financial markets in particular, serve to redistribute capital from ineffective to effective ventures, and from ineffective to effective investors. As a result, it is no longer necessary to make direct (and expensive) measurements of standards of living in sub-Saharan Africa; as long as your investment fund is gaining in value, you can rest safe in the knowledge that its growth is contributing, in a small way, to future prosperity.
Commitment mechanisms
However, if investment in capital is foregone consumption, then consumption is foregone investment. If I invest in the stock market today (altruistic), then in ten years' time spend my profits on a bigger house (selfish), then some of the good is undone. So the true altruist will not merely create capital, he will make sure that capital will never get spent down. One good way of doing that would be to donate to an institution likely to hold onto its capital in perpetuity, and likely to grow that capital over time. Perhaps the best example of such an institution would be a richly-endowed private university, such as Harvard, which has existed for almost 400 years and is said to have an endowment of $32 billion.
John Paulson recently gave Harvard $400 million. Unfortunately, this meant he came in for a torrent of criticism from people claiming he should have given the money to poor Africans, etc. I hope to see Effective Altruists defending him, as he has clearly followed through on their concepts in the finest way.
Further thoughts and alternatives
- Some people say that we are currently going through a "savings glut" in which capital is less productive than previously thought. In this case, it may be that Effective Altruists should focus on funding (and becoming!) successful entrepreneurs in different spaces.
- I am sympathetic to the Thielian critique that innovation is being steadily stifled by hostile forces. I view the past 50 years, and the foreseeable future, as a race between technology and regulation, which technology is by no means certain to win. It may be that Effective Altruists should focus on political activity, to defend and expand economic liberty where it exists - this is currently the focus of my altruism.
- However, government is not the enemy; rather, the enemy is the cultural beliefs and conditions that create a demand for the destruction of economic liberty. To the extent this critique, it may be that Effective Altruists should focus on promoting a pro-innovation and pro-liberty mindset; for example, through movies and novels.
Conclusion
This post has some faults, but it correctly points out the narrowness of currently EA thinking.
The problem with effective altruism is that it depends on values, and values are hard. Values are also notoriously gameable by politics. Currently, EA is Afrocentric and only effective for a very narrow value system.
EA is focused on saving the max number of lives in the present, or giving directly to the poorest areas. This approach is beneficial for those people, but it's not clear that this approach has a large impact on the future of humanity. It also seems very near-mode.
GiveWell claims that there are flow-through effects of charity, such as greater economic development, but these are underspecified.
Science, technology, medicine, and economic development has had a large positive impact on humanity. The style of EA that appeals to me would focus on promoting those things. Existential risk reduction also has appeal. Current EA claims to benefit economic development, but it's not clear that it's the best way to do that. And current EA seems weak for promoting science, technology, and medicine.
Most scientific, medical, and technological advances have come from the West (and Asia). If we want to see more of those advances, then shouldn't we be investing capital in the places with a historical track record of accomplishment?
If you are approaching EA with the attitude of an investor in the future of humanity, then you must also consider national differences in IQ and the correlation of intelligence with per capita income. An investor with a blank slate attitude will be sorely disappointed, because many areas will likely hit a wall in accomplishment.
The current EA approach seems to focus on aid over investment. From a redistributive standpoint, helping the most needy makes sense. Yet from an investment standpoint, helping the most productive makes more sense, even if the bang for your buck is less. Since the most productive people are typically less needy, these two approaches come to diametrically opposite conclusions. There is also a potential conflict between X-risk reduction and technological progress. This underscores how values are hard, and the tensions between different potential value systems in EA.
Yet perhaps there is a way to reconcile the aid and investment approaches: find a place in the world that has poverty or other problems but is high in human capital, and invest there. Is there really no such place in the world like this?
EA's current research seems focus on need-based, accomplishment-blind aid, but this only satisfies a narrow range of the values that EA could represent. It is curious that all major recommended EA interventions seem politically appealing, and there have been no major EA interventions proposed (to my knowledge) that are politically incorrect. Yes, EA has recommend avoiding certain popular interventions, but only in order to get better results within the same progressive value system.
We live in a very convenient world if helping humanity involves doing things that just happen to make people look good in Bay Area parties and the media in 2015. I am concerned that there is a file drawer effect for potential EA approaches that are politically awkward.
Flow through effects have not been completely ignored by GiveWell. But their comments on it are much less rigorous and careful than their other work:
http://www.jefftk.com/p/flow-through-effects-conversation
http://blog.givewell.org/2013/05/15/flow-through-effects/