Why do people give to charity?

It seems strange to even ask. Most people would point to the fact that they’re altruistic and want to make a difference. Others are concerned with inequality and justice. Another group points to the concept of “paying it forward” or repaying a debt to society. Other explanations cite various religious or social reasons.

Not too many people cite the fact that giving makes them happier. Even if people agree this is true, I don’t often hear it as people’s main reason. Instead, it’s more like a beneficial side effect. In fact, it seems pretty odd to me to hear someone boldly proclaim that they give only because it makes them happier, even if it might be true.

But if it’s true that giving does make people happier, should we be promoting that publicly and loudly?  Luke's article "Optimal Philanthropy for Human Beings" suggests that we should tell people to enjoy the happiness that giving brings.  Perhaps it might make a great opportunity to tap into groups who wouldn’t consider giving otherwise or have misconceptions that giving would make them miserable?

However, I’m a bit worried about how it might affect people’s incentives.  In this essay, I follow the evidence provided in the Harvard Business School working paper "Feeling Good About Giving: The Benefits (and Costs) of Self-Interested Charitable Behavior" by Lalin Anik, Lara B. Aknin, Michael I. Norton, and Elizabeth W. Dunn. Overall, in light of potential incentive effects, I think caution and further investigation is warranted when promoting the happiness side of giving.

Giving and Happiness

Giving What We Can has published its own review of research on happiness and giving and find a pretty strong connection. And it’s true -- lots of evidence confirms the connection and even indicates that it’s a causal relationship rather than a misleading correlation. In fact, it goes in both directions -- giving makes people happier and happier people are more likely to give[1].

Neurological studies of people found that people experienced pleasure when they saw money go to charity, even when it wasn’t their own, but experienced even more pleasure when they gave to charity directly[2], a conclusion that has been backed up with revealed preference tests in the lab[3, 4].

This connection has also been backed up in numerous experimental studies. Asking people to commit random acts of kindness can significantly increase self-reported levels of happiness compared to a control group[5]. Further research found that the amount people spent on gifts for others and donations to charity correlates with their self-reported happiness, while the amount they spent on bills, expenses, and gifts for themselves did not[6]. Additionally, people given money and randomly assigned to spend money on others were happier than those randomly assigned to spend the same amount of money on themselves[7].

Altering Incentives

People generally believe that spending on themselves will make them much happier than spending on others[6], which, given that this isn’t the case, means there is plenty of room for changing people’s minds. However, any social scientist or avid reader of Freakonomics knows that altering incentives can create unintended effects. So is there a potential harm in getting people to do more giving via advertising self-interested motive?

The classic example is that of the childcare center that had problems with parents who were late to pick up their children. They reasoned that if they charged fines, parents would stop being late, because they would have an economic incentive not to. They found instead, however, that introducing a fine actually created even more tardiness[8], presumably because what once was seen as rude and bad faith now could be made up for with a small economic cost. More surprisingly, the amount of lateness did not return to pre-fine levels even after the owners stopped the policy[9].

Other studies have found similar effects. A study of 3-5 year old nursery students who all initially seemed intrinsically interested in various activities were randomly put into three groups. One group made a pre-arranged deal to do a one of the activities in which they seemed interested in exchange for a reward, another group was surprised with a reward after doing the activity in question, and the third group was not rewarded at all. Those who were given an award upfront ended up significantly less intrinsically interested in the task than the other groups after the study was finished[10]. A similar study found that students who were interested in solving puzzles stopped solving those puzzles after a period ended where they were paid to solve puzzles[11].

In general, money and reminders of money tend to make people less pro-social[12]. This has also been found to some degree specifically in the world of charity. In a randomized field experiment, donors were encouraged to donate to disaster relief in the US and were randomly either enticed with an offer of donation matching or not. The study found that while people donated more often with the promise of donation matching, their contributions after the donation matching dropped below the control group, ending with a negative net effect overall[13].

Another study found that when gifts were sent out to donors, larger gifts resulted in a larger response rate of returned donations, but yielded a smaller average donation[14], though I suppose this could just be because more people who usually would give nothing were giving a small amount, bringing the average down. More importantly, this study found no net decrease in future donations after gifts were no longer sent out; instead, donations returned to their normal levels[14].

And certainly it’s worth noting some times when appeals to self-interest are successful. I couldn’t find any studies where this was the case. However, there is one anecdotal example: as Nick Cooney points out in "Self-Interest Can Make the World a Better Place -- For Animals, At Least", reduction in people eating factory farmed meat is coming almost entirely from people motivated not by concern for animal cruelty, but concern for their own health. Could advocating self-interested donations be the same as advocating health-motivated vegetarianism?

Opportunities for Further Investigation

It’s not very good to just let things be unclear if they don’t have to be, and I think we can resolve this issue with more scientific study. For example, one could randomly select one group to receive information about giving and happiness, another group to receive other standard arguments for giving, and a control group to receive no arguments or information about giving at all, and track their donation habits in a longitudinal study. This study would have it’s complications for sure, but could help see if information about giving and happiness backfires or not.

Or perhaps one could perform a field experiment. You could set up a booth asking people to donate to your cause and randomly include information about giving and happiness or not in your pitch and see how this affects immediate and long-term contributions. Doing this would have added advantages of being much quicker to run and not leading to people donating only because they think they’re being observed.

References

[1]: Anik, Lalin, Lara B. Aknin, Michael I. Norton, Elizabeth W. Dunn. 2009. “Feeling Good about Giving: The Benefits (and Costs) of Self-Interested Charitable Behavior”. Harvard Business School Working Paper 10-012.

[2]: Harbaugh, William T. 2007. "Neural Responses to Taxation and Voluntary Giving Reveal Motives for Charitable Donations." Science 316: 1622-1625.

[3]: Andreoni, James, William T. Harbaugh, and Lise Vesterlund. 2007. "Altruism in Experiments". New Palgrave Dictionary of Economics.

[4]: Mayr, Ulrich, William T. Harbaugh , and Dharol Tankersley. 2008. "Neuroeconomics of Charitable Giving and Philanthropy". In Glimcher, Paul W., Ernest Fehr, Colin Camerer, and Russel Alan Poldrack (eds.) 2009. Neuroeconomics: Decision Making and the Brain. Academic Press: London.

[5]: Lyubomirsky, Sonja, Kennon M. Sheldon, and David Schkade. 2005. "Pursuing Happiness: The Architecture of Sustainable Change." Review of General Psychology 9 (2): 111–131.

[6]: Akin, Lara B., et. al. 2010. "Pro-social Spending And Well-Being: Cross-Cultural Evidence for a Psychological Universal." National Bureau of Economic Research Working Paper #16415.

[7]: Dunn, Elizabeth W., Lara B. Aknin, and Michael I. Norton. 2008. “Spending Money on Others Promotes Happiness.” Science 319: 1687-1688.

[8]: Gneezy, Uri and Aldo Rustichini. 2000a. “A fine is a price.” Journal of Legal Studies 29: 1-18.

[9]: Gneezy, Uri and Aldo Rustichini. 2000b. “Pay enough or don't pay at all.” Quarterly Journal of Economics 115: 791-810.

[10]: Lepper, Mark R., David Greene, and Richard E. Nisbett. 1973. “Undermining Children's Intrinsic Interest with Extrinsic Reward: A Test of the ‘Overjustification’ Hypothesis.” Journal of Personality and Social Psychology 28(1): 129-137.

[11]: Deci, Edward L. 1971. “Effects of Externally Mediated Rewards on Intrinsic Motivation.” Journal of Personality and Social Psychology 18(1): 105-115.

[12]: Vohs, Kathleen D., Nicole L. Mead, and Miranda R. Goode. 2006. “The Psychological Consequences of Money”. Science 17 (314): 1154-1156.

[13]: Meier, Stephan. 2007. “Do Subsidies Increase Charitable Giving in the Long Run? Matching Donations in a Field Experiment”. Federal Reserve Bank of Boston Working Paper #06-18.

[14]: Falk, Armin. 2005. “Gift Exchange in the Field”. University of Bonn.

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(This essay is also cross-posted on the Giving What We Can blog and my blog.)