Navigating Charity’s Fast and Slow Lanes

Wednesday, May 28, 2014

Imagine that you’re running a charity. Suppose you have evidence showing that your charity is highly effective — that you are really making a difference in people’s lives. In your fundraising campaign, should you emphasize how effective you are?

In a new study, Yale University economist Dean Karlan and Clemson University economist Daniel Wood offer a surprising answer. It turns out that large donors respond positively to statistical evidence of effectiveness — but small donors respond negatively. There’s a major lesson here for the charitable sector, and the lesson has implications for other activities and institutions, including political campaigns, health education and various businesses.

Many people give emotionally, and almost automatically. For some of us, giving produces a kind of warm glow, and we give in part because we want to enjoy that glow. To warm-glow givers, numbers don’t much matter. If a charity wants to reach them, it would probably do best to provide photographs or a moving narrative about a needy child or family.

Other people give money because of their judgment that, all things considered, certain charities will significantly help people. Donors of this kind are willing to do at least a little calculating. They won’t necessarily do a lot of homework, but they care a lot about whether their money is being put to good use.

The distinction between the two kinds of givers corresponds to the psychologists’ distinction, elaborated at length by Nobel Prize winner Daniel Kahneman, between two ways of thinking: fast and slow. Fast thinking is intuitive and often emotional. When people are thinking fast, visual images are important. Slow thinking is more deliberate. When people are thinking slowly, numbers count.

Source: Bloomberg View (link opens in a new window)