The Math of Charitable Giving

A recent post at one of our favorite Fall Through the Cracks Friday resources, the Freakonomics Blog, caught our eye this week – probably because of our ongoing Sandy Relief Campaign, where for every $1 you donate it can turn into up to $6!

Back to FTTCF – and a look at the economics of charitable giving. From the post:

As any 10-year-old can tell you, multiplication is commutative: 2 x $70 is the same as 70 x $2.

 

But not in charitable giving, it turns out. Making two donations of $70 is a good deal more valuable to charity than making 70 donations of $2.

 

The reason lies in the fixed transaction costs. Many charities (unavoidably) get charged a fee for each deposit into their bank account. So two large donations create only two dollops of that fee, whereas 70 smaller donations attract 70 dollops. That fee might be $0.25 per transaction. So if the $140 is given in two donations, less than 1 percent of the two donations gets lost in transit between the donor and the charity; if the $140 is given in 70 donations, 12.5 percent gets lost in transit; and if $140 were given in 140 donations of $1, fully 25 percent would fail to reach the charity. Of course, if you gave 1400 donations of only $0.25 each, nothing would reach the charity at all.

 

As a friendly reminder, 100% of donations to the PLUS Foundation for Sandy relief go to the food banks the Foundation is working with.

This entry was posted in FTTCF, PLUS Foundation and tagged , , by plushq. Bookmark the permalink.

About plushq

The Professional Liability Underwriting Society (PLUS) was founded in 1986 by industry professionals who recognized the need for a forum for individuals involved in the field of professional liability. The Society is a non-profit organization with membership open to persons interested in the promotion and development of the professional liability industry. Membership consists of over 6,500 individuals, representing over 1,000 companies active in the many fields of professional liability. PLUS currently receives the support of more than 200 companies through corporate membership. PLUS is recognized as the primary source of professional liability educational programs and seminars, assistance to its members to help serve clients, and information regarding professional liability. The Society is continually seeking new means to fulfill its mission statement and better serve its members.

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