Rhodri Davies, Programme Leader, Giving Thought

Rhodri Davies

Head of Policy

Charities Aid Foundation

The role of giving


19 May 2015

An intriguing op ed in the New York Times this week (“How to get people to pitch in”) argued  that traditional approaches to encouraging cooperation and pro-social behaviour by offering monetary rewards or subsidies may be totally wrong-headed, and that harnessing the power of “social incentives” by using peer group effects would be far more effective.

The article was based on a recently-published paper by a group of economists and psychologists from Yale and Harvard entitled “Promoting cooperation in the field”. This surveyed the findings of the growing number of microeconomic field experiments designed to test approaches to promoting cooperative behaviour. And since many of these experiments are specifically focussed on charitable giving, there were a number of fascinating conclusions that anyone interested in philanthropy should probably take note of.

The paper’s main finding, as mentioned above, is that “cost-benefit” interventions which rely on material rewards or providing information on effectiveness are far less effective at promoting cooperative or altruistic behaviour than interventions which rely on tapping into people’s social concerns about how other people see them and will treat them in the future.

The paper divides cost-benefit interventions into two types:

  • “material rewards” – where cash or gifts given in return for contributing, and
  • “increased efficacy” – where donations are matched, or the benefit to recipients is emphasised.

The results of the various field experiments testing approaches of both kinds are very mixed – many of them found little or no positive effect of the intervention being tested.

The paper also divides social interventions into two types:

  • “Observability” – where others are informed about your contribution decisions
  • “Descriptive norms” – where you are informed about the contribution decisions of others

Unlike cost-benefit interventions, the results of the field experiments testing these approaches consistently showed a positive effect.

The obvious next question is why is there such a disparity? The paper suggests that the key explanatory factor is reciprocity, because our willingness to cooperate is largely driven by assessments of the long-term benefit that might come from others cooperating with us in the future:

“A key feature of human behaviour is that future consequences often exist for your choices today. When interactions are repeated or reputations are at stake, cooperation can be in your long-run self-interest: it is worth paying the cost of cooperating today in order to earn the benefits of others’ reciprocal cooperation with you in the future. As a result, our preferences are shaped by reciprocity, and we typically develop reciprocally cooperative intuitions or ‘social heuristics’.”

An important word here, which we will return to in a minute, is “intuition”: clearly the deliberations we make about reciprocity are not necessarily overt or conscious ones. Rather they are part of a pattern of long-term habits and beliefs that form the basis of an intuitive response:

“Thus, although people may not always explicitly deliberate over the impact of their actions on their reputations, reciprocal concerns are deeply rooted in human psychology and influence our intuitive, gut responses.”

The key difference, then between social interventions and cost-benefit ones is that the former effectively trigger our intuitions about reciprocity and reputation whilst the latter do not. In fact, cost-benefit interventions may even have a negative effect, because they can directly act against these intuitions by clouding the question of one’s motive for giving and thereby undermine any potential reputational benefits:

“The cost-benefit interventions that met with only mixed success do not engage reciprocity or reputation, or even worse, sometimes undercut these concerns. Material rewards for being cooperative can ‘crowd out’ the reputational benefits that typically come with contributing: they make it unclear whether contributions were made because you are actually a cooperative person (and thus deserving of a good reputation, both in the eyes of others and of yourself), or just for the selfish purpose of receiving the material reward.”

So what does all of this mean for philanthropy and charitable giving? Well, to my mind there are at least two important conclusions; one for those in the philanthropy world and one for those involved in making the policies that affect philanthropy.

The first conclusion is that if a lot of what is going on is happening at an intuitive level, we need to be careful about assuming that rational, evidence-driven approaches that rely on demonstrating the impact of donations on beneficiaries will actually incentivise people to give. This is an issue I have explored in a previous blog, and the evidence from this paper backs up the point I made there: that impact measurement is clearly a valuable tool for charities and institutional grant makers such as foundations, who can use it to monitor efficiency and effectiveness, but there is little evidence that it has a positive effect on an individual’s propensity to give.

The second conclusion is that our entire approach to crafting policy designed to incentivise giving may be wrong. Traditionally, the focus has been almost entirely on providing cost-benefit incentives through the tax system, either in the form of deductions (i.e. monetary rewards) or matching (i.e. increased efficacy). And what debate there has been has largely revolved around how these incentives can most effectively be structure.

But what if the initial premise was the wrong one, and these are not even the best form of intervention we could be using? Rather than arguing about the exact amount and design of tax incentives, should we instead be spending far more time focussing on trying to work out how we can design policies that harness the power of social incentives?

Policymakers have begun to explore some of these new approaches, and CAF was actually involved in a joint report with the UK Cabinet Office which looked at the applications of behavioural insights to charitable giving. This explored how social interventions could be used to boost generosity in practice, and found that many had a clear positive impact on people’s willingness to give.

It is easy to be a bit dismissive of the idea of “nudge” theory – perhaps because it seems like a fad, or because many of the findings are quirky or counterintuitive, or simply because the interventions are often low or even zero cost and therefore do not fit the existing paradigm of policymaking very neatly (although conversely, of course, this is also a large of their appeal in a world of significantly more constrained budgets!)

However, what this paper highlights is that a growing body of evidence from experiments in the field suggests that nudge-type interventions which tap into people’s subconscious beliefs about reputation and reciprocity are demonstrably more effective at promoting altruistic behaviour than traditional approaches based on reward or subsidy. And that is something that those of us looking for ways to boost charitable giving have to pay attention to.