As organisations receive more funding, the value of extra funding changes. This is relevant for donation decisions. People have used various concepts to discuss this feature:
- Room for more funding
- Funding gaps
- Diminishing (marginal) returns
In this pair of posts I discuss what people might mean by these different terms:
- Defining returns functions and funding gaps sharpens up the definitions of these terms.
- Selecting the appropriate model for marginal returns analyses the strengths and weaknesses of different models
The second post is co-authored with Owen Cotton-Barratt. He provided many of the ideas in the posts.
Hey Max, thanks for linking these.
I have a question about an argument for the benefit of reserves made in the second link:
I read this as saying that the benefit of donating to Organization A this year is that it will free up money for Organization B next year. But if Organization B is almost as good (as assumed in the quoted text), then why not donate to them directly this year?
On this reading, it seems like the impact of reserves for Organization A is whatever benefit Org A draws from the other arguments you offer (potential for capacity-building, freeing up staff-time from fundraising efforts next year) minus something like a discount rate / the cost of Organization B getting resources one year later. It's not obvious to me that this will always, or usually, be positive.
Am I missing something here?
To disagree slightly with my co-author here... As I understand you, you are conditioning on A being able to expand capacity.
I think what is going on is that you are asking "Should we give to Organization A or Organization B?". I think your analysis is roughly right as a response to this question. We are not claiming that Organization A is more effective than Organization B.
Instead, what we're asking at this stage in the paper is more like "Is the total counterfactual impact of giving to Organization A steeply declining at any point?".... (read more)