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.
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?". We think that the answer is probably "No" for the reasons given. But note that this doesn't imply that one should always give to Organization A: if A starts off more effective, but returns gradually diminish, then there will still be some point at which it makes sense to start donating to organization B.
Overall, I think there isn't a disagreement here (although I may have misunderstood), but this is a sign that we should have been clearer in this section - I'll think about a rewrite.
Ah, yes. Agreed. Thanks for the clarification.