Monday, December 21, 2009

Giving is social 

A friend of mine works in a church and told me this story this weekend. His church is having an Advent fundraising effort to help provide potable water to African villages. (I think it's this group. I've supported them and think they are a good group.) They set a target for the effort which my friend thinks is a modest goal -- each member-family provides enough money to bring water to one family (which requires about $4 per family.) In the first three weeks they raise almost double that number. The church leadership now has a decision to make -- do we announce how well we're doing before the last collection for the project? Their fear is that it encourages free-riding and reduces collections on the last week. In fact, my friend finds, it went up. He asks me, is this economically rational?

My hypothesis is that everyone wants to be part of a success. Announcing that it already is and then completing the project allows others to purchase (via donation) the good feeling of being part of it. "Yes, wasn't that project great? I'm glad I gave to it." You can imagine the conversations over coffee in the church narthex. My friend wondered why the leadership didn't set a higher target, and if they should. I responded no, you should underpromise and overdeliver. I think you can overdo that, as biasing one's expectations downwards leads over time to people expecting overdelivery.

We know from economic experiments that social influence on charitable giving is an important factor. I also noted that his church collected donations by placing jars in front of the sanctuary and having people bring the money forward. Nobody wants to be seen not standing up, particularly when the pastor has just told you everyone else gave more than expected. The combination of the method of collection and signaling others' donations were good incentives to get others to also give.

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