A closer look at the economics of giving provides an interesting answer to this question. Just like everything else in life, giving comes with opportunity costs. Donors may not be incentivized to donate a certain amount of money to a charitable organization due to the overruling alternate subject that they feel better about spending their money on. For example, there may be an object that they have been wanting for a very long time or something in need of replacement, such as a car, that they would rather spend their money on because they see that it will benefit themselves.
However, in comparison, donors to successful charities are incentivized to give. Though many of these donors are altruistic in giving, economists explain that the main reason why they are incentivized to give is that they are internally satisfied by the act of giving itself. They gain a greater utility by donating to a cause or organization that they feel strongly towards.
It seems that the reasons people donate place great emphasis on incentives, and therefore the current situation of a person plays a great role in which they decide to donate or not, and how much they choose to give. Personally, I would be more incentivized to give if I knew that all of my money was going towards that cause. Often charities are being funded by giving a portion of the money received to the actual cause while the rest of the money goes to the funding of the organization itself.
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I agree with what you say about how people donate to charity because of the utility it brings them. People often donate to charities because they want to make a difference in someone else’s lives. Another aspect to consider when it comes to why some charities are more successful than others is due to whether they advertise or not. It reminds me of game theory in a way because many charities have similar ideas/go to similar costs, so if one charity decides to advertise then it may be more beneficial to a similar charity to advertise in order to maximize their revenue.
ReplyDeleteAnother economic incentive on donating to charities is a tax write off. It is a clear economic incentive to many people filing their taxes. Although people may not be donating for the right reasons it does encourage donating. At the same time it does help generate money to many charities.
ReplyDeleteI think although some people may be altruistic when giving, economics tells us that the dominant motivation is the internal satisfaction that individuals derive from the act of giving itself.
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