Cost-Effective Compassion: The 10 Most Popular Strategies for Helping the Poor | Christianity Today

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Christianity Today, February, 2012

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Cost-Effective Compassion: The 10 Most Popular Strategies for Helping the Poor

Economists rate impact.

Bruce Wydick | posted 2/17/2012 10:12AM

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Concern for the poor is a fundamental pillar of Christian identity and calling, a constant theme throughout the Old and New Testaments (Deut. 15:4; Prov. 14:31; Gal. 2:10; James 2:2-6). A definitive mark of the church throughout history is its members caring for the poor in their midst.

Today, thanks to economic globalization and the Internet, those who want to care for the poor overseas enjoy a plethora of attractive options: sponsoring a child, donating a farm animal, making a small loan to a budding entrepreneur, installing a well in a village, getting a morning caffeine jolt with fair-trade (instead of free-trade) coffee—among others.

But what are the best ways to help those living in developing countries By "best," I mean most effective: things that actually help people rise out of poverty, and that carry with them a sizable "bang for your buck"—programs in which the impact on the poor is significant per donated dollar.

Answering this question proves more difficult than you'd expect.

The Economist's Challenge

Measuring the performance of a for profit institution is straightforward: you look at its profit. Measuring the performance of a nonprofit program is much more difficult. Most relief and development organizations carry out self-assessments and measure impact based on self-studies. But donors (and Christians at large) should know the deficiencies of these self-studies.

For example, many relief and development organizations measure results based on studies that compare outcomes of program participants to those of nonparticipants. Such studies typically yield biased results, because program participants are routinely a self-selected group of motivated individuals who would likely have improved even without the program. In other words, their success cannot be attributed to the program alone.

Other organizations conduct before-and-after studies and interpret the difference as "impact." But this also leads to bias: individuals tend to turn to development programs when they want to improve their lives. Just as the impact of a substance-abuse program cannot be judged by "before and after" outcomes (since the main causal effect is the addict deciding to enter the program), neither can poverty programs be assessed in this way. For example, people take micro-finance loans when they want to improve their lives; in a recent study, we find that 75 percent of the apparent impact of microfinance, based on practitioners' before-and-after observations, is an illusion (although the 25 percent that remains is not insignificant).

Some development programs rely on the perception of impact. But even honest attempts to self-evaluate are affected by what's called "confirmation bias": we naturally gravitate toward evidence that confirms a prior belief, especially a belief about our own effectiveness. People and organizations also suffer from "illusory superiority," which causes us to systematically overestimate our performance. For example, over 90 percent of us believe ourselves to be above-average drivers. (Apparently even those of my own species are not immune: another study found that 68 percent of university faculty rated themselves in the top 25 percent in teaching ability.) Development organizations are run by human beings. Like all of us, they tend to attribute their successes to program effectiveness and their failures to forces outside their control.

Donors' subjective impressions of a program's effectiveness are even less accurate. Jesus tells us that "it is more blessed to give than to receive" (Acts 20:35). But too often Christian antipoverty organizations have worked overtime to ensure that we feel blessed by our giving. Nonprofits tend to market themselves to potential donors through success stories, anecdotes, and narratives that emotionally connect. In doing so, they want our giving to feel good. But these carefully selected anecdotes virtually always exceed the average impact on a program participant, creating a bias in donors' minds about the impact of their giving.

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Cost-Effective Compassion, February 2012, Vol. 56, No. 2, Page 24

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LEANNE WYDICK(Registered User)

February 29, 2012 2:31pm

Bruce Wydick here: In response to Reykia: I appreciate your comments, but in the article, I try to explain why case studies no longer represent convincing evidence of impact for researchers today. In contrast, the study by McIntosh et al. is especially convincing for a few reasons--first, they examine income impacts via price returns which is where the big action ought to be in any fair-trade scheme. Second, they look at price returns over a very long period of time. Certainly one can find transitory impacts on incomes when world prices are low. Third, they explain exactly why they find what they find, and it relies on the same economic logic we teach in Econ 101: you can't sustain surpluses when their is free entry. The FLO and Transfair have developed an implemented a flawed mechanism in their well-meaning attempt to help coffee growers. There are many ways they could fix it and we hope they respond to the evidence and do so.

Reykia Fick(Registered User)

February 29, 2012 11:55am

Thanks for the interesting article. It’s certainly important for us to consider to best make an impact. However, your argument against Fair Trade coffee is based on a study which examines a single coffee cooperative. Meanwhile, a 10-year review of academic literature on Fairtrade (33 case studies) found “higher returns and more stable incomes as clear benefits enjoyed by Fairtrade producers,” and also added that “non-income impacts of Fairtrade are at least as important as income benefits for smallholder farmers… (e.g. capacity building, stability of income, market information and access, self-confidence, access to credit, national representation etc)”. More information here: http://www.fairtrade.net/impact_studies.html

MR MARK W COLE(Registered User)

February 23, 2012 7:47am

The mosquito nets have ddt on them. Also I don't think that there are any environment groups who want to ban DDT in order to save children from Malaria. They want to ban massive use of DDT for use on crops because the birds will all die along with the insects.

Dave Klassen(Registered User)

February 21, 2012 9:13am

Given the dynamic age in which we live where we are talking about the triple bottom line and demonstrations are taking place around the world calling governments to accountability (the occupy movement), I was surprised to find no mention of social entrepreneurship made in the article. The thinking of "development" in the article is from the 20th century. We have been there and done that. We have learned from our attempts to "develop" others. Enter social entrepreneurs. These are individuals or groups of people who consider a social and environmental bottom line along with the financial bottom line, and are motivated to address issues of poverty and social change. And they think big because the issue of poverty is big, affecting millions of people. They do this by creating markets for small producers, selling treadle pumps, developing clean water distribution systems to sell water, etc. The market sustains these initiatives and human dignity is respected.

Christopher Davies(Registered User)

February 20, 2012 8:42am

You write about church members caring for the poor in their midst, but then go on to write about the poor overseas, to which I think the rest of the article relates. But we need to care first for those nearest to us. Communists and many socialists tend to talk a lot about helping "the people" but care little for the individual, but that is surely where we need to start. The good Samaritan may have been wanting to help many other people, but he first helped the man he found lying in the road.

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