Economics Professor Urges Donors to Be Strategic in Hard Times

Raymond Fisman, professor of social enterprise at Columbia Business School, writes in a Forbes' op-ed that donors need to be more careful than ever in these wild financial times.

Fisman make these four recommendations:

1. Fight inertia.

   "The best predictor of someone's choice of charity today is where the check went last year. But this isn't a time for philanthropic inertia--a dollar given to one organization means one less dollar available to give to another, potentially more worthy cause. Economists refer to this as the opportunity cost of funds."

2. Focus on outcomes.

   "How many indigents were fed by a soup kitchen? How many unemployed--who would otherwise have remained jobless--were taken off the welfare rolls by a job-training program? And what did it cost to generate these outcomes? Identifying and funding the 'highest productivity' charities is more important than ever. Strategic giving is aided by an increase in the number of watchdog organizations and large foundations carefully assessing charities' activities and publicizing the results. It's now possible for even small donors to evaluate and compare potential beneficiaries and give strategically."

3. Re-prioritize.

   "...while times are bad, you may wish to reshuffle your giving to focus on causes designed to buffer the impact of the economic downturn on those most affected....Organizations with sizable reserve funds may not face the same financial crunch right now as those living hand-to-mouth."

4. Think about how much you can really afford to give.

   "...if you truly want to practice strategic philanthropy in tough economic times and have the means to do so, practice 'countercyclical philanthropy,' and give more when the needs are greatest."

Thank you Dr. Fisman! If you want to find out more about donating safely and sensibly, see "Is Your Charitable Gift In Good Hands?"

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