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How to give to charity like an economist

This is not the most efficient way to give to charity (Paul J. Richards/AFP/Getty Images)
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If you're anything like me, you'll wait until the last minute before dashing off to Best Buy to do all your holiday shopping (at least for all your non-streaming friends and family) in one fell swoop. But if you're anything like an economist, you'll want to weigh the costs and benefits so you use your money the most efficiently.

Especially when it comes to giving to charity.

December, after all, is when people make a third of all charitable donations. But it can be hard to know which ones will actually help people as opposed to just help you feel better in the holiday spirit. Some charities, it's true, spend a good chunk of their money on overhead. Even worse, though, are the ones that don't spend their money on things that work well. That includes, depressingly enough, everybody's favorite feel-good social media meme, the Ice Bucket Challenge. Now, it's great that all it took to get us to donate $100 million to ALS research was the chance to post videos on Facebook of us drenching ourselves with Arctic water. But, as Felix Salmon points out, there's probably not going to be a big bang for the buck here—at least not anytime soon—since medical research is so uncertain. And research shows that about half of this money would have otherwise gone to other charities that would help people right away.

I know what you're thinking: What's the most empirically-sound way to donate my money? Easy: It's called GiveWell, and they look at which charities use money the best and need money the most. To make their rankings, charities have to submit rigorous data—the gold standard of social science, randomized-controlled trials—showing that what they do really is helping the people they're trying to.

And, in particular, GiveWell focuses on charities that do the most good for the people who need it the most—the global poor. That's why the Against Malaria Foundation, which provides mosquito net beds for families in Africa, has been its highest-recommended charity for a few years now. There's solid evidence that the net beds, coming in between $5.30 and $7.50 a pop, are getting to people and reducing the spread of malaria. Add it all up, and GiveWell estimates that it costs $3,340 in donations to the Against Malaria Foundation to save a life.

GiveDirectly is another charity that spends money very well, but needs more of it. It has the innovative idea of fighting extreme poverty by giving people in Kenya and Uganda cold, hard cash with no strings attached. That, the evidence shows, lets people invest in themselves and their businesses, so that, in trial, people who got money were making 49 percent more than people who didn't two years later.

So don't feel bad if you say "Bah, humbug" to charities that appeal to your heart instead of your head. That doesn't make you a Scrooge. It makes you an economist. And there's nothing dismal about that science when it's telling you how to help the most people with your money.