10% is the charitable giving limit. There is another thing to be asked about, and that is the impact of the job. If I were to be a tax lawyer, I would be directly harming the ability of the US government to spend on social welfare programs. If I worked on Wall Street anywhere but Vanguard I would be bilking people out of their life savings, and at Vanguard I wouldn’t be making $100 K a year. Someone working as a tobacco farmer to raise money for cancer research has some misplaced priorities.
I understand why you said this, but most people interested in this are interested in the transition from 10% to >10% (say, 20), not in 10% to 50%. I presume you would estimate a higher number for whom this is healthy?
I were to be a tax lawyer, I would be directly harming the ability of the US government to spend on social welfare programs.
You could always go work for the IRS. It employs a lot of tax lawyers.
But there’s a bigger issue: you think that the work of a (privately employed) tax lawyer intrinsically harms the ability of the US government to spend? That belief has LOTS of issues. I’ll start with two: One, why do you think the capability of the US government to spend is an unalloyed good thing? And two, do you happen to know the volume (say, in feet of shelf space) of the current tax laws, regulations, and rulings? I’d recommend you find out and then think about whether any moderately complicated business can comply with them without the help of a tax lawyer.
If I worked on Wall Street anywhere but Vanguard I would be bilking people out of their life savings
Sigh. First, Vanguard is not part of Wall Street. Second… you really should not believe everything the popular media keeps feeding you.
By “Wall Street” I’m including the Buy Side as well as the Sell Side. The big buyside firms like Fidelity and Charles Schwab sell products that most people shouldn’t buy. Insurance probably has a better case to buy some actively managed products, or some exotic derivatives, but I don’t know why it can’t do it itself.
To the extent that finance reallocates risk it can provide a positive utility benefit. However, the very productive businesses have questionable utility. Promoting active trading, picking hot funds etc, all eat into the returns clients can expect. Justify the existence of Charles Schwab’s S&P 500 index fund, with expense ratio twice that of Vanguards. The most profitable divisions of investment banks tend to be the ones with the least competition, and hence most questionable social benefit.
I’m aware Dodge and Cox is in SF, and Vanguard in Valley Forge, Blackrock in Princeton, etc. However, they are all on “the Street”.
The IRS doesn’t pay well: for government pay one might as well work for NASA and accomplish something fun.
Tax lawyers can not decrease taxes taken by US government in the long run, because US government gets to make the law adjusting for the existence of tax lawyering. This is why I have absolutely no qualms about employing a tax lawyer in the US.
Not in the U.S. (note these are in pre-tax earnings, so they translate into less in foregone consumption than they do in donations made).
There are limits to how much you can deduct, but they’re very high.
For most people, the limits on charitable contributions don’t apply. Only if you contribute more than 20% of your adjusted gross income to charity is it necessary to be concerned about donation limits. If the contribution is made to a public charity, the deduction is limited to 50% of your contribution base. For example, if you have an adjusted gross income of $100,000, your deduction limit for that year is $50,000.
Regarding this:
If I worked on Wall Street anywhere but Vanguard I would be bilking people out of their life savings, and at Vanguard I wouldn’t be making $100 K a year. Someone working as a tobacco farmer to raise money for cancer research has some misplaced priorities.
Goldman has 32,000 employees. An upper bound for the harm caused by the marginal employee is thus the total harm caused divided by 32,000. For the harm to outweigh the good, Goldman would therefore have to be killing at least 3.2 million young people each year, or doing something else that is similarly harmful. That would mean that Goldman Sachs would need to be responsible for around 5% of all deaths in the world. Bear in mind that Goldman Sachs only makes up 22% of American investment banking, and 3% of the American financial industry—if the rest of finance is similarly bad, then it would imply that finance is doing something as bad as causing all the deaths in the world..
Let’s consider the American financial industry in general. Upcoming Giving What We Can research estimates that it would take $200 billion a year to move everyone in the world above the $1.25 poverty line. That figure will only be $74 billion in 2030. The employees of the financial sector could do this if they transferred (e.g. via GiveDirectly) 30-75% of their salaries to those in extreme global poverty (depending on what date you want to achieve the goal by). In other words, if everyone in finance were Earning to Give, it would be possible to end extreme global poverty within the next twenty years. Harm would only dominate if the financial sector is doing something roughly as bad as single handedly causing all global poverty.
THIS. Although I`m unsure about the particulars you mention here, being an European, people and effective altruists need to realize that your job is INSIDE the world you live in. Estimating how much good you’re producing is not just about how much money/time you’re giving to effective charities, but also how much your way of life is helping/damaging the world.
I’m not convinced. The amount of saved lives, QALYs, or whatever you are counting that the US government welfare program gets per dollar is (or seems to be to me) quite a bit less than the amount that, say, the AMF could get with that money. I don’t know how many dollars per QALY US government welfare manages to get, but I wouldn’t be surprised if it were on the order of $1000-$10000 per QALY. And that’s not even counting the fact that even if the US goverment had that bit more money from you not being a tax lawyer, that money would not all go to welfare and other such efficient (relative to what else the government spends money on) projects. I would imagine a fair portion would go to, say, bombing Syria, or hiring an extra parking-meter enforcer, or such inefficent stuff, that get an even worse $/QALY result.
And that is still not to mention the fact that some of that money would go to, say, funding the NSA to spy on your phone calls and read your email, or to the TSA to harass, strip-search, and detain you, which are net negatives.
And even that is not counting that MIRI may end up having a QALY/$ result far, far higher than anything the AMF or whoever could ever hope of possibly getting.
I’m not saying you’re flat-out wrong, and it is something to take into consideration when figuring out the altruistic impact of your job, but taking into account these objections, it seems highly unlikely that the marginal dollar from the government goes far enough to weigh very heavily in ones analysis.
On the topic of how much it takes to save a QALY in the US:
“Most, but not all, decision makers in the United States will conclude that interventions that cost less than $50,000 to $60,000 per QALY gained are reasonably efficient. An example is screening for hypertension, which costs $27,519 per life-year gained in 40-year-old men.3, 8 For interventions that cost $60,000 to approximately $175,000 per QALY, certain decision makers may find the interventions sufficiently efficient; most others will not agree.”
The first paragraph of this gives more on the cost of QALYs in the US. So, kidney dialysis is an intervention that is paid for by the government in the US, and it comes in at more than $100,000 per QALY saved.
Since marginal funding generally goes to pay for interventions which are no more effective than those already being paid for, I wouldn’t expect the cost of a marginal QALY to be below (say) $50,000.
I’m not sure if you were answering my comment or wubbles’s one. What I was saying was that you need to take into account the negative impact your job and way of life have on the world.
I agree that the US government probably is terrible at using tax money to better the world.
If I worked on Wall Street … I would be bilking people out of their life savings
Do you actually think that a finance professional who donated a significant portion of their income to effective charity would be doing more harm than good? Even given that you can save the life of a child in the developing world for on the order of $2000?
I don’t think the problem is finance professionals in general—it’s finance professionals in particularly corrupt parts of the industry.
Figuring out in advance that a job is doing particularly corrupt work seems to be something that people are very bad at—I don’t know whether it’s mostly that it would be hard for a neutral observer, or that people don’t want the problems of dealing with the consequences to their own lives if they find that their job is destructive.
Hmm, I was thinking the assumption (which I don’t necessarily entirely agree with) was that finance professionals were simply earning money without providing any benefit to society, and so a net negative. It sounds like your comment assumes that some of them are actually actively doing harm (though perhaps unintentionally), beyond just taking their own paycheck’s worth out of the productive economy. Is that your understanding?
The mortgage crisis was a result of banks being able to sell mortgages to other banks. This meant that the bank making the loan could make money just by the mortgage being initiated—the first bank no longer had a strong interest in the loan being repaid.
There were some other pieces to the situation that I don’t have clear in my mind at the moment, but I think there were incentives for the mortgage to actually not be repaid and the house to be taken by a bank.
One piece that I am clear on is that there were people who decided it wasn’t worth it for banks to keep accurate track of who owned which mortgage, or what had been paid, or what had been agreed to.
This is stealing people’s houses. It’s a degree of damage which it’s hard to imagine being covered by charity.
The other side of the story is that not every bank behaved like that—not all of finance is fraudulent.
Its at least somewhat true, if perhaps not well stated- packaged mortgages and derivatives based on packaged mortgages (mortgages sold as investment vehicles to other banks and funds) played a very large role in the crisis.
Without “selling mortgages to other banks” the popping of the housing bubble wouldn’t have turned into the liquidity crunch that started in 2008.
So were mortgages by themselves. Without the widespread availability of mortgages “the popping of the housing bubble wouldn’t have turned into the liquidity crunch” too. Or, for that matter, without the fact that the “standard” mortgage is a 30-year fixed—not, say, a 1⁄1 ARM.
But anyway, the reason for the contagion from mortgages to liquidity wasn’t the ability to sell mortgages. It was the mispricing of mortgage derivatives, specifically the widespread belief that certain tranches of collateralized mortgage obligations (CMOs) were effectively risk-free.
If you want to dig deeper, the real cause was the global asset bubble helped by the too-loose monetary policy in the mid-2000s.
Financial economics are complicated. Snap judgements from popular press rarely have much relationship to reality.
So were mortgages by themselves. Without the widespread availability of mortgages “the popping of the housing bubble wouldn’t have turned into the liquidity crunch” too.
Well, sure. And also without houses themselves…
My point is that the statement wasn’t false on its face. Repackaging and reselling was A proximate cause of the liquidity crunch, its not the only cause but its a part of what happened.
This is stealing people’s houses. It’s a degree of damage which it’s hard to imagine being covered by charity.
Is it really? I suppose this depends on how many houses any individual is responsible for and how much money they capture per house. I guess that second part is the real issue—any individual who would be giving to charity probably only captures a fraction of what they earn for their firm.
But if you could capture the whole value of a predatory mortgage and convert it into developing world lives saved, it’s not hard to imagine the numbers adding up. (One American family goes bankrupt and 20 Malawian children who otherwise would have don’t die in childhood? On the face of it that looks like a pretty positive net outcome.)
If you can do outsized damage significantly beyond what you can capture as income though, then I suppose it gets a bit tougher to justify.
(One American family goes bankrupt and 20 Malawian children who otherwise would have don’t die in childhood? On the face of it that looks like a pretty positive net outcome.)
If we’re talking about donations on the scale of the activities that went into the mortgage crisis, I think you’d start to suffer seriously diminishing returns.
Even if you didn’t, there are other problems you’d run into, such as the limited ability of the Malawian (or other impoverished African) society and economy to accommodate such a sudden spike in children surviving to adulthood. The lives that you save from extermination at the hands of malaria or other preventable causes are probably mostly going to be relatively lousy or short due to other causes, pending much further investment.
As I understood it, the hypothetical was a single individual deciding to work in finance and donate a large portion of their income to efficient charity. In that case I don’t think the diminishing returns are so much of an issue.
I would worry more about negative flow-through effects of a decline in trust and basic decency in society. I think those are much more clear than flow-through effects of positive giving. I’m not sure if this outweighs the 20-to-1 ratio.
If I were to be a tax lawyer, I would be directly harming the ability of the US government to spend on social welfare programs.
Government social welfare spending is notoriously inefficient. So if your client is at all generous with his money you’re coming out ahead. Heck even if he doesn’t give to charity but does use the money to invest in productive enterprises, you’re probably coming out ahead. And that’s before taking into account how you spend your money.
10% is the charitable giving limit. There is another thing to be asked about, and that is the impact of the job. If I were to be a tax lawyer, I would be directly harming the ability of the US government to spend on social welfare programs. If I worked on Wall Street anywhere but Vanguard I would be bilking people out of their life savings, and at Vanguard I wouldn’t be making $100 K a year. Someone working as a tobacco farmer to raise money for cancer research has some misplaced priorities.
Where is that 10% number coming from? Looks to me like the limit is at least 20% in the US, and up to 50% for some organizations.
(BTW, can someone from MIRI or anyone else tell us if they’re a 50% organization?)
EDIT: and by the way, that’s just the limit on what’s tax-deductible. There’s no legal limit on how much you can actually give.
MIRI is a 50% organization.
See IRS Exempt Organizations Select Check and click the “Deductibility Status”
Malo knows this, but I’ll say it publicly:
In general, we suspect there are few people for whom it’s healthy to actually be giving away 50% of their income.
I understand why you said this, but most people interested in this are interested in the transition from 10% to >10% (say, 20), not in 10% to 50%. I presume you would estimate a higher number for whom this is healthy?
Yes.
Awesome, thanks!
I guess we also have to worry about state and maybe even city-specific tax laws too, huh?
You could always go work for the IRS. It employs a lot of tax lawyers.
But there’s a bigger issue: you think that the work of a (privately employed) tax lawyer intrinsically harms the ability of the US government to spend? That belief has LOTS of issues. I’ll start with two: One, why do you think the capability of the US government to spend is an unalloyed good thing? And two, do you happen to know the volume (say, in feet of shelf space) of the current tax laws, regulations, and rulings? I’d recommend you find out and then think about whether any moderately complicated business can comply with them without the help of a tax lawyer.
Sigh. First, Vanguard is not part of Wall Street. Second… you really should not believe everything the popular media keeps feeding you.
By “Wall Street” I’m including the Buy Side as well as the Sell Side. The big buyside firms like Fidelity and Charles Schwab sell products that most people shouldn’t buy. Insurance probably has a better case to buy some actively managed products, or some exotic derivatives, but I don’t know why it can’t do it itself.
To the extent that finance reallocates risk it can provide a positive utility benefit. However, the very productive businesses have questionable utility. Promoting active trading, picking hot funds etc, all eat into the returns clients can expect. Justify the existence of Charles Schwab’s S&P 500 index fund, with expense ratio twice that of Vanguards. The most profitable divisions of investment banks tend to be the ones with the least competition, and hence most questionable social benefit.
I’m aware Dodge and Cox is in SF, and Vanguard in Valley Forge, Blackrock in Princeton, etc. However, they are all on “the Street”.
The IRS doesn’t pay well: for government pay one might as well work for NASA and accomplish something fun.
Tax lawyers can not decrease taxes taken by US government in the long run, because US government gets to make the law adjusting for the existence of tax lawyering. This is why I have absolutely no qualms about employing a tax lawyer in the US.
Not in the U.S. (note these are in pre-tax earnings, so they translate into less in foregone consumption than they do in donations made).
Regarding this:
See this essay:
THIS. Although I`m unsure about the particulars you mention here, being an European, people and effective altruists need to realize that your job is INSIDE the world you live in. Estimating how much good you’re producing is not just about how much money/time you’re giving to effective charities, but also how much your way of life is helping/damaging the world.
I’m not convinced. The amount of saved lives, QALYs, or whatever you are counting that the US government welfare program gets per dollar is (or seems to be to me) quite a bit less than the amount that, say, the AMF could get with that money. I don’t know how many dollars per QALY US government welfare manages to get, but I wouldn’t be surprised if it were on the order of $1000-$10000 per QALY. And that’s not even counting the fact that even if the US goverment had that bit more money from you not being a tax lawyer, that money would not all go to welfare and other such efficient (relative to what else the government spends money on) projects. I would imagine a fair portion would go to, say, bombing Syria, or hiring an extra parking-meter enforcer, or such inefficent stuff, that get an even worse $/QALY result.
And that is still not to mention the fact that some of that money would go to, say, funding the NSA to spy on your phone calls and read your email, or to the TSA to harass, strip-search, and detain you, which are net negatives.
And even that is not counting that MIRI may end up having a QALY/$ result far, far higher than anything the AMF or whoever could ever hope of possibly getting.
I’m not saying you’re flat-out wrong, and it is something to take into consideration when figuring out the altruistic impact of your job, but taking into account these objections, it seems highly unlikely that the marginal dollar from the government goes far enough to weigh very heavily in ones analysis.
On the topic of how much it takes to save a QALY in the US:
-from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1497852/
The first paragraph of this gives more on the cost of QALYs in the US. So, kidney dialysis is an intervention that is paid for by the government in the US, and it comes in at more than $100,000 per QALY saved.
Since marginal funding generally goes to pay for interventions which are no more effective than those already being paid for, I wouldn’t expect the cost of a marginal QALY to be below (say) $50,000.
I’m not sure if you were answering my comment or wubbles’s one. What I was saying was that you need to take into account the negative impact your job and way of life have on the world.
I agree that the US government probably is terrible at using tax money to better the world.
Do you actually think that a finance professional who donated a significant portion of their income to effective charity would be doing more harm than good? Even given that you can save the life of a child in the developing world for on the order of $2000?
I don’t think the problem is finance professionals in general—it’s finance professionals in particularly corrupt parts of the industry.
Figuring out in advance that a job is doing particularly corrupt work seems to be something that people are very bad at—I don’t know whether it’s mostly that it would be hard for a neutral observer, or that people don’t want the problems of dealing with the consequences to their own lives if they find that their job is destructive.
Hmm, I was thinking the assumption (which I don’t necessarily entirely agree with) was that finance professionals were simply earning money without providing any benefit to society, and so a net negative. It sounds like your comment assumes that some of them are actually actively doing harm (though perhaps unintentionally), beyond just taking their own paycheck’s worth out of the productive economy. Is that your understanding?
The mortgage crisis was a result of banks being able to sell mortgages to other banks. This meant that the bank making the loan could make money just by the mortgage being initiated—the first bank no longer had a strong interest in the loan being repaid.
There were some other pieces to the situation that I don’t have clear in my mind at the moment, but I think there were incentives for the mortgage to actually not be repaid and the house to be taken by a bank.
One piece that I am clear on is that there were people who decided it wasn’t worth it for banks to keep accurate track of who owned which mortgage, or what had been paid, or what had been agreed to.
This is stealing people’s houses. It’s a degree of damage which it’s hard to imagine being covered by charity.
The other side of the story is that not every bank behaved like that—not all of finance is fraudulent.
This is not true. In fact, this is probably not even wrong...
Its at least somewhat true, if perhaps not well stated- packaged mortgages and derivatives based on packaged mortgages (mortgages sold as investment vehicles to other banks and funds) played a very large role in the crisis.
Without “selling mortgages to other banks” the popping of the housing bubble wouldn’t have turned into the liquidity crunch that started in 2008.
So were mortgages by themselves. Without the widespread availability of mortgages “the popping of the housing bubble wouldn’t have turned into the liquidity crunch” too. Or, for that matter, without the fact that the “standard” mortgage is a 30-year fixed—not, say, a 1⁄1 ARM.
But anyway, the reason for the contagion from mortgages to liquidity wasn’t the ability to sell mortgages. It was the mispricing of mortgage derivatives, specifically the widespread belief that certain tranches of collateralized mortgage obligations (CMOs) were effectively risk-free.
If you want to dig deeper, the real cause was the global asset bubble helped by the too-loose monetary policy in the mid-2000s.
Financial economics are complicated. Snap judgements from popular press rarely have much relationship to reality.
Well, sure. And also without houses themselves…
My point is that the statement wasn’t false on its face. Repackaging and reselling was A proximate cause of the liquidity crunch, its not the only cause but its a part of what happened.
Is it really? I suppose this depends on how many houses any individual is responsible for and how much money they capture per house. I guess that second part is the real issue—any individual who would be giving to charity probably only captures a fraction of what they earn for their firm.
But if you could capture the whole value of a predatory mortgage and convert it into developing world lives saved, it’s not hard to imagine the numbers adding up. (One American family goes bankrupt and 20 Malawian children who otherwise would have don’t die in childhood? On the face of it that looks like a pretty positive net outcome.)
If you can do outsized damage significantly beyond what you can capture as income though, then I suppose it gets a bit tougher to justify.
If we’re talking about donations on the scale of the activities that went into the mortgage crisis, I think you’d start to suffer seriously diminishing returns.
Even if you didn’t, there are other problems you’d run into, such as the limited ability of the Malawian (or other impoverished African) society and economy to accommodate such a sudden spike in children surviving to adulthood. The lives that you save from extermination at the hands of malaria or other preventable causes are probably mostly going to be relatively lousy or short due to other causes, pending much further investment.
As I understood it, the hypothetical was a single individual deciding to work in finance and donate a large portion of their income to efficient charity. In that case I don’t think the diminishing returns are so much of an issue.
I would worry more about negative flow-through effects of a decline in trust and basic decency in society. I think those are much more clear than flow-through effects of positive giving. I’m not sure if this outweighs the 20-to-1 ratio.
Government social welfare spending is notoriously inefficient. So if your client is at all generous with his money you’re coming out ahead. Heck even if he doesn’t give to charity but does use the money to invest in productive enterprises, you’re probably coming out ahead. And that’s before taking into account how you spend your money.