So I think the complaint about “clever accounting” is wrong. The counter-argument is somewhat technical, so it might still incur a PR penalty, but it’s not actually true.
As an individual donor considering where to donate based on ROI, you don’t actually care about the ROI that includes fundraising, because the fundraising doesn’t target you. The fundraising is targeted at people who currently don’t choose their charity based on ROI, so it actually makes sense to treat it as a completely exogenous process for the purposes of marginal ROI calculation.
(EDIT: because the average ROI is the integral of the marginal ROI, it’s clear that the marginal ROI has to get lower somewhere for the math to work out. I think the right way to do the accounting is to say that the low-marginal-ROI donations are those that come from the people whose minds are changed by Effective Fundraising. I smell some weird decision theory stuff going on behind the scenes here but I’m not quite sure if it’s interesting or important.)
A helpful thought experiment is replace “fundraising org” with “org that creates additional people who donate to the highest-ROI charity” (because that’s what they’ll be doing; if EF discovers a higher-ROI charity, then they’ll switch to fundraising for that one instead, hopefully). This might make it more clear that you shouldn’t include fundraising costs in the cost of a particular charity—the charities “just happen” to be where the newly-minted altruists are donating their money.
EDIT: By the way, this objection has been raised both times EF has been brought up to a wider audience. So if anyone can think of a cleaner/more intuitive way to explain the counter-argument above, it would probably be quite high-value.
So I think the complaint about “clever accounting” is wrong. The counter-argument is somewhat technical, so it might still incur a PR penalty, but it’s not actually true.
As an individual donor considering where to donate based on ROI, you don’t actually care about the ROI that includes fundraising, because the fundraising doesn’t target you. The fundraising is targeted at people who currently don’t choose their charity based on ROI, so it actually makes sense to treat it as a completely exogenous process for the purposes of marginal ROI calculation.
(EDIT: because the average ROI is the integral of the marginal ROI, it’s clear that the marginal ROI has to get lower somewhere for the math to work out. I think the right way to do the accounting is to say that the low-marginal-ROI donations are those that come from the people whose minds are changed by Effective Fundraising. I smell some weird decision theory stuff going on behind the scenes here but I’m not quite sure if it’s interesting or important.)
A helpful thought experiment is replace “fundraising org” with “org that creates additional people who donate to the highest-ROI charity” (because that’s what they’ll be doing; if EF discovers a higher-ROI charity, then they’ll switch to fundraising for that one instead, hopefully). This might make it more clear that you shouldn’t include fundraising costs in the cost of a particular charity—the charities “just happen” to be where the newly-minted altruists are donating their money.
EDIT: By the way, this objection has been raised both times EF has been brought up to a wider audience. So if anyone can think of a cleaner/more intuitive way to explain the counter-argument above, it would probably be quite high-value.