51. What Makes a Donor Donate?

The science of charity, with economist John List.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

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• 0:46Stephen J. Dubner?

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• 1:27Stephen J. Dubner?

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• 2:12Stephen J. Dubner?

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• 2:29Speaker 01

  From APM, American Public Media and WNYC, this is Freakonomics Radio on Marketplace. Here's the host of Marketplace, Kai Rizdal.

• 2:43Speaker 02

  Time now for a little bit of Freakonomics Radio, that moment in the broadcast every couple of weeks where we talk to Stephen Dubner, the co-author of the books and the blog of the same name. It's The Hidden Side of Everything. This week, in the spirit of the season, Dubner weaves a tale of charitable giving as only Freakonomics can do it.

• 3:00Stephen J. Dubner?

  Today, we begin in Australia with a story of Dick Smith.

• 3:09Stephen J. Dubner?

  Dick Smith made a lot of money with his chain of electronics stores. Now, he says, he gives 20% of his income to charity. He says Australians don't give nearly enough, so he started a campaign to convince them to give more.

• 3:25Speaker 03

  Now, I've written to Rupert, I know him.

• 3:26Stephen J. Dubner?

  That's Rupert Murdoch he's talking about.

• 3:29Speaker 03

  And he's sort of made out to me that he does give some money away, but it's done confidentially. But talking to his staff, Rupert Murdoch's staff, they say, no, Dick, there is not a generous bone in his body.

• 3:39Stephen J. Dubner?

  Smith continued with the gentle approach, hoping a bit of quiet persuasion would make Australians open their wallets like the rich Americans you hear about so often.

• 3:49Speaker 03

  But I've not succeeded. I've completely failed. So now I'm going publicly and outing these people and at least embarrassing them, hoping that one will break ranks and fulfill obligations of putting something back into society.

• 4:03Stephen J. Dubner?

  As you can imagine, this shame game didn't sit so well with everyone. There have been articles.

• 4:09Speaker 04

  The article that I believe you're referring to was, is Dick Smith just a [BLEEP] head?

• 4:15Stephen J. Dubner?

  Writer Matthew Beechey thinks this is a bad idea.

• 4:19Speaker 04

  I think he's stirring the pot a bit.

• 4:21Stephen J. Dubner?

  It's too soon to say how well Smith's shaming routine will work, but it made me wonder. When it comes to charitable giving, what does work? I asked someone who knows.

• 4:33John List?

  I'm John List, and I'm a professor at the University of Chicago, and I focus on the economics of charity.

• 4:40Stephen J. Dubner?

  All right, so let's say you're trying to raise money for, I don't know, a public radio station.

• 4:45Speaker 02

  Please help us continue to bring you the news and information from around the world that you value. Contribute today, and thanks.

• 4:51Stephen J. Dubner?

  John List discovered that a good way to start raising money is by telling people that you've put some of your own money in the pot already. You know, seed money.

• 4:59John List?

  So what we found is that the more seed money that you had, not only induced more people to give, but those people actually gave more money.

• 5:10Stephen J. Dubner?

  All right, so seed money works. What about the old matching gift trick?

• 5:14John List?

  What the experts will tell you is that the larger the match is, the more effective or the more dollars you will raise. And that's just flat out false.

• 5:24Stephen J. Dubner?

  What List found is that a one-to-one match does work well, but increasing the match to two-to-one or three-to-one doesn't do any additional good. But here's something that is worthwhile: raffles. If you're serious about raising money, offer people a prize.

• 5:42John List?

  And just by doing that, you end up increasing gifts by as much as 100%.

• 5:48Stephen J. Dubner?

  And here's my favorite. It's called the once and done. It lets you opt out.

• 5:53John List?

  It's giving the control of the relationship to the solicitor.

• 5:59Stephen J. Dubner?

  Here's how it works. Since charities know it's annoying to constantly get solicitations in the mail, they give you a choice. If you send in some money today and then check a box "opting out", we'll never bother you again.

• 6:14John List?

  Given the once and done proposition, they not only give more money in that particular fundraising drive, but they do not check the box. And in future months, they end up giving more money than people who never received the once and done proposition.

• 6:33Stephen J. Dubner?

  Since John List seems to know all the charity tricks that work, I asked him about Dick Smith, the Australian electronics mogul, and his shaming idea. You think that is a good strategy for fundraising? Or is Dick Smith, just as one Australian columnist put it, just a [BLEEP] head?

• 6:52John List?

  Well, I think the strategy is probably good in the short run, but I wonder in the long run if those millionaires or billionaires might flee the continent and seek refuge elsewhere. And then you have a short run gain, but a long run loss.

• 7:07Stephen J. Dubner?

  I'm Stephen Dubner for Marketplace.

• 7:14Stephen J. Dubner?

  Freakonomics Radio is the website. Dubner's back in a couple of weeks.

• 7:30Stephen J. Dubner?

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• 8:03Stephen J. Dubner?

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• 8:33Stephen J. Dubner?

  Freakonomics Radio is sponsored by Southern Company. The world and its energy needs are always changing. Southern Company's commitment to meeting this demand stays the same. That's because Southern Company believes energy is more than a utility. It's what powers possibilities. So they are looking ahead and investing $80 billion in infrastructure upgrades and are committed to fueling growth in ways that benefit all customers so that reliable and affordable energy is accessible for generations to come. Go to southerncompany.com to learn more. Southern Company, building the future of energy.

• 9:11Speaker 06

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