Freakonomics Radio - 103. Free-conomics

Episode Date: November 28, 2012

Economists are a notoriously self-interested bunch. But a British outfit called Pro Bono Economics is giving away its services to selected charities.

From APM, American Public Media, and WNYC, this is Freakonomics Radio on Marketplace. Here's the host of Marketplace, Kai Risdahl. 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 about, wait for it, wait for it, yes, The Hidden Side of Everything. Dubner, how are you? I am great. I love the holidays. You know, everybody starts to feel charitable toward our fellow humans. Let me ask you this, Kai. If you had to guess, how would you say that economists rank on the scale of charitable giving, let's say? Zero. Zero. Is there a negative number that I could throw out there? Let me, you know, we do think of economists as a little bit more self-interested than average,

let's say. There is a lab experiment that's known as the dictator game that we're, it's meant to test charitable giving between strangers. And one of the best predictors that one person will give zero of their money to another person is if that person is an undergraduate economics major. Yeah, it's the understanding the incentives thing, man. It doesn't surprise me at all. Exactly. But let me say this. In Freakonomics Radio's ongoing efforts to understand the creature known as homo economicus, we have uncovered evidence in the wild, mind you, that the species may in fact be evolving. Okay.

There is a British economist named Martin Brooks. He works at a hedge fund. And for some time, he had been interested in bringing a more data-driven approach to philanthropy. Okay. And then one day, his phone rang. A big UK charity called Barnardo's, which is a children's charity, rang me up and said, could they borrow an economist from me? Because they didn't know where to find them and they couldn't afford to hire one, even if they did know where to find them. So I'm guessing here, but it's the charity wants to hire an economist to see if they're getting a good return on their money, if they're doing things right, all that economist stuff, right?

Yeah, yeah, that's exactly the right idea. So Martin Brooks thought, well, what if I could recruit a bunch of economists who are willing to donate their time and skills and kind of match them up with charities who need it? And they did it. And they called this thing pro bono economics. For us, the pitch of pro bono economics is that economists are better with a spreadsheet than they are with a paintbrush. And you should marry them up, those economists, up with a spreadsheet to help a charity rather than give them a paintbrush to paint a heart. Warms my heart, Dubner. Does me good to hear about economists doing good in the world. Right. And let me tell you specifically, this first charity that contacted Brooks is Bernardo's. Its focus is helping young people who've been sexually exploited. So Brooks had

a couple of economists who worked for the Bank of England analyze Bernardo's data. And they found that for every one pound that this charity spent on services, UK taxpayers saved at least six pounds. So look, that's good to know, right? A charity wants to go around saying it does good work, but it's even better to have the data to show it, especially when you need to plead your case to the government or donors or the public, right? Yes. So you got to figure pro bono economics has more business than it knows what to do with, right? Charities are lining up to get these guys. You would think so. Pro bono economics, they've signed up more than 200 economists who volunteered, but the charities are not coming out of the woodwork to take advantage

of them. In other words, the supply of economists is currently outstripping the demand from charities, even though the economists are working for free. Now, maybe this says something about the low regard with which people hold economists, or it may be that charities think that the economists aren't necessarily going to give them good news. Okay, here's Sue Holloway, who works as the director of pro Bono Economics. We've worked with a number of charities where the evidence has not been conclusive that they are having a big impact, or it's shown that at the moment they're not having, making much change in the way they were expecting.

Do you think they're worried that they're going to give them like bad news or trouble or wrong answers? Or say that their mission is not really, you know, viable? Well, look. Yeah, yeah, yeah, right. I would think that any right-minded charity would want to know where it's failing every bit as much as where it's succeeding. You know, that's valuable information. Yeah, but that's tough stuff.

Human egos being what they are and institutions being what they are, you may be right. Martin Brooks found that the typical charity does not run itself at all like a business. If you go and talk to fundraisers, one thing that fundraisers don't tend to do is use data. They tend to sell the story by telling a story about a beneficiary. Right. So what Martin Brooks wants to do is publicly rank charities by how effective they are, which, as you can imagine, has gotten a little pushback from the charity sector. In the meantime, I've been looking to see if there's kind of a US equivalent of pro bono economics. I haven't turned up anything yet. Maybe, here's my holiday wish, that some warm-hearted economist is driving home right now,

listening to this program, and when he gets home, he'll fire up his 501c3 paperwork and get it going. How's that for getting the whole experience? I like that. I'm trying to think of what it would be like if we got an economist in here, man, at Marketplace, just to poke around. Be careful what you ask for, buddy boy. Stephen Dubner, Freakonomics.com is the website. We'll see you, man.

Thanks, Guy. On the next Freakonomics Radio, people spend a lot of time in college these days. What do they take with them when they're gone? One of my greatest examples comes recently from a student I had probably three years ago, four years ago. And he recently hiked the Appalachian Trail. He wrote to me and said that on the last days when he was so sick of it and so weary. He kept repeating to himself from Beckett, I can't go on, I'll go on. We'll go on next week on Freakonomics Radio.