51. What Makes a Donor Donate?

[0] From APM, American Public Media and WNYC, this is Freakonomics Radio on Marketplace.

[1] Here's the host of Marketplace, Kai Risdahl.

[2] 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.

[3] It's the hidden side of everything this week in the spirit of the season.

[4] Dubner weaves a tale of charitable giving as only Freakonomics can do it.

[5] Today we begin in Australia with a story of Dick Smith.

[6] Dick Smith made a lot of money with his chain of electronics stores.

[7] Now, he says, he gives 20 % of his income to charity.

[8] He says Australians don't give nearly enough, so he started a campaign to convince them to give more.

[9] Now, I've written to Rupert.

[10] I know him.

[11] That's Rupert Murdoch he's talking about.

[12] And he's sort of made out to me that he does give some money away, but it's done confidentially.

[13] But talking to his staff, Rupert Murdoch's staff, they say, no, Dick, there is not a generous bone in his body.

[14] 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.

[15] But I've not succeeded.

[16] I've completely failed.

[17] So now I'm going publicly and outing these people and at least embarrassing them, hoping that one will break ranks.

[18] and fulfill obligations of putting something back into society.

[19] As you can imagine, this shame game didn't sit so well with everyone.

[20] There have been articles.

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

[22] Writer Matthew Beechie thinks this is a bad idea.

[23] I think he's stirring the pot a bit.

[24] It's too soon to say how well Smith's shaming routine will work.

[25] But it made me wonder, when it comes to charitable.

[26] giving.

[27] What does work?

[28] I asked someone who knows.

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

[30] All right.

[31] So let's say you're trying to raise money for, I don't know, a public radio station.

[32] Please help us continue to bring you the news and information from around the world that you value.

[33] Contribute today and thanks.

[34] John List discovered that a good way to start raising money is by telling people that you put some of your own money in the pot already.

[35] You know, see, money.

[36] 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.

[37] All right.

[38] So seed money works.

[39] What about the old matching gift trick?

[40] What the experts will tell you is that the larger the match is, the more effective or the more dollars you will raise.

[41] And that's just flat out false.

[42] 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.

[43] But here's something that is worthwhile.

[44] Raffles.

[45] If you're serious about raising money, offer people a prize.

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

[47] And here's my favorite.

[48] It's called the once and done.

[49] It lets you opt out.

[50] It's giving the control of the relationship to the solicitie.

[51] Here's how it works.

[52] Since charities know it's annoying to constantly get solicitations in the mail, they give you a choice.

[53] If you send in some money today and then check a box opting out, will never bother you again.

[54] Given the once -and -done proposition, they not only give more money in that particular fundraising drive, but they do not check the box.

[55] and in future months, they end up giving more money than people who never received the once -and -done proposition.

[56] 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.

[57] You think that is a good strategy for fundraising, or is Dick Smith just as one Australian columnist put it just a f***ead?

[58] 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.

[59] And then you have a short run gain, but a long run loss.

[60] I'm Stephen Dubner for Marketplace.

[61] For Economics Radio is the website, Dubner's back in a couple of weeks.