Cross-posted from my blog.
Contrary to my carefully crafted brand as a weak nerd, I go to a local CrossFit gym a few times a week. Every year, the gym raises funds for a scholarship for teens from lower-income families to attend their summer camp program. I don’t know how many Crossfit-interested low-income teens there are in my small town, but I’ll guess there are perhaps 2 of them who would benefit from the scholarship. After all, CrossFit is pretty niche, and the town is small.
Helping youngsters get swole in the Pacific Northwest is not exactly as cost-effective as preventing malaria in Malawi. But I notice I feel drawn to supporting the scholarship anyway. Every time it pops in my head I think, “My money could fully solve this problem”. The camp only costs a few hundred dollars per kid and if there are just 2 kids who need support, I could give $500 and there would no longer be teenagers in my town who want to go to a CrossFit summer camp but can’t. Thanks to me, the hero, this problem would be entirely solved. 100%.
That is not how most nonprofit work feels to me.
You are only ever making small dents in important problems
I want to work on big problems. Global poverty. Malaria. Everyone not suddenly dying. But if I’m honest, what I really want is to solve those problems. Me, personally, solve them. This is a continued source of frustration and sadness because I absolutely cannot solve those problems.
Consider what else my $500 CrossFit scholarship might do:
* I want to save lives, and USAID suddenly stops giving $7 billion a year to PEPFAR. So I give $500 to the Rapid Response Fund. My donation solves 0.000001% of the problem and I feel like I have failed.
* I want to solve climate change, and getting to net zero will require stopping or removing emissions of 1,500 billion tons of carbon dioxide. I give $500 to a policy nonprofit that reduces emissions, in expectation, by 50 tons. My donation solves 0.000000003% of the problem and I feel like I have f
Summary: across Africa it is very common for power companies to be operating under government imposed rates that are well below their actual costs, with the difference made up by occasional bailouts. In response, they have very little reason to invest in reliable delivery, and quite a lot of reason not to: it doesn't bring in more money if it costs more to produce than you can sell it for [1]. Businesses and anyone who can afford it make up for the unreliable power with generators, which are much more expensive than well functioning grid power would be. Allowing utilities to charge a higher rate, still less than the cost of generators, would probably make things better for most people and reduce the cost of electricity a lot when you include that currently a lot of the cost is generators. This may be politically infeasible, however, and one potential intervention is NGOs covering the difference.
[1] It wasn't entirely clear to me whether the post was talking about marginal costs or average costs, so I'm not totally sure this is right.
Marginal costs, and yes, you are completely correct.
We are currently having problems with inadequate electricity generation in Ecuador, where drought has weakened hydropower output. What do you think second-best solutions might be for countries in this boat? Waiting for foreign donors/investors/lenders to impose higher prices as a condition of major help? Waiting for solar and batteries to get better/cheaper and replace more of diesel's role, and also to make generation cheaper for the energy firms so that their deficits are smaller and more bailout funds can be aimed at new investment?
Countries like Ecuador, Colombia, and Nigeria have recently demonstrated courage in reducing motor fuel subsidies (which, in Nigeria, may impact those firms and households who rely on diesel backup). Are electrical price subsidies politically even tougher due to electricity being so much more common than cars in low and middle-income countries?
Hi Lauren,
Thanks for sharing. Do you have any thoughts on the cost-effectiveness of the best interventions in this area relative to GiveWell's top charities? I skimmed the section "Solutions", and you sounded pessimistic.