Imagine you are setting out on a dangerous expedition through the Arctic on a limited budget. The grizzled old prospector at the general store shakes his head sadly: you can't afford everything you need; you'll just have to purchase the bare essentials and hope you get lucky. But what is essential? Should you buy the warmest parka, if it means you can't afford a sleeping bag? Should you bring an extra week's food, just in case, even if it means going without a rifle? Or can you buy the rifle, leave the food, and hunt for your dinner?
And how about the field guide to Arctic flowers? You like flowers, and you'd hate to feel like you're failing to appreciate the harsh yet delicate environment around you. And a digital camera, of course - if you make it back alive, you'll have to put the Arctic expedition pics up on Facebook. And a hand-crafted scarf with authentic Inuit tribal patterns woven from organic fibres! Wicked!
...but of course buying any of those items would be insane. The problem is what economists call opportunity costs: buying one thing costs money that could be used to buy others. A hand-crafted designer scarf might have some value in the Arctic, but it would cost so much it would prevent you from buying much more important things. And when your life is on the line, things like impressing your friends and buying organic pale in comparison. You have one goal - staying alive - and your only problem is how to distribute your resources to keep your chances as high as possible. These sorts of economics concepts are natural enough when faced with a journey through the freezing tundra.
But they are decidedly not natural when facing a decision about charitable giving. Most donors say they want to "help people". If that's true, they should try to distribute their resources to help people as much as possible. Most people don't. In the "Buy A Brushstroke" campaign, eleven thousand British donors gave a total of 550,000 pounds to keep the famous painting "Blue Rigi" in a UK museum. If they had given that 550,000 pounds to buy better sanitation systems in African villages instead, the latest statistics suggest it would have saved the lives of about one thousand two hundred people from disease. Each individual $50 donation could have given a year of normal life back to a Third Worlder afflicted with a disabling condition like blindness or limb deformity..
Most of those 11,000 donors genuinely wanted to help people by preserving access to the original canvas of a beautiful painting. And most of those 11,000 donors, if you asked, would say that a thousand people's lives are more important than a beautiful painting, original or no. But these people didn't have the proper mental habits to realize that was the choice before them, and so a beautiful painting remains in a British museum and somewhere in the Third World a thousand people are dead.
If you are to "love your neighbor as yourself", then you should be as careful in maximizing the benefit to others when donating to charity as you would be in maximizing the benefit to yourself when choosing purchases for a polar trek. And if you wouldn't buy a pretty picture to hang on your sled in preference to a parka, you should consider not helping save a famous painting in preference to helping save a thousand lives.
Not all charitable choices are as simple as that one, but many charitable choices do have right answers. GiveWell.org, a site which collects and interprets data on the effectiveness of charities, predicts that antimalarial drugs save one child from malaria per $5,000 worth of medicine, but insecticide-treated bed nets save one child from malaria per $500 worth of netting. If you want to save children, donating bed nets instead of antimalarial drugs is the objectively right answer, the same way buying a $500 TV instead of an identical TV that costs $5,000 is the right answer. And since saving a child from diarrheal disease costs $5,000, donating to an organization fighting malaria instead of an organization fighting diarrhea is the right answer, unless you are donating based on some criteria other than whether you're helping children or not.
Say all of the best Arctic explorers agree that the three most important things for surviving in the Arctic are good boots, a good coat, and good food. Perhaps they have run highly unethical studies in which they release thousands of people into the Arctic with different combination of gear, and consistently find that only the ones with good boots, coats, and food survive. Then there is only one best answer to the question "What gear do I buy if I want to survive" - good boots, good food, and a good coat. Your preferences are irrelevant; you may choose to go with alternate gear, but only if you don't mind dying.
And likewise, there is only one best charity: the one that helps the most people the greatest amount per dollar. This is vague, and it is up to you to decide whether a charity that raises forty children's marks by one letter grade for $100 helps people more or less than one that prevents one fatal case of tuberculosis per $100 or one that saves twenty acres of rainforest per $100. But you cannot abdicate the decision, or you risk ending up like the 11,000 people who accidentally decided that a pretty picture was worth more than a thousand people's lives.
Deciding which charity is the best is hard. It may be straightforward to say that one form of antimalarial therapy is more effective than another. But how do both compare to financing medical research that might or might not develop a "magic bullet" cure for malaria? Or financing development of a new kind of supercomputer that might speed up all medical research? There is no easy answer, but the question has to be asked.
What about just comparing charities on overhead costs, the one easy-to-find statistic that's universally applicable across all organizations? This solution is simple, elegant, and wrong. High overhead costs are only one possible failure mode for a charity. Consider again the Arctic explorer, trying to decide between a $200 parka and a $200 digital camera. Perhaps a parka only cost $100 to make and the manufacturer takes $100 profit, but the camera cost $200 to make and the manufacturer is selling it at cost. This speaks in favor of the moral qualities of the camera manufacturer, but given the choice the explorer should still buy the parka. The camera does something useless very efficiently, the parka does something vital inefficiently. A parka sold at cost would be best, but in its absence the explorer shouldn't hesitate to choose the the parka over the camera. The same applies to charity. An antimalarial net charity that saves one life per $500 with 50% overhead is better than an antidiarrheal drug charity that saves one life per $5000 with 0% overhead: $10,000 donated to the high-overhead charity will save ten lives; $10,000 to the lower-overhead will only save two. Here the right answer is to donate to the antimalarial charity while encouraging it to find ways to lower its overhead. In any case, examining the financial practices of a charity is helpful but not enough to answer the "which is the best charity?" question.
Just as there is only one best charity, there is only one best way to donate to that charity. Whether you volunteer versus donate money versus raise awareness is your own choice, but that choice has consequences. If a high-powered lawyer who makes $1,000 an hour chooses to take an hour off to help clean up litter on the beach, he's wasted the opportunity to work overtime that day, make $1,000, donate to a charity that will hire a hundred poor people for $10/hour to clean up litter, and end up with a hundred times more litter removed. If he went to the beach because he wanted the sunlight and the fresh air and the warm feeling of personally contributing to something, that's fine. If he actually wanted to help people by beautifying the beach, he's chosen an objectively wrong way to go about it. And if he wanted to help people, period, he's chosen a very wrong way to go about it, since that $1,000 could save two people from malaria. Unless the litter he removed is really worth more than two people's lives to him, he's erring even according to his own value system.
...and the same is true if his philanthropy leads him to work full-time at a nonprofit instead of going to law school to become a lawyer who makes $1,000 / hour in the first place. Unless it's one HELL of a nonprofit.
The Roman historian Sallust said of Cato "He preferred to be good, rather than to seem so". The lawyer who quits a high-powered law firm to work at a nonprofit organization certainly seems like a good person. But if we define "good" as helping people, then the lawyer who stays at his law firm but donates the profit to charity is taking Cato's path of maximizing how much good he does, rather than how good he looks.
And this dichotomy between being and seeming good applies not only to looking good to others, but to ourselves. When we donate to charity, one incentive is the warm glow of a job well done. A lawyer who spends his day picking up litter will feel a sense of personal connection to his sacrifice and relive the memory of how nice he is every time he and his friends return to that beach. A lawyer who works overtime and donates the money online to starving orphans in Romania may never get that same warm glow. But concern with a warm glow is, at root, concern about seeming good rather than being good - albeit seeming good to yourself rather than to others. There's nothing wrong with donating to charity as a form of entertainment if it's what you want - giving money to the Art Fund may well be a quicker way to give yourself a warm feeling than seeing a romantic comedy at the cinema - but charity given by people who genuinely want to be good and not just to feel that way requires more forethought.
It is important to be rational about charity for the same reason it is important to be rational about Arctic exploration: it requires the same awareness of opportunity costs and the same hard-headed commitment to investigating efficient use of resources, and it may well be a matter of life and death. Consider going to www.GiveWell.org and making use of the excellent resources on effective charity they have available.