Update: This project has been funded by an EA Funds grant. I am actively working on it-if you are interested in helping out, send me a message.

I am considering setting up a charity. Its goals are:

  1. To help effective altruists in financial need by giving back part of their donations
  2. To promote large donations to EA-related causes by providing donors with a safety net, minimizing risk
  3. To foster a healthy EA community

To achieve these goals, the charity will maintain an emergency fund. If effective altruists encounter financial trouble, they can apply to recoup up to 50% of their EA-related donations from this fund.

To prevent fraud, donors will have to get their charity to state to us that they will never return any funds to the donor, and we will need see their donation receipts.

The recoupment process will be similar to filing an insurance claim, but less strict. If someone requests a fraction of what they have donated to EA-related charities, they will usually get their money back without difficulty. We will not have to worry about fraud nearly as much as insurers, because donors can only recoup up to half of what they originally donated.

As far as I know, this type of charity does not exist yet, and there are a lot of things that still need to be figured out. More extensive discussion can be found here (me) and here (Alicorn). Note that both linked essays discuss a fund that only offers support to contributors (excluding direct donors). I no longer think that is desirable, and it will be very difficult to convince governments to grant such a construction tax-exempt status.

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This seems like the type of infrastructure that should be experimented with on a small scale rather than heavily debated

Agreed! I have applied to ACX Grants to set up a trial version. If anyone else is interested in funding this, send me a message.

I was going to say something similar. Have you considered trialling this with a fiscal sponsor (like Rethink Charity if they’re up for storing money, or Survival and Flourishing’s fiscal sponsor if you can get a grant through them?)

Sounds right. There's a lot to learn about the incentives behind this kind of initiative, but I'm excited about it (I argued for some similar initiatives a couple of years ago)

Thanks for the interesting idea! It makes me happy that people see EA also as a community and care for other community members.

Regarding the specifics, I'm not really clear on why an emergency fund should be coupled with donations.

If this is intended as a non-profit mutual aid fund, I don't think it should be related to charity at all. In my last workplace there was an employee mutual aid fund that each person could opt into by putting in a sum of money (or maybe it was sick days?), and apply for aid whenever needed.

Other than lowering risks for donations specifically, I would think EAs who don't earn enough to donate would be at greater risk for financial emergencies. Moreover, "having and donating money" is really not the only effective altruistic thing one could do.

On the other hand, if this is intended as a kind of insurance and is supposed to actively contribute to charities, wouldn't it make sense to adopt a for-profit insurance attitude (except for the tendency to avoid paying out), take premia from members and cap the payouts in some way, and forward the profits specifically to effective charities?

Even in this case, I think it's problematic to have payouts be proportionate to a member's contributions, as that means the people who'll get the highest expected value from the fund are the richest, while the likelihood of actually needing those funds is disproportionately higher for the poorest.

Providing insurance is really hard, and insurance coverage is inherently limited. From the LessWrong article I linked:

This sounds a lot like insurance, and effective altruists could indeed insure themselves against a myriad of risks. Unfortunately, insurers will reject claims whenever possible, many risks cannot be easily insured, and insurance requires monthly payment, which requires a stable income. In other words, insurance is no replacement for a personal financial buffer. Insurance is useful to mitigate specific high-cost risks, but that's it.

(Additionally, insurance introduces the overhead of an insurance company. When I asked for a ballpark estimate at the insurer I interned at, I was told that at most one-third of all premium money is put back into payment of legitimate claims.)


Regarding the specifics, I'm not really clear on why an emergency fund should be coupled with donations.

By focusing exclusively on reimbursing donors in financial trouble, we avoid opening a can of worms. First of all, the risk of fraud is much lower. If you can only get back half of what you gave away, there is no way to use the fund to make money, unless you control a GiveWell-recommended charity. Second, we do not have to judge whether someone is EA-aligned. Third, people cannot take advantage of the fund and, perhaps more importantly, people will not have to worry other people are taking advantage of the fund.

To expand on the last point, if we ever decide to reimburse a donation because someone's second car broke down, that might annoy some people with a different idea of what constitutes an emergency, but at least they know that person donated at least twice the amount needed to fix the car. Now, if we handed out fix-your-second-car money to people who never donated anything to charity, I'd predict riots.

Also, coupling the two promotes donations. People who would normally find parting with substantial amounts of money scary have the assurance that they can always knock on our door.

I'm normally skeptical of "emergency fund" ideas in large part because it's hard to decide "who counts," so I like that this solves that problem.

I think you should probably also:

1. Cap the size of the reimbursement fund at some smaller portion than 10% of total receipts over time, and 

2. Request that recipients repay their reimbursement, perhaps suggesting that instead of donating 10% of income going forward, they give through the new org, and put 50% of donations to reimburse their previously refunded payment and 50% to charity.

3. Disclose the payments to individuals with a 1-year lag unless the payment to them has been repaid, with the option for recipients to request a longer lag to announce for them to repay if they don't want it announced.

As Linch says, this is a vision for this new fund that is different than what the OP and what I think sentiment supports.

In one generous vision, we have a institution where someone can donate most of their income each year. They can trust that if their loved one gets sick, they can pull out a large fraction of the money to help, like 99.99% of humanity. It's none of our business if they do this. It's a feature.

 

There is an aesthetic among older EAs (not carpet bagging arrivistes like myself) of donating huge  fractions of their income, kidneys, etc. Some of these people are in great positions—some aren't and I've heard of anecdotes where early EAs can get burnt out and in difficult situations later. 

If you believe the above, a 10% limit and a public announcement of both their "clawback" (and implicitly their personal situation) is really different. I would guess this thins the value of this project to the degree that it's not worth the legal and logistical challenges which are pretty big (there's even a mechanism design sort of challenge).

I'd think that saying who was given money would be a pretty fundamental part of transparency for this, as is the expectation that people would continue giving once whatever emergency exists is resolved. Yes, 1 year is likely too short a time frame to repay if there is a huge need, but that's why I'd say people should be able to suggest a longer time frame. (And if someone has a huge disaster and needs cash, I'd think that they wouldn't mind people hearing that fact quite as much.)

The use case, in my mind, is someone who is nervous about giving 25% of their income and not trying to keep 6 months of savings in case of disaster. If they did that, then something happens, they need to change their mind about some of the giving - but once they are back on their feet, they would go back to donating. However, if it's building a way for people to later say "I want half my money back, to keep forever, now that I no longer want to do this," I don't think it's worthwhile as a project.

A lot of these choices seem unnecessarily punitive to me, not sure.

That seems plausible - but I don't know how this would work if there wasn't any transparency about who was given money back, so I'm not sure how to avoid #3.

And For #2, I think the point is that this isn't a payout for disaster, it's a temporary solution to replace savings. Once they are back on their feet and able to donate, I'd think that paying a larger part into the fund makes sense. But I agree that it's a different vision than using this as pure insurance.

As you point out up front, you posted this idea several times, including back in 2019. 

https://www.lesswrong.com/posts/JDdmcc4CmMDDo82rZ/an-emergency-fund-for-effective-altruists

https://www.lesswrong.com/posts/A6Ebdw3DMEdh7Jr6C/an-emergency-fund-for-effective-altruists-second-version

 

I think it is great and commendable you are continuing! 

The prior posting raises reasonable questions:

  • Why has the idea kicked around for a few years?
  • Do you have responses to the issues raised in those discussions? Here's one example (charity status and tax efficiency):

 

Sometimes ideas get tangled up in noisy online chatter and that's unfair and I don't want to cause this. But discussions shouldn't rehash the same ideas and addressing prior comments (even if explaining why they can't be addressed and what barriers block you) would add clarity and momentum to your project.

This post can be considered a response to that very comment! The main change is described here:

Note that both linked essays discuss a fund that only offers support to contributors. I no longer think that is desirable, and it will be very difficult to convince governments to grant such a construction tax-exempt status.

By expanding the scope to all donors to EA-related causes, contributors to the fund no longer gain an entitlement. This means that the fund will almost certainly be recognized as a charity, and donations will be tax-exempt.

As for the long silence, I only recently had the time to contemplate the change I made.

The inability to be a 501(c)3 seems far from obvious, and a lawyer specializing in this should absolutely be consulted! See, for example, why Labor Unions don't qualify, and consider the possibility of organizing as a 501(c)4,  which can sometimes qualify parts of the contribution for tax deductibility. (And if the "insurance fund" is capped in size, the portion reserved can decline over time, eventually making ~100% into a tax-deductible donation.)

But doing that will require starting up and getting some seed funds, so obviously it won't be resolved yet.

FWIW, in case helpful for anyone to know,  I am pretty sure that in the UK this wouldn’t be eligible for gift aid (the tax relief system for charitable donations) as gift aid cannot be claimed if the donor is receiving a benefit and this would count as a benefit. Capping the size of the "insurance fund" would not solve this (or at least not with any simple system I can think off).

I agree with what you said. 

Based on how much some EAs seem to give, the OP's project seems really good. 

Money is the most fungible thing there is. 

I'm a bit enthusiastic about this idea. However, as already mentioned by others:

  • I would try it on a small scale instead of debating much.
  • I'd rather have it look more like an unemployment fund than as a charity, specifically because probably there are some issues on tax deduction if you can actually get the money back.

I think the main appeal of this idea is that most great ways to improve the world often involved careers change, which involves some level of personal risk. For example, I currently face the option of earning probably quite a lot via quantum computing after having done a Ph.D. in the topic, or attempting a career change. I know that studying things such as AI to get to AI Safety does not look too risky, but if we can find ways to mitigate the personal risk of career changes, that'd be great in my opinion.

In other words:

  • In personal matters, you want to be conservative because 50 million do not make you 50 times happier than 1 million.
  • On altruistic matters, you should aim for risky and large upside options.

This fund could help bridge those different aims.

I wrote a prior version of this idea when I first got interested in EA: https://forum.effectivealtruism.org/posts/5jBa7chCZudMHWe39/donation-insurance

Like many semi-decent ideas, it was never actually implemented.

I like your conceptualization better, and I also think compared to 6 or so years ago, EA now has both more money and more operational capacity, so I feel pretty good at partially or mostly refunding the earlier donors, particularly the ones who have fallen on hard times.

Also related - Lemonade is an insurance public-benefit company where leftover money goes to charity

Maybe something like a social cooperative or, other for-profit models, would be a better fit, and maybe you could get tax exemption from the 90% donation while still paying regular taxes for the 10% "insurance pool". It could maybe enable only people who gave through this service to give money back.

This is great idea!

It seems to me that the purpose of the fund is to:

Generate income + validate donations -> so you can refund if needed

But by opening up your services to people outside the fund, now the purpose seems only to generate income. In which case, why not get the services funded by a private funder or EA funds?

This would be way simpler, as your job would just be to validate donations and transfer money. Which seems like - if nothing else - a good 80/20 to start out with before trying anything else.

Thank you for looking into this and posting about it. I've talked to a couple of EAs about a similar concept in the past. I'm really excited to see what what you find when you start prototyping and piloting this!

Some related idea might add value, but I'm quite skeptical of this idea. Almost all EAs would generally rather donate to an organization than to an "EA emergency fund," since the best opportunities to do good prima facie do not include giving money to other EAs (except in cases more like giving someone a grant, but we already have funds set up for grantmaking).

Also:

Note that both linked essays discuss a fund that only offers support to contributors. I no longer think that is desirable

This seems to contradict "donors can only recoup half of what they originally donated."

Finally, if something like this fund existed, it wouldn't make sense for the default way to contribute to be by donating to GiveWell "through the fund" — it would be more efficient to separate donations to organizations from donations to this fund.


That said, there may be efficiency gains from a system that helped donors maintain financial security while donating more (as you and Alicorn noted on LessWrong).

There might be several ways of thinking about the efficiency gain:

  1. It could allow people to skate by with lower personal emergency funds, thus donate slightly more, since they could rely on EA insurance in a pinch.
  2. The idea that you could "take back" donations if you fell on hard times might encourage many people to give much more now rather than waiting and giving later. I suspect this is a bigger effect than #1... many people today are pursuing de facto patient philanthropy because they'd rather have the optionality of money and then donate later in life when their finances are on more of a set path. EA insurance could help giving now compete with the attractive optionality of giving later.
  3. By giving people an extra layer of financial security, EA insurance might indirectly encourage people take on more high-risk ambitious projects generally.

Almost all EAs would generally rather donate to an organization than to an "EA emergency fund," since the best opportunities to do good prima facie do not include giving money to other EAs (except in cases more like giving someone a grant, but we already have funds set up for grantmaking).

I think I disagree with one specific thing: we want people to take risks in their careers so that large amounts of "good" are created. But then how can we compensate those people taking risks that benefit others? I am therefore in favor of decoupling taking large charitable upside risky career moves with personal risk.

In other words:

  • In personal matters, you want to be conservative because 50 million do not make you 50 times happier than 1 million.
  • On altruistic matters, you should aim to be risky.

This fund could help bridge those different aims.