ALLISON SCHRAGER | THE MICROPHILANTHROPIST | December 18th 2007

Can you really help Africa by buying a t-shirt or the right sort of coffee? Perhaps so, says Allison Schrager, but you could probably do better by putting in a bit more intellectual effort and giving the money directly ...

Special to MORE INTELLIGENT LIFE

Christmas is the season of frenzied last-minute shopping, and cacophonous sales pitches aimed at impulse buyers. Among the latter are promises from retailers to give a part of the price or profit on a particular product to charity. This may sound like an efficient way to do good while shopping. But as I look more closely at the sweater that will make the world a better place, I can't help but wonder how, and why.

Assume the retailer believes that I will be more likely to buy the product when it involves a donation to a worthy cause. I may even pay a premium for the pleasure, a sort of voluntary goodwill tax. If so, the retailer has a good strategy for increasing sales and generating good publicity. And if buying the product has some positive externality, such as saving whales or curing breast cancer, then I am happy to purchase it independent of the retailer's strategy. There is some good, and no obvious harm.

That said, we are rarely offered much information about how the retailer plans to deliver on his promise. Which charitable organization is being supported, and how much of the proceeds are being donated? You don't have to be an economist to wonder about vague claims such as, "Helps sick and starving people in Africa". A tall order. If I were giving directly I would want to know exactly how my cash would be used. Even well-intentioned NGOs can be ineffective; at worst they can naively foster corruption or steer limited resources into industries that stall growth.

A second problem is that we are rarely told how much of the "donation" goes toward advertising the charitable gimmick, and so boosting the retailer's goodwill—and how much goes directly to the cause. If I pay a premium, am I merely financing a PR campaign?

In general, I try to ensure that when I give money, I think as hard as, if not harder than, when I spend it on myself. I use economic logic to rationalise the odd extravagant purchase: the boots I love may be expensive, but I place a value on them even higher than the crazy price, therefore I am getting a bargain!

The proposition that some small fraction of my spending on a pair of boots will go to a vague but important-sounding cause may be better than nothing. But settling for that assurance is a much lazier and less efficient approach on my part than putting money aside and making a considered donation to a charity I have carefully researched.

That said, I am not entirely against "embedded giving", as it has come to be called. If I am indifferent as between two goods with a similar price, and one happens to give to a familiar charitable organization, why not buy the goodwill commodity? For example, I do have a (Red) iPod. The (Red) cause fights for public health in Africa. (Well, actually, I won the iPod at last year's office Christmas party raffle, but I like the cause and red makes an attractive iPod colour. If I had bought it myself, I would have picked out the same one and perhaps felt a little smug at providing medication to Africa.)

And, to the extent that retailers publicise whatever cause or charity they support, they raise awareness and accountability. On that basis, if you have the option of "embedded giving" this week, at no obvious extra cost to yourself, then take it by all means. But try to see it as a complement to direct charitable giving, not as a substitute for it.