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« Six Painless Ways to Cut Your Grocery Bill | Main | Books that Make Great Gifts: FMF Readers' Edition »

November 28, 2010


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Logically it doesn't make sense, but we too have found that even though we continue to up our giving we still have plenty of money for living, saving for retirement, etc.

So long as we don't fall into the heresy of the "health and wealth gospel", I think the biblical principles of sowing and reaping do apply. We do tend to forget that Christians are called to suffer in this world; some suffer much more than others. So I think it is incorrect to believe that in every, single circumstance Christians will always be fincancially rewarded in their giving. Providence controls all, and that's a great comfort.

Great stuff, and very encouraging to hear FMF!

I love you Sunday Morning Posts FMF!!

The really interesting next step to this would be to control for, for lack of a better term, personality. What I mean is, the example controlled for race, religion, family size, income, location, etc. But it chose subjects who either gave generously or did not of their own free will.

So, if we take that statistical sample represented by hypothetical generous family, and force them to stop giving at all for several years, do they slide back on the financial health scale? If we take the family that gave little and force them to donate 10% to charity, but change nothing else, will they improve (as some evangelists preach when looking for donations)?

The point is, is just giving the money what brings the benefit? Or is financial donation part of a generous personality, and that personality-type tends to not only give financially, but also be seen as trustworthy, generous, and worthy of support by others with the power to contribute in various ways to the generous person's prosperity? Would the benefit of that personality still be there if they were compelled by external forces to no longer make financial contributions?

A similar situation would be an article I once read (long ago - sorry I can't cite it) that suggested that drinking, smoking, and golfing were positively linked to career advancement. Does that mean lighting up, hitting a few balls around the back yard, then pouring youself a glass in your living room would put your career on the fast track? No, of course not. It was the networking with colleagues in the break room (now alley behind the building), bar, and golf course that produced the benefit. In other words, the social personality produced the advantage, not the contents of the smoke, glass, or golf bag. Those just happened to be some of the things that sociable people liked to do. People with that personality would probably be successful even if they quit smoking, jumped on the wagon, and used it to run over their clubs.

That leads to another qeustion: do those who exhibited the benefit of generosity give in ways that are visible and obvious? Like at charity functions that expand and solidify their personal network, or in ways that "put their name" on the donation, be it on a brick in the veterans' home patio or a wing of the new childrens' hospital? Or does benefit still appear for someone that gives anonymously, or at least in a way that leaves few knowing how much they donated and to whom?

I would like to think the generous personality is the real source of prosperity and therefore the anonymous giver gets the same benefit. This would be in line with biblical principles, not to mention support my own reluctance to ever discuss or reveal charitable donations to anyone other than the recipient or facilitator (and IRS of course). However, the scientific part of my brain would love to see it supported quantitatively.

Correlation does not imply causation. Repeat it with me. Correlation does not imply causation.

Which do you think is more likely:

a) This BYU guy's claim-- that giving money magically causes your income to increase, or

b) a family with better income (or higher prospects of improved income) is more likely to give more-- because they'll have more.

We could also consider a third option-- that both of these things (earning and giving) are correlated to a whole host of other characteristics of successful people, and that there is no CAUSAL relationship between the two at all.

Frankly I'm disappointed to keep reading things like this, for two reasons.

1) It's irresponsible to tell people without money to spare that if they give it away, magically they will start earning more.

2) The reason to give IS IN THE GIVING, not because of a hollow promise of more money to come back to you.

He is not a BYU professor. He was doing a speech at BYU from which the article is written, I was there at the time. He is Roman Catholic and lives in D.C. He used to work at Syracuse University.

Well, I am not one to think that because they donated 100 dollars, 375 dollars will somehow show up in their bank account. However, I do think true givers make 'giving' as part of their budget. Therefore, perhaps they work harder, are better networked as part of their charity, etc. So in the end, their career and income benefit from their priorities and principals, although in a roundabout way.

RBK is right on all points. Correlation does not imply causation. Those numbers merely show that people who earn more, give more.

"If you give $10,000, you're better off by $37,500"

FMF, did you really tell people this? Why do you also recommend investing in index funds? It sounds like giving crushes the market!

I think I'd like to see more research and more clarity in analysis.

Does the Return On Giving (ROG) vary with level of giving or does it have diminishing or increasing returns? An average $375 return on giving $100 is just that, and does not necessarily indicate that giving $100,000 makes you better off by $375,000, so I would not make that extrapolation unless Brooks' research made that finding.

If that were the case, we could grow the economy out of recession simply by giving sufficiently.

Giving is still good and desirable, with research and ample anecdotal evidence to support it

Just wanted to let you know that this post made me unsubscribe to your RSS feed. Ridiculous.

Unfortunately, Arthur Brooks is not the best or most honest researcher. If your facts come from his book "Who Really Gives?" they may or may not be solid. Newer research (check out "American Grace" by Robert Putnam) has discredited several parts of his book. Personal conversations reveal that Brooks is heavily swayed by what his publisher thinks will sell books, rather than what his data really show. (As a public policy researcher, I can tell you it is very easy to make a case you want to make by fudging data, and Brooks is one of the worst about that).

Ridiculous post! It does not explain how come people who give more earn more. And if this statement for giving was true for the economy, everybody would like to give their money away as soon as possible.

I agree with J.R. and Get Happy Life: "ridiculous."

The finding referred to in the main post is actually quite simple to explain. You can look at two families that share various demographic criteria -- religion, income, number of children, you name it. But there will be differences in the free cash flow between those two families that are not reflected just in basic demographic statistics. For instance, maybe one of two families with the same income is currently paying for a sick grandma that's taking up an unusual amount of money, while the other has no such expense. The family with the lower fixed expenses will both be in a position to donate more to charity *and* to save more. The family with the higher fixed expenses will cut back on charity, *and* they'll save less. (They probably also cut back on a variety of other things.) All this finding shows is that basic demographic criteria don't capture everything in the real world. There are lots of what they call "confounding variables" that these simplistic models ignore.

I do think that people should give money to charity. But the notion that you'll earn a 3750% financial return on your charitable giving is totally absurd, and the fact that the poster drew that inference should make him question the research he's relying on. There are lots of good reasons to give money to important causes. But neither God nor any one else is out there handing $375 to everyone who gives $100 to some charity.

Correlation, not causation. I'm not saying that you shouldn't donate to charity -- you should -- but don't expect to earn more money when you do. It's more likely that the people who choose to donate more are more generous, more congenial in general. They may forge better relationships, be offered better opportunities as a result, get along better with friends and colleagues, and so on.

It's like saying that the key to success in the tech industry is to drop out of college. Mark Zuckerberg did. Bill Gates did. They dropped out of college, but is their success attributable to dropping out? No. They both got into prestigious schools and were remarkably brilliant well before they dropped out.

Sounds to me like the prosperity gospel. I know quite a few people who give generously and yet are not seeing an increase in income or net worth. I think it comes down to a situation of people who give are more likely to be more in control of their finances and/or careers. I would bet you could find similar statistics of people who put 10% into their 401k see great increases in their net worth and salaries over their career.

Correlation does not equal causation. I can't just give $100 and expect to get $375 back. However, by giving $100 I am most likely operating under a budget, which means I may not needlessly overspend by $375.

Your Mileage May Vary.
God is NOT an ATM machine, nor is He stocks, nor is He a CD.

Just because you give, does NOT mean you will prosper. In fact, you may give generously your whole life, and be super-poor your whole life too. I know this firsthand.

Rewards can be given AFTER you've died. You're not always going to prosper on earth, and to say so, is sometimes a lie.

I am all for giving to charity. There are plenty of good reasons to give to charity, so I am surprised that people have to twist statistics in order to justify it. Why not just talk about the true benefits of giving (it makes you feel good, you get to help others, you get to network with like-minded people, you get a tax deduction)? There certainly are enough benefits to charitable giving that you don't have to justify it by going through some mental gymnastics. Others have pointed out quite nicely why correlation doesn't imply causation, so there is no need to rehash it.

After reading this, there are two possibilities:

1. Professor Brooks is just innummerate and doesn't understand statistics.
2. Professor Brooks does understand statistics but is twisting them to suit some agenda.

Can't say which it is, since I haven't heard of the man until today.

On my blog, I have a semi-regular feature called "misleading financial post of the week". Unfortunately, this article is in the running. I say unfortunately because FMF is one of my favorite bloggers and I generally agree with him on most things, and the things I don't agree with him on, at least he has a rational argument to the contrary. However, in this case, I have to call him out on it.

Hmmmmmm. My keen sense of perception is telling me that most of you aren't liking this topic. ;-)

BTW, I see a lot of rebuttal of Mr. Brooks' findings, but no one is addressing those of Dr. Stanley. Is this because you agree with what he says (which is the same as what Mr. Brooks concludes)?

It's not exactly the same, since Stanley is talking about net worth while Brooks is talking about income. The same objections apply, though. Giving is correlated with income - OK. Giving is correlated with saving - OK. There's still no causation proven, but it's far more plausible that underlying personality traits caused all three than that the giving caused the prosperity.

Stanley's conclusion leads me to believe that givers tend to save a higher percentage of their income than the non-givers, thus the higher net worth.

Brooks' statement is hollow, concoting a scenario to illustrate his point is not a stastical correlation.

08graduate is right. The same statistical objections exist with Stanley's statement.

How about this, FMF. I don't want to rake you over the coals for this because I know you mean well and that you're trying to encourage giving. There's a lot to be said for that. What I would suggest is that you simply use results like these to encourage readers to be better people, as it seems like the evidence indicates that the sorts of people who give with an open heart tend to be the sorts of people that find success in their financial life, and that does not appear to be coincidence. I think that's a perfectly reasonable statement as long as you give the caveat that there is no evidence of a causal relationship.

There is no promise of ROI from giving, and it's irresponsible to tell people that there is. But there's nothing wrong with encouraging them to be the best people they can be with their money, within their family, and within their community. If you can convince people to improve their lifestyle in this manner then you will undoubtedly turn them into givers AND savers-- and you'll have them doing it for the right reasons instead of the promise of reward.

FMF, others have had their say with the soundness of the statistics and methodolgy, but here is my data point (it is one, and one does not make a line or a trend, but it is similar to the findings in the story).

I was raised Catholic, but had a falling out with the church that lasted for MANY years. My family has come into the Christian faith within the past year. My wife and I were baptized in July 09, but did not start our 'official membership', including tithing until this year. This was partly because we thought that we couldn't make room in the budget for it. Finally, we just sat down and chose to make it a priority.

As I look back over the year's budget and actuals, along with the Quicken files, I am amazed that we could go from giving just over 0% to a full 10% and see our Net Worth increase 13% during the year.

Causality, No. But giving does NOT prevent the growing of wealth either! That is the take away from the article that I will remember, not the perhaps flawed logic that says if I give $100, I will get $375 in return...

The key take away is what Speed Weasel said, "giving does NOT prevent the growing of wealth." When teaching personal finance to churches, I focus on this issue less than the purported benefits.

An awful lot has been said about this topic. I'm not an expert on statistics or causal relationships, so I won't attempt to comment on that. I will say this though. The evidence shows that you can at least say that generosity does not hinder success, so when considering whether to give or not, the amount of money you currently have should not enter into the decision. I would bet you'll find that some of the most wealthy and generous people were generous long before they were wealthy.

I think this is an excellent article for FMF to do a follow-up post on. The findings are interesting, yet I feel they are incomplete.

I would like to know if simply giving money away really causes the income to increase - or if it is nothing more than correlation.

This doesn't go into the mechanics of how givers receive more if they give more. Are there examples of how this works or is it magic?

Tommy Z - It CAN'T instantly cause income to increase, or else myself and at least 4 or 5 of my close friends would be wealthy people indeed.

And I'm very frugal and debt-free to boot, so my poverty in the face of giving can't be blamed on reckless spending. And my income has NOT increased, it's actually decreased as I gave. So....yeah.

Tommy Z --

Since this is a Sunday post, here's the Bible's take on your question:

The Bible talks about sowing and reaping often to describe how giving "works." Just like you wouldn't plant a seed and expect a harvest the next day, you shouldn't expect an immediate return on your giving. But a return will come -- and it will be more than what you planted (gave).

FMF - Don't forget that the 'rewards' might NOT be in cash, and might not be on earth in our lifetime either. Not everyone gets rich on earth. Some people's rewards are Heavenly, or if they are reaping on earth, it might not even be anything material. :P

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