How Kiva Can Make You Richer

[Guest]

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[norak]

Whenever I have thousands of dollars in my bank account and I am walking around at the mall, the temptation to whip out the debit card and start buying things (like a DVD or an mp3 player) is strong.

I can never lie, so whenever a family or friend asks how much money I have lying around, I have to tell them that I have thousands in my bank account, and when they hear this they usually ask if they can borrow the money. The problem is it's a pain getting the money back. I loaned $2000 to my brother two years ago and only received it back a week ago (he needed to buy a sports car).

Even though you can't earn interest, Kiva can help make your money less liquid and more scarce, thereby reducing the temptation to spend (otherwise you may go broke) and it gives you a perfectly good excuse not to lend to family and friends since you have already loaned the money to others who probably need it more.

[charity]

   On first read, this is kind of funny, but I think there is truth to it!  I find it easier to sometimes say no to those extra expenses like drinks and eating out, because it is sobering to think of how much good that money could do one of the borrowers on Kiva rather than being a quick fix for one nights dinner.  And there is definitely truth to having your money tied up so that isn't not available for loans or giveaways to needy relatives!

[thisdaydreamer]

Ha! Very true! 

And I thought the true riches came fr.om helping to fight world poverty...

[KivanSteven]

Great point Norak...I can testify to your point completely, and so long as personal expenses and bills are in line I think its completely a positive thing to have some of your money "tied up" and inaccessible for some time through Kiva.  There is no temptation when the possibility of that temptation is impossible.

[padders]

I have found kiva makes me less likely to spend money on things I don't need; a number of times it has crossed my mind how many loans I could get instead of X; and once that thought goes through my mind I don't generally by X.

[Bosi]

I have found kiva makes me less likely to spend money on things I don't need; a number of times it has crossed my mind how many loans I could get instead of X; and once that thought goes through my mind I don't generally by X.

Yes, that is me, too. Everything will be converted into KIVA units.

Of course there are also plenty of websites where you could receive interests ... But hey, it feels not good for me in my stomach ;-)

The one is that KIVA probably addictive. So, in Europe it would have been a warning. 

[NevadaStars]

I have found kiva makes me less likely to spend money on things I don't need; a number of times it has crossed my mind how many loans I could get instead of X; and once that thought goes through my mind I don't generally by X.

That's what I've been doing also!  My priorities have certainly changed since joining Kiva    Cheap wine isn't so bad after all! 

[ssnyder]

Here's another interesting story on how giving can make you rich:
http://www.portfolio.com/views/columns/2007/10/15/Charity-Makes-Wealth

[Dottie b]

Interesting article, Sam, but I'm afraid I don't understand how they arrived at their conclusion. Can you or someone try to explain it to me?

Dottie B

[ssnyder]

The explanation is on the second page (it took me a while at first to realize there was a second page since the page number link is kind of small and hidden):
http://www.portfolio.com/views/columns/2007/10/15/Charity-Makes-Wealth#page2

How can this be? Is it a statistical anomaly—or even a metaphysical phenomenon? While the link between giving and prosperity is not as mechanistic as returns on municipal bonds, there are some very earthbound explanations for it. Psychologists and neuroscientists have identified several ways that giving makes us more effective and successful. For example, new research from the University of Oregon finds that charity stimulates parts of the brain called the caudate nucleus and the nucleus accumbens, which are associated with meeting basic needs such as food and shelter—suggesting to the researchers that our brains know that giving is good for us. Experiments have also found that people are elevated by others into positions of leadership after they are witnessed behaving charitably.

The financial advantages of giving aren’t limited to individual givers. There is also evidence that donations push up income even more at the level of an entire nation’s economy. We can demonstrate this by looking at average household charity and per capita G.D.P. as they change over time. Charity and G.D.P. levels have moved together over the years. Corrected for inflation and population changes, U.S. government data show that G.D.P. per person in America has risen over the past 50 years by about 150 percent. At the same time, donated dollars per person have risen by about 190 percent.

These trends by themselves don’t tell us which force is pushing and which is pulling, however. To figure that out, we need to determine whether past values of one affect future values of the other. By using a method called vector autoregression, economists can see how changes in this year’s G.D.P. are affected by past values of both G.D.P. and charity. If an increase in last year’s charity levels correlates with a jump in this year’s G.D.P., it is logical to conclude that donating is stimulating the economy.

As in the case of individual income, the evidence is that increases in G.D.P. and giving mutually reinforce each other: Economic growth pushes up charitable giving, and charitable giving pushes up economic growth. Data from the Statistical Abstract of the United States and the Center on Philanthropy at Indiana University provide examples: In 2004, $100 in extra income per American drove about $1.47 in additional charitable giving per person. At the same time, $100 in giving stimulated more than $1,800 in increased G.D.P. This rate of social return shows that economic-multiplier effects are not limited to private investment. In short, giving plays a positive role in American economic growth. It is a good investment for our country. Some might even go so far as to say that donating to charity is a patriotic act.

[Dottie b]

Yes, I had missed the second page! Thanks!

The second page doesn't address my concern, though. I try to think it through, and sometimes I think I get it, and then I lose it!

This is the problematic paragraph:

"We start by predicting how much money people would donate based on how much they volunteer, regardless of income. This projection essentially strips out the role of income in giving. Next, see if that predicted donation level correlates with income. If it does and the correlation is positive, it means that giving pushes up income and not just vice versa."

I had to scribble down a example - someone who volunteers 1 hour a week vs. 10 hours. Projecting a donation based on that might mean the person volunteering one hour donates $100 (just for example) and the person volunteer 5 hours donates $500. Apparently the researchers learned that the person donating $500 actually has more money, and they assume that is because they give more. But it still seems to me that they give more because they have more!

I found it easier to follow the reasoning on the second page, that giving more raises GDP. I figure that's just a result of more money circulating faster.


Dottie B, obviously not an economist!

[Canadian Here]

Dottie:
NOT an economist here, either....but my legal reasoning skills tell me that this argument is based on
what is called, "circular reasoning", similar to the chicken and the egg scenario.
I  find it interesting that they don't cite any stats in support of their proposition. I wouldn't take this this
one to the bank, quite frankly. I'd want to see the stats to back it up.
Ever heard the old adage, "bulls..t baffles brains"? This may be an example of that! Without the stats,
it's impossible to tell if the claim, as advanced, is correct or not.
Lorna

[ssnyder]

I  find it interesting that they don't cite any stats in support of their proposition. I wouldn't take this this
one to the bank, quite frankly. I'd want to see the stats to back it up.

I had the same reaction when I read the article and emailed the author (http://faculty.maxwell.syr.edu/acbrooks/) to find out if he could send me a link to the relevant papers.  For what it's worth, he said that more information is in his new book:
http://www.amazon.com/Gross-National-Happiness-Arthur-Brooks/dp/0465002781

I also found this paper that gives more information and citations:
http://findarticles.com/p/articles/mi_qa5443/is_200710/ai_n21300818/print

[Sherri]

I have found kiva makes me less likely to spend money on things I don't need; a number of times it has crossed my mind how many loans I could get instead of X; and once that thought goes through my mind I don't generally by X.

Oh yes, I agree! I also find that it makes me less likely to fall into 'poor me' thinking. Poor me, I don't have a HDTV. But wait... I just loaned to someone for whom a $400 loan will change their life.  Someone struggling to send their kids to school, or patch the roof of their house. Yeah... suddenly poor me seems silly. Walking a new Path has changed my life! Suddenly everything is wonderful. 

(I just turned 'image animations' back on for my browser. I didn't realize all these smilies have little animations. They're so cute!!  )

If anyone ever listens to Dave Ramsey (radio money management show host), he also talks about how when people become givers, they tend to also increase their own success and wealth.

[Canadian Here]

I had the same reaction when I read the article and emailed the author (http://faculty.maxwell.syr.edu/acbrooks/) to find out if he could send me a link to the relevant papers.  For what it's worth, he said that more information is in his new book:
http://www.amazon.com/Gross-National-Happiness-Arthur-Brooks/dp/0465002781

I also found this paper that gives more information and citations:
http://findarticles.com/p/articles/mi_qa5443/is_200710/ai_n21300818/print

Sorry, ssnyder...I'm still not convinced.
Northing, I could see, at a quick glance, says anything about the medotholgy used in collecting the data
(e.g. type of sample, how obtained, the the survey methodology and the reason it was selected, in
preference to other methods. Were respondents compensated and if so, to what extent? etc.) The only
thing I noticed was that the number of respondents was large and they were ALL AMERICAN
and came from 29 States. I wonder how the individual States were selected and what the voting patterns
(i.e. political ideology) is in those particular States.
What about International "givers", like me? The study says nothing about us, and there are many of us on KIVA!
My opinion remains the same: I'd have to know a LOT MORE than what the author is telling us. His
study raises more questions for me than what it answers.
Thanks for the links, though! 
Lorna

[Dottie b]

Thanks for finding that, Sam!

I didn't find the explanation in the journal article any clearer than in the original article. Might have helped a bit if I had seen the tables he referenced, but I couldn't find them.

Whoever edited that should be fired - it was incredibly sloppy. And the author himself doesn't seem to be a disciplined writer. He's got a lot of extraneous stuff in there, sort of like he's trying to fill the blue book for the professor.

And I find his comment to you that there's more in his book interesting but not helpful. What's wrong that he can't clearly explain his main point to intelligent people?

Dottie B

[Canadian Here]

Thanks for finding that, Sam!

I didn't find the explanation in the journal article any clearer than in the original article. Might have helped a bit if I had seen the tables he referenced, but I couldn't find them.

Whoever edited that should be fired - it was incredibly sloppy. And the author himself doesn't seem to be a disciplined writer. He's got a lot of extraneous stuff in there, sort of like he's trying to fill the blue book for the professor.

And I find his comment to you that there's more in his book interesting but not helpful. What's wrong that he can't clearly explain his main point to intelligent people?

Dottie B

Naturally he wants to SELL his book and not give it all away for nothing...
I guess he's not that charitable! 
Lorna

[ssnyder]

Here's a PDF version with some tables & charts:
http://www.aei.org/publications/pubID.27279,filter.social/pub_detail.asp

It would be nice if there was a more precise way of determining if there's a monetary return on investment from charitable giving, but at least there's always the warm glow effect 

http://sciencenow.sciencemag.org/cgi/content/full/2007/614/1

[Canadian Here]

Here's a PDF version with some tables & charts:
http://www.aei.org/publications/pubID.27279,filter.social/pub_detail.asp

It would be nice if there was a more precise way of determining if there's a monetary return on investment from charitable giving, but at least there's always the warm glow effect 

http://sciencenow.sciencemag.org/cgi/content/full/2007/614/1

Sam:
I am perfectly ready to believe that there are temporary changes in the brain when giving, as evidenced by an MRI: an objective disgnostic tool.
I have trouble with the "subjective" evidence (i.e. "qualitative" methodology) which appears to be used in this study, from what I can see. To measure financial gains, losses
and other sorts of numerical data, this is the wrong type of reseach design to use. More properly, it ought to have been a "quantative" design, which is
considerable more objective than the former methodology. (I did a couple of 'research methods' courses many years ago in university but I remember most of the basics. These
courses were the bain of my existance at the time and I HAD to get at least a B+ so I really sweated them!.) 
Lorna

[Dottie b]

Thanks again, Sam! The answer may be in those tables, but unfortunately I never studied statistics! So I can't figure out why giving would cause increased wealth, as opposed to just being associated with it.

Ah, well.

(I did read somewhere, though, that giving to charity causes a pleasure sensation as strong as having sex. . . .) 

Dottie B

[KivanSteven]

But giving lasts longer so Id have to give the nod to that