“if individuals were perfectly altruistic, we should observe little volunteering. Why? Volunteering time implies an opportunity cost to individuals, as they could work and be paid elsewhere and instead give some of those wages to the charity.”
In his opinion, we should spend our time doing the work we could get paid the most for and then donating the money we made to the charity. This relates to the concept of comparative advantage, where countries should specialise in the things they can do most efficiently and trade for the rest.
This past Spring I had the privilege of leading a group of 28 students and 2 teachers to Vietnam, to build houses with Habitat for Humanity, but I had some doubts. The economist in me wondered if this was the best way to intervene in a poor community.
The students and teachers on our team built 3 brick houses for families in a small town near Rach Gia, in southern Vietnam. There was no doubt that we worked hard and provided better homes, as well as some cooking supplies and other gifts, for 3 families.
However, when I did the math roughly 75% of the money we put into the project was not spent on the build itself. It payed for things like our flights, hotels and food for our team. So, theoretically at least, we could have donated all of the money to Habitat for Humanity and perhaps funded the building of 20 houses, rather than building 3 ourselves.
I spoke with the Volunteer Program Coordinator at Habitat for Humanity (Le Thi Kim Ngan) about my concerns. She had given me in particular a lot of guidance, to keep me on top of all of the arrangements for our team, and I trusted her to be honest with me. I asked her, “Ngan, do you sometimes simply wish we would send a cheque for all of the money and stay home?”
I was surprised by her response and I wanted to share it with you. The following are her reasons why she feels donations of time and effort are better than money. She said to me:
Benefits for locals
-When your team donates it’s time, the families you help get to learn about you. It is more personal and friendships are made between the families and the volunteers. We could inform them of your donation, but it wouldn’t have the same impact.
-The families get the opportunity to host the teams and this builds pride in their local community. They enjoy sharing their neighbourhood during construction time.
-The local people have opportunities to meet and talk with the volunteers. And they will be more interested if the volunteers are international. In this way, they can learn about languages and cultures and open their minds to friendships around the world.
-It supports the local economy. Businesses benefit from the volunteers spending money on flights, accommodation, transportation and food.
-Local community organisations also benefit. They become more accustomed to partnering with foreign people and organisations. Habitat for Humanity also benefits by being able to employ people to work with you.
Benefits for Volunteers
-Volunteers get the opportunity to learn by traveling, visiting beautiful places and interacting with the host culture.
-They get to feel proud of their work and they get a good feeling from the memories of their work.
-They make new friends.
-They get a new view on local life in a developing country and perhaps grow more concerned for the poor.
Ngan also said that “when the volunteers return home they will share their volunteering story with their families, friends and communities” which could bring, “more contributions to improve more poor families’ lives after that.” In this way they might cultivate a habit of volunteering. When they are teacher or running their own companies in the future, they might encourage their own staff to volunteer.
What surprised me most about her thoughts was how much she felt the local people really valued their time with us. I wouldn’t have expected that. And actually, I remember noticing this when we were there. A lot of community organisations wanted to meet with us, so we would often stop our work and have a somewhat formal meeting with representatives from a local women’s union, for example. One afternoon we stopped work early and played volley-ball against some local youth. At the time that seemed a strange use of our time, as we’d come there to work hard building houses. But it had seemed somehow important to the community.
Also (thinking a bit more as a business teacher now) I can see that Habitat for Humanity benefits from a competitive advantage. They offer an experience that we simply couldn’t get if we just donated money. This attracts groups like us to work with them, rather than donating to another charity, so they get donations that they might not otherwise get.
Economists wouldn’t dispute the value of the warm feeling we get from volunteering in a way that makes us feel good. I am glad if my students felt that they had done some good in Vietnam and I definitely felt that way as well.
If you are considering volunteering with Habitat for Humanity in Vietnam, visit www.habitatvietnam.org or contact me and I can answer your questions or put you in touch with Ngan.
Andreoni, James. “Privately Provided Public Goods in a Large Economy: The Limits of Altruism,” Journal of Public Economics, February 1988, Vol. 35, No. 1, pp. 57-73. as cited in The Economics of Charitable Giving: What Gives? from the Federal Reserve Bank of St Louis.