This week a huge “Carbon Counter” was unveiled near Madison Square Garden in New York. The display, similar to the National Debt Clock, aims to provide a reasonably sound, real-time estimate of global carbon emissions (you can see the counter on the web here). The reason the counter is notable is that the sponsors and creators get the science behind the counter exactly wrong. Not the science of carbon emissions or climate change, but the behavioral economics and psychology that purportedly explains the purpose of the counter. In their press statement, the sponsors say, “Behavioral economists will tell you that the simple act of placing an electricity consumption meter in plain view can substantially cut a home’s energy use. The same goes for real-time miles-per-gallon meters in cars, which change the way we drive.“ This is true—but it is equally true that the reason such meters work is that the individual gets real-time feedback on the effect of various actions they take. They meters shorten the feedback loop from cause to effect and make the connection easy to see and understand. However, the same economists and psychologists who have demonstrated the effect of personal electricity and gasoline consumption meters have also proven that showing people big numbers with no feedback mechanism does two things: 1) causes people to tune out the information that they cannot easily assimilate, and 2) convince themselves that the number is completely out of their control; individual action is pointless.

So, rather than being helpful, the carbon counter is counterproductive. It doesn’t encourage people to take action; it tells them that action is irrelevant. Despite the claims of carbon neutrality for the display (achieved through offsets), the display is actually quite strongly contributing to the problem of carbon emissions. A much better use of funds, though far less public, would be buy and install some of those personal electricity and gasoline meters.

NB: for an excellent discussion of how to help people make better decisions and when information helps and when it hurts, read Nudge by Cass Sunstein and Richard Thaler. We can’t recommend it highly enough.

A year ago the global food crisis was front and center in international circles. Today, you’d be hard pressed to find the phrase appear at all. But the problems so evident last year have not been solved, they’ve mostly just been displaced from their position at the top of the crisis list. Indeed, this week came news that one billion people in the world are hungry, defined as consuming less than 1800 calories a day—a number that is 10% higher than at this point in last year’s food crisis.

Behind the scenes there’s plenty being done, though with quite dubious potential outcomes for food security for the world’s poorest and most vulnerable. A few weeks ago, the Economist featured a special report on what it calls “land grabs” in the world’s most productive agricultural regions. South Korea, UAE and Egypt have all taken long-term leases on more than a million acres in Sudan for instance. Saudi Arabia has launched a $100 million long-term program in Ethiopia that includes the right to bring all food grown in the project to Saudi Arabia. If you’re thinking, “Aren’t Sudan and Ethiopia the sites of recent famines?“, you’re right. Troubling, isn’t it?

Meanwhile, the biggest food crisis of all lurks not very far over the horizon. Improbably for such a potentially devastating issue, the re-emergence of wheat stem rust hasn’t gotten a lot of attention. Stem rust, a fungus that typically wipes out 50% to 80% of an affected field, was the scourge of global wheat production until the 1960’s when resistant varieties were developed and introduced around the world. Defeating stem rust was arguably the biggest contributor to the Green Revolution. In 1999 however, a new variety of stem rust emerged in Uganda (and is therefore called Ug99). There is no variety of wheat in the world that is resistant to Ug99, it is especially virulent and it is spreading rapidly. It has already spread across Eastern Africa, jumped the Red Sea and arrived as far East as Iran. Experts say 20% of the world wheat crop is in “imminent danger.“ It is only a matter of time before it reaches India, Pakistan, Russia and China—all of whom are among the top 10 largest wheat producing regions in the world. Time is not on our side—developing varieties resistant to Ug99 using conventional methods would take nine to 12 years; bioengineering could shorten that time, but only if we get lucky. Which means we could be facing a food crisis soon that utterly dwarfs the last two years.

In these times of near double-digit unemployment levels, it is hard to believe that job recruiters actually compete with one another. And yet employers insist that it is difficult to find the best people, and to do so—and keep them—companies need to have any number of ways to attract them, starting with competitive salaries. So it does seem strange that the public education sector has so staunchly resisted making salaries in any way dependent upon a person’s performance of the job. Indeed, more than 95 percent, by most counts, of public sector teachers are paid a salary based on a combination of factors, including tenure and credentials, that have nothing to do with their performance as it relates to student learning.

There are a number of places that are trying to change that. Geoffrey Canada of the Harlem Children’s Zone promotes merit pay for teachers as a way of attracting high potential talent (and culling out ineffective, and even damaging, teachers); the Milken Foundation has also donated to an initiative in Dallas aimed at experimenting with merit pay for teacher’s programs. A number of schools opening in New York City—including this one profiled in a recent New York Times piece—are designed with the premise that excellent teachers paid well will successfully help kids learn.

It should be noted that there is no conclusive evidence that paying teachers for their performance in the classroom in fact results in better learning for students. These experiments are driven by intuitive sense, and the fact that the non-experimental research available is positive. A useful 2008 paper by economist Michael Podgursky of the University of Missouri, and education specialist Matthew Springer of Vanderbilt, provides an overview of the few efforts that have taken place and the evidence is suggestively positive, though not conclusive. The authors say that empirical results are thin on the ground because too few comprehensive initiatives have taken place, and those efforts that are underway were not designed to be rigorously evaluated (for example, programs such as KIPP do a lot of different things, including pay their teachers well, and they are ‘schools of choice’ meaning parents and students have to both choose and be chosen, which creates a non-random study population).

A few interesting points are worth nothing from this work however: First, the available research shows no relationship between a teacher’s credentials and how well students learn—certified or not, Ivy-league educated or not, it seems teacher training does not directly correlate with teacher skill. This alone suggests that paying teachers based on their educational path doesn’t make any sense. The second useful point is that the available research suggests that performance-based pay structures for teachers would potentially work in two ways to improve learning. First, by paying teachers salaries comparable to what they may earn in the private sector, more talented people may opt for careers in education; second, under-performing teachers will have an incentive to improve their performance (assuming any program provides a means for that improvement), or they will be culled from the ranks, resulting in a higher percentage of the teacher corps being high performing. The suggested improvements based on these concepts alone seem worth exploring.

Hopefully, those explorations will be permitted to happen in significant enough numbers to be meaningful. Unfortunately, school experiments have come under particular attack from teachers unions. The Wall Street Journal reported last week that two school choice initiatives are under siege by public school teachers unions in Milwaukee and New York City—in the case of New York, the union is objecting to the growth in the number of charter schools since Mayor Michael Bloomberg took over the department of education. Charter schools are often at the center of merit pay experiments. Allowing such experiments to take place can only benefit everyone: teachers, unionized or not, will have more information on what really works. If it turns out that merit pay is ineffective, the unions can say “I told you so.“ If effective, though, unions will be able to be more actively involved in forging policy that makes sense regarding wages, benefits and even—shocking—when a teacher should be fired. Permitting in the teacher corps the kind of career dessication enjoyed by French civil servants is a guarantee of stagnation. And that benefits nobody.

Today GivingUSA announced its annual tally of philanthropic giving in the United States (in this case covering 2008). The numbers this year unsurprisingly show a roughly 6 percent decline in giving in 2008. The commentary is generally following the usual pattern: Some are pointing to the biggest decline in giving in nearly 50 years as proof that the sky really is falling for many non-profits. Others are painting the numbers in a positive light noting that the 6 percent decline is far less than the fall in net worth of individuals, foundations and corporations and that the total figure for philanthropic giving still exceeded $300 billion (2007 is the only other year to pass the $300 billion mark).

Indeed one can read the numbers however one is predisposed to, but it bears repeating several points about how these numbers are generated before taking either the positive or negative interpretations to heart:

* The numbers are estimates. The best estimates currently available but estimates none-the-less. It is therefore entirely plausible that there is +/- 6 percent of error in the estimates, particularly in an era where the forms and norms of giving are rapidly changing. It is possible that the estimates missed enough giving to close the apparent gap between 2008 and 2007.

* (Ed. Note: See Correction Below in Comments) The numbers include pledges, not just actual funds transferred. Given that there is lots of anecdotal evidence of pledges being revoked, scaled back or defaulted on, the decline in giving could easily be twice or three times as large as estimated once the dust settles.

* The most surprising, and frankly frightening, data point is that giving for basic human needs (food, shelter, jobs charities) fell three times more than the average decline. That flies in the face of conventional wisdom about how givers react to tough times (see for instance, the comments of United Way CEO Brian Gallagher from our interview with him last summer.)

* In the end, there is certainly reason for caution in believing that actual giving has changed much: annual giving by Americans, when adjusted for inflation and economic growth (or decline, as the case may be) has been essentially flat for the 50 years or so that we have data. Therefore, we should demand a lot more evidence than just preliminary estimates before we believe that a trend that has held for several generations has changed.

The inter-generational cycle of poverty has resisted several centuries worth of philanthropic efforts. Basically, the best predictor of adult poverty is childhood poverty. Children who grow up poor under-perform in school, get lower-paying jobs, have their own children earlier, and often remained mired in poverty. To fight this cycle, a huge proportion of anti-poverty philanthropy is devoted to improving school performance among poor children. Unfortunately there are few replicable success stories from these efforts.

Two studies published this month offer some hope of understanding why the cycle of poverty is so hard to break and what philanthropists can do about it.

First, research by Gary Evans and Michelle Schamberg from Cornell University has persuasively shown that poverty raises the allostatic load of a child, and a higher allostatic load has dramatic depressive effects on working memory. (The full paper is here.) In layman’s terms, allostatic load is a measure of the physiological effects of stress; working memory is the ability to hold and manipulate “bits” of information. Working memory is critical for math, reading comprehension and analytical thinking. While we’ve essentially always known that poor children perform below average in school, this research conclusive demonstrates one of the major factors in that poor performance. (Keep in mind that working memory isn’t a measure of intelligence but does have an impact on the type of learning most easily measured on standardized tests.)

The second study is a working paper by Roland Fryer of Harvard University that shows the first methodologically sound evidence of closing the achievement gap among a population of poor children. This success was achieved at an intensive middle school program run by Harlem Children’s Zone. This is big news since, much to the surprise of much of the public, to date there has been no evidence that any program can systematically and consistently improve school performance. Evans and Schamberg’s research perhaps sheds some light on why the intensive method used by HCZ (and, to be fair, by many other programs like KIPP) appears to be working: children with impaired working memory would benefit from longer periods of focused repetition and practice of key concepts and skills.

So there is a lot of good news: clear evidence of one source of poor children’s lowered school performance and evidence that something can be done to overcome some of the limitations.

Philanthropy’s drive to deal with “root causes” will undoubtedly send many looking for ways to reduce stress among poor children. That would lead us back into very questionable territory, however. Evans and Schamberg’s research doesn’t explain what the exact source of the stress experienced by poor children is, nor why the stress experienced by poor children is so different than that experienced by many non-poor children. For example the children of parents in the armed forces obviously experience heightened levels of stress, between frequent moves and having a parent deployed to a war zone—but there is no reason to believe that military children systematically underperform compared to their peers. Another large, unanswered, question is the role of nutrition. Allostatic load measures physiological changes that are also tied to poor diet and a lack of exercise (blood pressure, creatinine levels, BMI). Is there an interaction between stress and the poor diets of many children? We simply don’t know.  There’s also the fact that interventions that take poor children out of the typically stressful environment (by relocating them to middle-class housing for example) have been shown not to have much effect.

The lack of certainty about root causes should encourage us to focus philanthropy on interventions that help children with impaired working memories—and to fund research that can help understand the exact interrelation between allostatic load and poverty.

Jameel Poverty Action Lab has published their paper detailing the findings of the first randomized controlled trial of “normal” microfinance—small, short-term loans made in a group liability structure. The final findings are quite similar to the early results we reported last October. To quote the paper:

“Households with an existing business at the time of the program invest in durable goods, and their profits increase. Households with high propensity to become business owners see a decrease in nondurable consumption, consistent with the need to pay a fixed cost to enter entrepreneurship. Households with low propensity to become business owners see nondurable spending increase. We find no impact on measures of health, education, or women’s decision-making.“

Really understanding what was found in the study requires reading the full paper. But here are some additional interesting excerpts:

* “There was almost no MFI borrowing in the sample areas at baseline. However, 69% of the households had at least one outstanding loan. Loans were taken from moneylenders (49%), family members (13%), friends or neighbors (28%).“

* “31% of households ran at least one small business [before the availability of microfinance].“

* “[T]he reported purpose[for the loan] was starting a new business; 22% were supposed to be used to buy stock for existing business, 30% to repay an existing loan,15% to buy a durable for household use, and 15% to smooth household consumption.“

* “[A]pproximately 1 in 5 of the additional MFI loans in treatment areas is associated with the opening of a new business.“

* “[T]here is no significant difference in total household expenditure per adult equivalent between treatment and comparison households.“

Some readers may think the report is fairly damning to the marketing claims of the impact of microfinance—more studies like this in other areas and over longer periods are necessary before we can reject the traditional views though. Ultimately, though, this study is very good news for microfinance because it begins to illuminate what is really happening among borrowers. That information, in turn, can be used to improve the product to make sure that the best products are offered to clients—and the impact of microfinance can improve.

I have a bias towards education—I always want more of it, whether formal or informal. I generally believe that with education people are equipped to do a lot of things, like make better decisions or evoke rights they would not have otherwise known they had. I am clearly not alone in this, as a lot of social and charitable programs—from comprehensive sex education, to vocational training for micro-entrepreneurs—derive from the idea that education helps people do the things and make the decisions that will allow them to ultimately get a better job or earn more money or receive better services or otherwise avail themselves of a lot of things that will make their lives better. Yet a cursory glance at the available evidence has made it clear that, unfortunately, education does not always deliver on its promise.

First, some positive examples: A project in Kenya aimed at informing adolescent girls about the demographics of HIV-infection in their country showed that when girls were told about the risks of having sex with older men—a common practice in East Africa—they avoided those relationships. Score one for education. In another positive example, a microfinance project that added vocational training for a randomly selected group of borrowers resulted in higher earnings for those trained. Interestingly, earnings were even higher for the borrowers who didn’t want to do the training when it was first offered to them. Score two.

But now the negative examples: A project in India geared toward empowering community members to pressure government agencies into providing better educational services had no impact on community activism, despite the program’s focus on informing townspeople about the services they were entitled to, the deficit between promise and delivery, and ways to contact the responsible agencies. Also, preliminary indications from a study aimed at gauging whether ‘financial literacy’ education would help poor market vendors borrow less from moneylenders and save more to finance their business didn’t show evidence of behavior change. Closer to home, an evaluation of abstinence education programs showed they actually did not in fact increase abstinence among participants (though neither do they increase the frequency of ‘unsafe’ sex, a concern of many critics of such programs).

By no means a comprehensive review, these examples nonetheless suggest that simply educating people is not a consistently effective way to influence behavior, much less yield objectively better choices among those educated. Clearly there are other factors in play, such as peer pressure on sexual behavior, or community norms on activism. All of this raises sincere questions about why education works when it does—and how those lessons can be applied to the situations where they do the most good and supplemented where education just isn’t enough.

Day Two of the Council on Foundations annual conference featured two great sessions that we’ll turn into articles soon. In each case, the presenters had useful, substantive and thought-provoking things to say. Of course, there were a couple of not-so-great sessions as well.

The first session that really caught my attention focused on philanthropy’s role in ensuring markets work in low-income neighborhoods. A little over a year ago, I wrote a post on “emerging opportunities” calling out the possibility of bringing low-cost, high-quality supermarkets into poor neighborhoods. Apparently I was already behind the times even then—an organization called The Reinvestment Fund has been doing exactly that, using investment capital, in my own backyard for several years. Panelist Jeremy Nowak had plenty of things to say about the challenge of integrating philanthropy and for-profit investment, with this quote perhaps the most telling: “We couldn’t deal with foundations because the foundations that we talked to wanted to be the customer. We needed to serve actual customers.“ A similar sentiment was expressed by Moira Carlstedt, president of the Indianapolis Neighborhood Housing Partnership (which provides market-rate mortgages for low-income residents of Indianapolis who even during the bubble couldn’t get credit) who noted that her organization had turned down several program-related investments from foundations because the foundations had too many stipulations for the investment to be worth it. Another soundbite of Jeremy’s worth repeating: “Quick, scale and philanthropy are mutually exclusive.“ The very clear message from the session was that there are lots of opportunities out there for philanthropy to help nudge markets in the right direction, but philanthropists and foundations have a lot to learn before they can capitalize (pun intended) on those opportunities. We’ll be interviewing several of the panelists in the next few weeks so we can provide a fuller picture of what they had to say.

The other terrific, and disappointing, session was on slavery and trafficking. Terrific because the presenters brought passion and knowledge in equal parts to the session. Disappointing because there were so few people there to see it—it was the most sparsely attended session I saw at the conference. All the presenters did a great job of illustrating how easy it is to overlook slavery and trafficking even though it is pervasive—a charge I personally and Philanthropy Action will both plead guilty to but hope to rectify. We’ll be publishing more content from this session in the coming weeks but for now I’ll provide two pointers to what seem to be a high-impact, low-cost opportunities highlighted in the session. Julia Ormond, founder of ASSET, noted that the State of Texas recently issued a regulation requiring all outlets holding a liquor license to post the National Trafficking Hotline number. According to Ormond, now half of the calls to the hotline originate in Texas. A little funding to help speed the adoption of a similar regulation in every state would seem to be a great opportunity to have a big impact on trafficking. Kevin Bales, founder of Free the Slaves, pointed out that while similar numbers of people in the US are murdered and trafficked each year (an estimated 17,000), there are 85,000 trained, full-time homicide detectives but less than 50 trained, full-time trafficking experts in police departments around the country.

Now for some sour notes. First, continuing the trend from the first day, the lunch plenary speaker was Melody Barnes, Director of the White House Domestic Policy Council. Ms. Barnes spent some time discussing the Office of Social Innovation and the $50 million social entrepreneurship fund recently announced by the administration. Ms. Barnes claims that a new bureaucracy is not being built, but given the attention this initiative is going to get, one wonders how the OSI can distribute the funds without lots of bureaucracy. It left me wondering why the administration didn’t just inject the money, TARP-style, into ShoreBank and the Nonprofit Finance Fund (for instance) and let people who have acquired some practical knowledge of social investment put the money to work. The session that seemed to be responsible for the small crowd at the Slavery and Trafficking session was a “discussion” of the National Center for Responsive Philanthropy’s report “Philanthropy At Its Best” which criticizes foundations for not meeting NCRP’s definition of good philanthropy (which includes giving at least 50 percent of funds to “marginalized groups” and providing general operating support rather than restricted funds). The comments and viewpoints expressed were exactly what anyone marginally familiar with the sector over the last ten years could have predicted. 

In her posts from the Global Philanthropy Forum last week, Laura noted the overwhelming prominence of “public-private partnerships”—surprising because, at least recently, high-net worth philanthropy has been thinking in terms of alternatives to government. Here at the Council on Foundations conference that trend is most definitely confirmed. Almost all of the plenaries have featured government figures—and that’s before Mike Bloomberg and former President Clinton speak tomorrow. Overall, it’s clear that mainstream philanthropy is not going to be willing to move without government. I suppose we shouldn’t be surprised: $800 billion in extra spending will get everyone’s attention.

The big concern is not that partnering with government is a bad thing but that a sector that is notorious for chasing fads is just chasing the “new new” thing. That behavior doesn’t play to the potential strengths of philanthropy—taking risks and innovating. That was an important point made by David Douglas, Chief Sustainability Officer at Sun Microsystems in a session on the role for philanthropy in developing energy independence and sustainable energy (for more on philanthropy’s role in global warming, see the most recent issue of Alliance Magazine). According to Douglas, history shows us that government is typically quite poor at actively driving innovation unless it knows exactly what it wants. Government is much better at creating guaranteed markets for the outcomes of innovation, thereby stirring private investment in innovation. If philanthropy begins waiting for government to pave the way and then follow, we’re unlikely to get the kind of innovation in any area (energy, education, poverty) that most seem to agree that we need.

In fact, one of the common things said by government representatives is that they are looking to philanthropy to provide guidance on what to invest in and how to measure. This is perhaps the most discouraging thing that I heard because it at least superficially indicates that these government leaders don’t know how bad the philanthropy sector has been at creating and using measures that matter. The last thing we need is to replicate the last decade’s circular arguments about how to measure impact in the social sector.

On an encouraging note, the sessions related to international grantmaking were generally well attended. Curiously the session on philanthropy in the BRIC countries had probably three times as many people as the session on African grantmaking. Some great data was presented at the grantmaking in Africa session that we’ll publish in a separate post soon. Also in that session, Peter Laugharn, Executive Director of the Firelight Foundation, presented five lessons to improve grantmaking in Africa (to see the list, check out the new Philanthropy Action Twitterstream).

We are getting on the Twitter track—after Barack Obama, admittedly, though neither of us could claim the president’s cool. Readers can follow our Tweets here. Check out recent coverage of the Global Philanthropy Forum, as well as this week’s coverage of the annual conference of the Council on Foundations.