The Economics of Charity

Stephen J. Dubner writes a short blog entry on the economics of charity for the web site Freakonomics. The conclusions are interesting. First, the facts:

...consider the following three natural disasters from a few years ago, listed along with number of fatalities and amount of U.S. individual charitable donations (according to Giving U.S.A.):

1. Asian Tsunami (Dec. 2004)
220,000 deaths
$1.92 billion

2. Hurricane Katrina (Aug. 2005)
1,577 deaths
$5.3 billion

3. Pakistan Earthquake (Oct. 2005)
73,000 deaths
$0.15 billion ($150 million)

Americans gave nearly three times as much money after Hurricane Katrina as they did after the Asian tsunami, even though the tsunami killed many, many more people. But this makes sense, right? Katrina was an American disaster.

Then along comes a terrible earthquake in Pakistan, killing 73,000 people, and U.S. contributions are only $150 million, making the $1.92 billion given after the tsunami look very, very generous. That’s only about $2,054 per fatality in Pakistan, versus an approximate $8,727 per fatality for the tsunami. Two far-away disasters both with huge loss of life — but with a huge disparity in U.S. giving. Why?