How to donate after Hurricane Harvey

There’s a disaster in the world, so, sure as night follows day, the Red Cross fundraising machine has groaned back into action, helped by millions of well-meaning individuals on various social media platforms. The pictures of devastation are all over the TV, people want to Do Something, and all too often the first and last thing they Do is to donate to the Red Cross.

Don’t be that person. Don’t give money to the Red Cross. There is no reason to believe that the Red Cross will be particularly effective in Texas, and the Red Cross itself has given almost no details about what it’s doing in the region, how much money it’s spending, and what it will do with any extra donations.

Also, don’t think that there’s any particular urgency here. Disaster-relief capabilities can’t be built up overnight; the people who have them will use them, and insofar as they’re insufficient, which they surely will be, money now will be far too late to build an effective response to a disaster which has already happened.

A hurricane of this magnitude wipes out entire communities. Coastal Texas will be in real need not just for days or weeks, but for months and even years. So if you’re giving, think about giving to local organizations which will be around for the long haul, rather than national or international charities which will parachute in and then leave once the TV cameras have gone.

And whatever you do, don’t donate stuff (clothes, diapers, canned goods, etc) unless you are on the ground in the affected area and know exactly who is going to distribute it, to whom, and how. Take the money you would spend on buying or replacing that stuff, and just give the money instead.

Remember, too: There are lots of worthy organizations in coastal Texas which do sterling work even when there isn’t a disaster to respond to. The food banks, in particular, are a great place to donate to Texans in need: you might want to start with Galveston, Corpus Christi, and Houston, as well as the Texas Diaper Bank.

Will these particular organizations rise to the occasion and react effectively and efficiently to the unprecedented devastation of Hurricane Harvey? Some will, some won’t: it’s far too early to tell. If you want to wait and see, that’s entirely reasonable. On the other hand, if you want to give now, then it makes sense to give to an organization with a long history of helping the region’s neediest. Even if it’s not a purpose-built disaster relief shop, your money will still go to a very good cause.

As for purpose-built disaster relief shops, some are better than others, but disaster relief by its nature is inefficient, and dominated by the government. What’s more, the best time to give to such organizations is before disaster hits, not after. If you’re giving after the fact, do be sure to give unrestricted donations, so that your money can be put to the best possible use.

If you want to give to Hurricane Harvey disaster relief specifically, then staying local is a good idea. I can’t personally vouch for the Coastal Bend Disaster Recovery Group, but it seems like a good place to start, and it’s certain to be a better place to donate than the Red Cross.

Try to remember, as well, that there are ongoing disasters happening around the world which aren’t getting saturation news coverage. Eastern Nigeria, Somalia, and South Sudan are all in major crisis, and Yemen is probably bigger than all of them put together. (Yemen, however, is one of those crises where individual donations are sadly not going to be much help: only the international community will really be able to make a difference.)

If Hurricane Harvey has spurred you to put your hand in your pocket, then, that’s great. Giving generously to people in need is always a good idea. So give today, when a disaster is dominating the news, and give next month, when the need in Texas and around the world will be less well covered. Give whenever you can! Just, please, don’t make your donation to the Red Cross.

The Berkshire Museum’s operating deficits

The Berkshire Museum is still not getting back to me, sadly, but the museum did respond on Facebook to my last post about its financials:

The IRS form 990 does not differentiate between operating and non-operating revenues and expense. Such details are key for anyone who is trying to analyze the Museum’s (or any cultural or educational organization’s) financial position and operating results. The museum stands by its statements.

It’s true that the museum has been talking a lot about its “operating deficit” – a number which has indeed been more than $1 million a year since the 2009-10 fiscal year. So, what is an operating deficit?

If you look at the most recent audited financial statements, you’ll see that the museum’s revenue falls into three buckets. There’s “contributed income,” which includes government grants and membership revenue; there’s “earned income,” which includes admissions and museum store profits; and then there’s “non-operating items,” which includes capital donations, investment income, and endowment contributions.

When the museum talks about its operating deficit, it’s deliberately excluding all of those non-operating items from its calculation. And those can be substantial: in the 2013-14 fiscal year they totaled $2,486,135, while in 2014-15 they came to $2,285,275. It’s not clear why sums of this magnitude, even if they’re lumpy, should be ignored when looking at the sustainability of the institution.

What’s more, the distinction between operating and non-operating income was not always as key as the museum now claims that it is. In the years before the financial crisis, and before the museum sold off three paintings to create the Keep Crane fund, there was no non-operating items section in the audited financials. In 2007-8, for instance, some $3.6 million in donations to the capital campaign were listed under “contributed income”.

The following year, 2008-9, there was a new line showing $7,009,306 in “deaccession income,” separate from the contributed income and earned income. But it was only in the year ended June 2010 that the museum created a separate section of the income statement for non-operating items.

Certainly, if you’re responsible for any institution’s finances, you need to understand where the money is coming from. But ultimately what really matters is the bottom line. To fixate on an arbitrary measure of operating income, when a substantial amount of money is coming from non-operating income, only serves to make things look worse than they actually are.

Addendum for auction nerds:

One of the interesting things about the change in accounting protocols is to see what happened to $223,857 of “other earned income” in the 2008-9 fiscal year. Originally, all of it fell under “contributed income”. But when the accounts were restated the following year, “other earned income” was just $3,357, and there was a new line under “non-operating items” showing $220,500 in “buyer’s premium from sale of collection items”.

That was the year, of course, when Sotheby’s sold three of the museum’s paintings by Boris Dmitrievich Grigoriev, for a total of $8,083,500. Pipe Players sold for $3,218,500; Shepherd of the Hills sold for $3,722,500; and Man with Pipe sold for $1,142,500.

Those are not very round numbers, of course, and the reason is that Sotheby’s adds a “buyer’s premium” onto the auction prices. In 2008, that premium was 25% on the first $50,000 paid, 20% of the rest of the first $1 million, and 12% above $1 million.

If you know that, you can work out what the hammer prices were: $2.8 million for Pipe Players, $3.25 million for Shepherd of the Hills, and $950,000 for Man with Pipe. That’s a total hammer price of $7 million exactly, and $7 million is the amount that ended up going into the Keep Crane fund which was created to house the proceeds from the sale.

Normally, when you sell a work of art at auction, the auction house will charge you a “seller’s premium”: it will take some percentage of the hammer price for its troubles. If you’re a prime customer, however, you can normally negotiate that seller’s premium down to zero, and take home the hammer price in full.

This time, however, Sotheby’s went one further, and offered the Berkshire Museum something called “enhanced hammer”. The museum didn’t just get the $7 million hammer price, it also got $220,500 over and above that.

The Berkshire Museum, in other words, negotiated a deal with Sotheby’s where it would receive 103.15% of the hammer price, but it only put the first 100% into the Keep Crane fund. The $220,500 bonus ended up buried in its operating budget. At least until the accounts were restated.

Which only leaves one question: If the museum negotiated 3.15% enhanced hammer when it sold $8 million of art, how much do you think it has negotiated now that it’s selling more than $40 million of art?

The Berkshire Museum’s financials

I just spent a lovely weekend in the Berkshires, which included (of course) a stop at the Berkshire Museum. My trip coincided with the publication of an open letter from the museum’s president, Buzz McGraw, where she says that while she understands the “shock, sadness and anger” which greeted her decision to sell of the museum’s masterpieces, “the vitriol that some have expressed has been disheartening”.

The letter is a positive development, for two reasons. Firstly, McGraw says that she and the museum’s director, Van Shields, are now willing and able to talk about what they decided to do: I have, of course, put in my own request. And secondly, near the bottom of a related FAQ, the museum links to some updated financials, which help to answer some of the open questions.

First and foremost: Just how much money has the Berkshire Museum been losing, in recent years? Here’s the answer:

Source: Berkshire Museum form 990

This is the Berkshire Museum’s net revenue: its total revenue, minus all of its expenses, going back to the 1999-2000 fiscal year. Back then, it ran a surplus of $403,000; in 2015-2016, by contrast, it ran a deficit of $512,000. There were some very bad years at the beginning of the 2000s, after the dot-com stock-market crash; there were some very good years in the mid-2000s, during the boom years, and then there were some more bad years once the recession hit. All of this is pretty much what you’d expect, and it doesn’t indicate that the museum is facing unusually harsh problems, or that it’s at imminent risk of closing.

After all, all those surpluses in the good years helped to build up the museum’s nest egg. Here’s its total net assets, over the same time period:

Source: Berkshire Museum form 990s

As of mid-2016, the most recent information we have, the Berkshire Museum is sitting on net assets of $17.5 million. That’s up from a low point of just $5.3 million in the early 2000s. Again, it doesn’t seem to be at any imminent risk of running out of money.

So what about its budget? Is that out of control? It doesn’t seem that way.

Source: Berkshire Museum form 990s

What you see here is revenue fluctuating quite a lot, as you’d expect – after all, fundraising tends to be lumpy. Expenses, meanwhile, hit an all-time high of $3.1 million in the last two fiscal years; they were less than $2.4 million as recently as 2010-11.

In any event, there’s nothing in these charts which implies that the Berkshire Museum is facing an existential risk. There’s also nothing which implies that the museum needs an extra endowment of $40 million or more, which would throw off $2 million a year in income just on its own. The museum has neverhad a $2 million deficit; even in the depths of the Great Recession, its deficit didn’t top $1 million.

Finally, let’s move from the Form 990s to the audited financial statements. (It’s worth noting that all of these statements are at pains to point out that “the museum follows a practice of not capitalizing its collections”.) This is where we can take a look at what has happened to the Keep Crane Fund, the money from the last big deaccession in 2008.

The Keep Crane Fund was founded with $7 million from the sale of art, and between its foundation and mid-2016, it transferred a total of $3,405,290 to help fund the museum’s operations. Some of that money went to new commissions, most notably windows for the entranceway by glass artist Tom Patti. But it looks like most of that money has simply been used to fund the operating budget, which was not the original intent. The fund stood at $6.3 million as of mid-2016; it looks very much like it’s being treated like an endowment, throwing off $360,000 or more every year, and being invested so as to try to maintain its value over time.

In other words, the Berkshire Museum has already done, on a relatively small scale, what it has said it wants to do with its remaining masterpieces. It sold off paintings, invested the proceeds in the market, and then used the income from that fund to help support its operations.

That’s not the kind of action which would ever be embraced by the American Association of Museums, but clearly the Berkshire Museum has decided that it’s OK. And it raises an obvious question. Let’s say that the museum, looking forwards, determined that it was likely to see its expenses exceed its revenues by say $500,000 a year, and that it wanted to create an endowment which was capable of covering that deficit. If the endowment spends 5% of its assets each year, then it would need to start at $10 million.

Given a bit of time and goodwill, it’s entirely possible that the Berkshire Museum and the Norman Rockwell Museum, between them, could find a donor willing to spend $10 million on Shuffleton’s Barbershop, and then immediately donate the Rockwell masterpiece to the artist’s eponymous museum. The painting would remain in the Berkshires, where Rockwell wanted it to be, the Berkshire Museum would get their $10 million endowment, the other 39 pieces would be saved, and there would be much less uproar and vitriol.

But the board doesn’t seem to have seriously attempted to find that kind of solution; instead, they signed an agreement with Sotheby’s which gives them no control whatsoever over where their paintings end up. And, of course, they agreed to sell 40 artworks, rather than just one. If and when McGraw agrees to speak to me, I’ll be sure to ask her why.

Are rich people presumptively bad?

Matt Levine makes a very interesting point in his newsletter this morning:

One deep theme of this column is that “greed” is overrated as a driver of bad behavior. People who want to make a lot of money are fine, as people go; it’s the people who want power that you should worry about. A hedge fund manager once quoted Samuel Johnson to me: “There are few ways in which a man can be more innocently employed than in getting money.” You can see this play out in the CEO resignations. Are the CEOs of big companies the conscience of America, the leading moral lights of our time? No, of course not. They are just people, and rich ambitious people at that. But they are not comfortable with Nazis and white supremacists, and so they abandoned an administration that equivocated on Nazis and white supremacists. It looks impressive by contrast with the political leaders who won’t abandon that administration. But of course they won’t: The pursuit of power requires more compromises, and is more corrupting, than the pursuit of money.

This touches on a debate I’ve been having with many different people since I started Cause & Effect. The main thing I’ve been reporting on is philanthropy, and philanthropy almost by definition is a rich-people hobby, and a lot of people really don’t like the rich!

Invariably, it’s one of the first questions I get when I talk about a rich person who is making the world a better place. Well, how did that person make their money? Are they just trying to assuage their guilt? By putting their name to good causes, are they attempting to launder their public reputation? What’s noble about that?

This line of questioning does not just come up with respect to people like the Koch brothers, who run a filthy industry which undeniably makes the world a worse place. If anything I hear it more often with regard to hedge-fund types – people who generally made their money trading various types of securities and derivatives.

It’s not easy to make the case that making a lot of money in the markets is a particularly evil act. But here’s the thing: generally, people don’t bother to make that case at all. They just assume that behind every great fortune there lies a great crime. (Incidentally, that quote does not come from Honoré de Balzac, in case you were wondering, even though Mario Puzo said that it did.)

We’ve now reached the point that even if you know nothing at all about who rich people are or how they made their money, not even their names or nationalities, it has become no big deal to refer to them as “scum”.

There are two related reasons for this. The first is the financial crisis, which had many causes but which is popularly blamed on “Wall Street”, which basically means any large pool of capital. And the second is the terrifying and seemingly unstoppable rise of inequality, in just about every country in the world but especially in the USA.

At some level, of course, inequality is the fault of rich people: if there weren’t so many rich people, and if they weren’t so rich, then we’d have much less inequality. And the way that rich people stack the political deck in their own favor is well documented. So as a class, rich people deserve a lot of blame: they do seem much more interested in perpetuating and increasing their own wealth than they are in reducing poverty and inequality.

Meanwhile, at the individual level, no rich person is going to view it that way. Joe Stiglitz is a rich person, and he has no love for rich people as a class, but he doesn’t blame himself for what the rich have wrought. After all, he’s fighting against it! And the same goes for every other rich person you’re likely to meet.

That’s why the Bernie Sanders message, of bashing “millionaires and billionaires,” resonates: it’s clear that the country has been run by and for the rich for many decades, and that they’ve left hundreds of millions of Americans behind while making hundreds of billions of dollars for themselves. These polarized times don’t lend themselves to distinctions between the Good Rich and the Bad Rich. It’s a lot easier, and not exactly false, to declare that it’s time for the 99% to take over and for the the 1% to leave quietly.

This hasn’t yet become an institutional impediment to philanthropy, but I suspect that it will. Mistrust of the rich is growing, and philanthropy is plagued by an institutional lack of accountability.

The first impulse of philanthropists, when faced with anger against the rich, is to take a “not all rich people” stance – a position which generally goes down about as well as the “not all men” or “not all white people” stances. That’s especially true because the one thing that rich people generally never do, no matter how righteous and progressive they might be, is give up control of their money. They might give a lot of it away, but by golly they’re going to be the ones ultimately deciding where and when and to whom.

That’s why I’d love to see a more democratic form of philanthropy, one where decisions are made more by consensus and less by a dollar-weighted societal algorithm. One of the first things that philanthropists learn is humility: they might want to change the world, but most of the time they don’t, or can’t, or only achieve small effects at the margin. So, given that, why not accept the fact that letting other people control the money is unlikely to result in an appreciably worse outcome?

I’ve said that Jeff Bezos should sell his shares in Amazon and give the cash to poor people; the same is true, mutatis mutandis, for most other rich people too. The rise of inequality is making society worse, and the obvious solution is redistribution of wealth from the rich to the poor, who will generally make pretty good decisions about what to do with the money. (They won’t donate it to Harvard, for starters.) At a societal level this should happen through taxation, but that’s no reason for it not to happen at the individual level as well. Because ultimately, the only way that philanthropy is really going to be able to shed its aura of noxious elitism is if the rich give up the reins of control, and allow the poor to make many, many more allocative decisions.

Let’s add a charitable donation line on restaurant receipts

Most charitable donations are made by middle-class individuals, not by billionaires or charitable foundations. And as we all know, the middle class is stretched, with families living from paycheck to paycheck. If you ask people to make a donation today, you’re asking them to pull money from the same account they use to make rent, or pay the mortgage. It’s easy to see why they might be reluctant to do that.

That’s one of the reasons why I like the idea of food pantries, or even turning art into social justice: they’re ways of changing the mental bucket that donations come out of. Spending money on food is something you’re going to do anyway, and once you’ve bought that food, it’s up to you how you’re going to use it. Art is a sunk cost, and it’s not something you’d normally consider using to make rent.

As blood banks have known for decades, there’s a lot of natural generosity in people. Give them the right opportunity, in the right context, and most people are more than happy to give. It’s just that day-to-day budget money is generally the last thing they feel comfortable giving up.

So if you want to be able to get money from people, try to raise that money in a context where people are primed to spend, or where they have access to a new pool or stream of money, one which hasn’t already found its way into day-to-day life. Restaurants are one area people are used to spending money, especially expensive restaurants: people who would never dream of spending $50 on a bottle of wine in a wine store will happily do so in a restaurant, which implies that at some level the value of a dollar is degraded in that context.

Casinos are another obvious place to strike: the way that they convert cash into chips is just one of many ways they seek to make money seem unreal, divorced from quotidian reality. Luxury-goods stores love to site themselves inside casinos because people spend more freely there; there must be some way that charities can similarly benefit from Vegas tourists’ famously free-spending ways, both inside the casinos and in neighboring strip clubs and other attractions.

Then there are what financial types like to call “liquidity events”: selling your house at a profit, inheriting a bunch of cash, selling your stake in a company, moving to a much better-paid job, all those kind of things. Such events are an incredibly brief window of opportunity for charities, because they take place just before the hedonic treadmill starts speeding up. It won’t take long for that raise to get spent, or for that lump of cash to become part of some kind of long-term savings plan. But for a few days, it’s a windfall, a time when people might think that they don’t need to keep all of it for themselves, and might want to share some of it with the less fortunate.

Those days are a great time to lock in some kind of commitment device. Take some of that lump sum and give it to charity, or at least move it over to a donor-advised fund. Take some of that raise, and allocate it straight to people who need it (or, again, set up a recurring transfer into that DAF). Once you start giving a certain amount of each paycheck to charity, then at that point it becomes the default: you need to make an active decision to stop giving. And if you never had that money to spend, then the hedonic treadmill simply never had the opportunity to speed up that fast.

I just mocked this up, but you get the idea

If I had an entrepreneurial streak, I’d try to come up with some way of adding an extra line, below the tip line, on restaurant receipts, where patrons could donate a sum of their choice to a charity of the restaurant’s choice. Those diners are probably already spending quite a lot of money, there’s a good chance that they’re drunk and happy and feeling generous, and given the opportunity to give then and there, many of them will seize it. Or perhaps the big payments processors could implement this kind of functionality themselves. Either way, it seems like it could raise a lot of money at very low cost. Anybody wanna try?

Enough already with the charitable deduction

The US government is going to give $51.8 billion to charity this year. Not directly: it doesn’t have an army of technocrats deciding which charities get $1,000 and which get $100 million. Instead, it just has the charitable tax deduction.

If you’re in the 39.6% tax bracket, itemize your taxes (as you probably do, if you’re in that bracket), and give $1,000 to charity, only $604 of that donation comes out of your post-tax income. The rest comes from the government. For many taxpayers in high-income areas like New York City, the government gives even more: by the time you take state and local taxes into account, the government can end up footing the bill for almost half of your charitable donations.

The result is that the people determining where the bulk of that $50 billion a year is going are a relatively small handful of rich coastal types in high-tax states, skewed hard towards people with mortgages. (If you claim the mortgage interest deduction, that makes it almost certain that you’ll claim the charitable deduction as well.) The higher your tax bracket, the more influence you have over where that tax expenditure gets directed.

As a piece of public policy, this is is, as Richard Thaler says, a preposterous nonstarter. But it’s also the law, which means that any attempt to drag it vaguely in the direction of sensible would be a very good idea.

Weirdly, such an attempt might end up coming from none other than the Trump administration. No one really knows what to expect from tax reform, but one common thread, seen in proposals from both House Republicans and the White House, is the idea of doubling the standard deduction, while getting rid of the tax deductibility of state and local taxes.

That would be a great way of scaling back the mortgage interest deduction without taking direct aim at it. After all, the whole point of the standard deduction is to make life easy for filers with non-complicated taxes: you just take the standard deduction and move on, without having to itemize every last charitable donation you made over the course of the year. The bigger the standard deduction, the more likely people are to take it – and the more people who take the standard deduction, the less money the government spends on the charitable deduction.

Naturally, charities are up in arms, terrified that their donations will go down. A variety of institutions joined have joined forces to create the Council on Taxes and Philanthropy, dedicated to lobbying against any increase in the standard deduction. The standard deduction, they say, “is utterly unfair” and resembles nothing so much as “communism,” since it gives the most profligate spender exactly the same deduction as the most devout tither. Romain Hassrick, a baptist priest, has even said that it is “the first long step down the road toward the destruction of religious freedom.” He adds, for good measure, that the measure risks “squeezing out the vital spark of personal freedom” in America.

Oh, wait, that was what the charities said in 1944, when the standard deduction was still in its early days of being rolled out. They were ignored then, and the amount of money that Americans gave to charity was utterly unaffected by the introduction of the standard deduction. In other words, it turns out that when you give $1,000 to charity, it’s very nice if the government picks up some of the bill, but even if it doesn’t, you’re still likely to give the same $1,000 to the same charity.

This time around, the talking points are maybe a bit less apocalyptic, but they’re still pointed: the WSJ cites an Indiana University study which found that “these backdoor limits on charitable deductions could reduce giving by $13 billion, or 4.6%, annually”. The Journal doesn’t mention that $13 billion is the very top end of a big range from $4.9 billion to $13.1 billion. It doesn’t mention the way in which charitable giving has increased enormously in the past 10-20 years, in large part thanks to billionaires who don’t take the deduction. And it doesn’t mention that with total charitable giving approaching $400 billion a year and growing fast, now is actually an incredibly good time to start taking the government foot off the gas pedal. The philanthropic sector is big and mature enough now that it can finally fend for itself.

Instead, the Journal spends a lot of time talking about a desperate attempt to increase, rather than decrease, the scope of the charitable tax deduction. Basically, the idea is to give the deduction to everybody, whether they take the standard deduction or not: anybody can take the standard deduction and then itemize charitable contributions over and above that amount, to increase their total deduction.

This would probably increase charitable giving, at the margin, while also costing the government many billions of dollars. But just take a look at the estimates in that Indiana University study: expanding the charitable deduction to all taxpayers, it says, would increase charitable contributions by between $5.0 billion and $10.2 billion, while simultaneously decreasing tax revenue by $9.2 billion. Or, using a different calculation method, charitable contributions would increase by $12.2 billion, while tax revenue would decrease by $13.1 billion.

In other words, this proposal is essentially a direct transfer of billions of dollars from the public fisc to various charities, most of whom are likely to be churches of some description. (The people who give money to charity but don’t already itemize are middle-Americans who don’t have big mortgages but who are more devout than average and who tend to give substantial amounts of money to their church.) This comes very close to violating the separation of church and state, and besides it stands to reason that the churches most in need of government support would be the ones with the lowest charitable donations, not the highest.

So next time you hear someone talk about a “universal deduction” for charitable donations, understand that what they’re talking about is pretty much the least efficient use of taxpayer funds imaginable. Tax revenues would go down by more than charities would benefit, and the government would (as now) have no actual control over where those monies went. Charities have a very good public reputation, and it’s easy for lawmakers to want to support them. But this is not the way to do that.

Unsolicited advice for the Berkshire Museum

The Berkshire Museum has now hired extra crisis-PR help. So here are a few ideas about what it should do next, on the messaging front. The tl;dr: try engaging your critics a little bit, and being much more honest about the realities you’re facing and the trade-offs you are making.

I’d love it, of course, if that meant you would talk to me, or to Lee Rosenbaum, or to representatives of the various major institutions which have come out firmly in opposition to your current path. After all, since I wrote about the museum’s deaccessioning plans a couple of weeks ago, a lot of public stances have been taken. Most importantly, the Association of Art Museum Curators has joined the the American Alliance of Museums and the Association of Art Museum Directors in opposing your plans: as far as I can tell, no national organization thinks that what you are doing is a good idea.

Instead, while you did did respond to the national associations, that response took the form of a short press release which basically said “yeah, we knew what they were going to say, but we’re right and they’re wrong”. Where the associations said “We stand ready to assist, in any way we are able, to find other solutions to the institution’s needs without resorting to the selling of works that can never be recovered,” your response was basically “shut up and go away, we’ve made our decision”.

Right now it’s pretty clear that you have made a strategic decision to notengage with your critics. As far as you are concerned, all debate happened in the past, in behind-closed-doors consultations with local stakeholders, and now all open questions have been answered, at least to your own satisfaction. The decision has been made, it’s the right decision, and you’re moving on, no matter how vehement the opposition.

Some people, of course, will never be persuaded. But even if they’re not persuaded, you’re likely to get much more sympathy if you ratchet up the openness and pull back on the disingenuousness. What’s more, there’s something unedifying about watching you send surrogates into the field to fight on your behalf, as we recently saw when Joseph Thompson, the director of Mass MoCA, wrote in to argue in favor of your decision. (Previously, of course, Laurie Norton Moffatt, the director of the Norman Rockwell Museum, had come out strongly against the deaccessioning.)

But first, let’s look at your initial press release announcing the deaccessioning, a seven-page document with the headline “Berkshire Museum Unveils $60 Million Reinvention Plan”. There’s nothing about the deaccessioning on page one (“we are so proud of this thrilling new vision for the Museum”), and when it finally appears on page two (“these initiatives will be largely funded through the sale of artworks in the Museum’s collection, which have been deemed no longer essential to the Museum’s new interdisciplinary programs”) there’s no indication that this was in any way a difficult decision to make, or that the museum will be sad to see these artworks go. On top of that, the entire 2000-word press release makes no mention at all of the donors who gave these artworks to the museum. Which is odd, given that it’s their donations which are ultimately making the whole program possible.

From the beginning, then, there was a disconnect between your relentlessly upbeat official messaging, on the one hand, and the reasons you gave to the press, on the other.

“For the past 10 years, the annual structural deficit, including depreciation, has averaged approximately $1,150,000, [director Van] Shields said…

“To survive, it is change, move, or die — we have to change,” Shields said.”

This is, clearly, the real reason for the deaccessioning – and it’s one which, again, does not appear in the press release. Your website does not have annual reports, so it’s hard to see what Shields is talking about, and the most recent publicly-available Form 990 is from 2015. Still, here’s what it shows:

In 2015, you had $4.3 million in revenue against $3.1 million in expenses, which looks very much like a surplus, not a deficit, of $1.2 million. That’s on top of a $460,000 surplus the prior year. And you ended 2015 with $18.4 million in net assets, which was $830,000 higher than where you ended 2014.

This doesn’t look like an existential crisis to me – but then again, it’s not always easy to see an existential crisis in a Form 990. The thing is, when you talk about a “structural deficit, including depreciation,” no one really knows what you’re talking about. Specifically, how does depreciation add to the deficit? If you bought some asset for a certain amount of money, and now that asset is worth less money, that’s fine, it’s not a deficit.

Weirdly, the most specific numbers, when it comes to your current financial predicament, are coming not from the museum itself. Rather, they’re coming from the director of a rival institution, in the form of Thompson’s op-ed:

The museum’s structural deficit — its annual shortfall — is well over $1 million per year, on a budget that is only $2.4 million. With rapidly diminishing reserve funds, the math is ineluctable, and the results are devastating: The institution is literally eating itself alive. We owe the current board and administration a debt of gratitude for shining a bright, public light on this alarming fact. That revelation was a brave and honest act of fiduciary responsibility.

I have absolutely no idea what “bright, public light” Thompson is referring to here, because I sure as hell can’t find anything on your press releases page which talks about your fiscal situation, nor can I see anything showing that the reserve funds are even going down rather than up, let alone “rapidly diminishing”.

Indeed, when the Berkshire Eagle – which supports your plans – asked you for profit and loss statements from the past two years, we’re told that “The Eagle was referred to online filings, which do not include those years.” That’s not a good look.

And supporters like Thompson are not exactly on the same page as whomever writes your press releases. His op-ed is full of “brutal reality” and “crushing socio-economic backdrop” and “facing up to stark economic realities,” which is something you seem to be much better at doing in private than in public. When your public statements are centered on statements about how “Pittsfield’s economy is on the rise,” it’s hard to square that with a narrative of existential crisis and gale-force demographic headwinds.

It’s not easy to take Thompson’s op-ed at face value, either. For one thing, he concedes that the Clark Art Institute, the Norman Rockwell Museum, the Williams College Museum of Art, and his own Mass MoCA have all managed to emerge in recent decades “as programmatic dynamos, active institutions with vibrant rosters of nationally significant exhibitions and massive public outreach.” That hardly bespeaks a broader climate which is naturally deleterious to museums.

Thompson then goes on to talk about a “Rockwell at Rockwell” strategy, which sounds great! Until you realize that at no point was the Rockwell Museum approached about such a plan: its director says that you never approached her to work together to identify another solution for the artwork.

Instead, all she can do is plead:

Shuffleton’s Barbershop is not, as has been stated, a redundant Rockwell, a footnote to the superb collection down the road at the Norman Rockwell Museum. It is, rather, a unique masterpiece and one of Rockwell’s very best paintings that he gifted to the Berkshire Museum and the people of Berkshire County for education and enjoyment.

At the very least, this surely deserves a response. Is it your position that this is wrong, that Shuffleton’s Barbershop is not a unique marsterpiece? Is it your contention that Rockwell did not gift it to the people of Berkshire County for their education and enjoyment? Indeed, what kind of responsibility do you owe to your donors, and can you be trusted to keep your promises?

This is not just about long-distant gifts by Rockwell, either. As recently as November 2008, you sold three works by Russian painter Boris Dmitrievich Grigoriev at auction, raising some $7 million. All of that money was earmarked for future art acquisitions, but what actually happened to it? I asked, and was told this:

Proceeds from the sale of the Russian paintings in 2008 were used to create the Keep Crane Fund; that has been used to acquire natural history specimens, Native American ethnographic materials, fine art photography, and a commission: three works by Berkshire-based artist Tom Patti, as well as to provide for direct care of the collection.

It’s pretty clear to me that very little of that $7 million has been spent on acquisitions, and that most of it has gone into what you’re euphemistically calling “direct care of the collection,” and what most other people would simply call operating expenses.

In other words, for all that your supporters are out there praising your transparency, everybody else, including all the journalists trying to write about this issue, are finding you maddeningly slippery and hard to pin down. The overwhelming impression is that you have something to hide, that you’re not telling the whole truth.

I mean, you can’t be telling the whole truth! There isn’t a museum director in the world who wouldn’t be sad to see a great work like Shuffleton’s Barbershop sold off forever. (Or, to put it another way, if Van Shields isn’tsad to see that piece go, he shouldn’t be in charge of such a storied institution, he should be out there trying to build some kind of digital whiz-bang multimedia experience from scratch.) For some reason, however, Shields seems to be incapable of expressing regret: He’s like some kind of Silicon Valley startup bro who has convinced himself that his messaging always has to be about how everything’s great and he’s crushing it. Well, that doesn’t work, in the museum world.

Mass MoCA’s Thompson, in his op-ed, talks glowingly about how a Hudson River School painting formerly owned by the New York Public Library now reaches many more people at the Crystal Bridges Museum. That’s more by luck than judgment: Crystal Bridges just happened to be the high bidder at the auction. But there’s no reason that museums can’t place their deaccessioned works carefully with other local or national institutions, instead of just shipping them off to Sotheby’s.

So maybe start there: Why didn’t you approach the Norman Rockwell Museum in an attempt to keep your Rockwells in the Berkshires, as their donor (Rockwell himself) clearly would have wanted? How did you decide that a Sotheby’s sale was the best way to deaccession these pieces, rather than an attempt to place them more carefully with public institutions? Did you even attempt to quantify how much of a dollar difference that would likely make?

And then maybe move on to the deeper question of when and how deaccessioning is OK. The standard answer is that it’s only OK if you’re using the proceeds for new acquisitions, but Thompson has a much broader conception:

Deaccessioning art… can invigorate and even save institutions, so long as the funds raised through deaccessioning are utilized for prudent permanent capital investments, which include strengthening the endowment, making core infrastructure improvements to support the preservation and presentation of remaining collections, and augmenting budgets for future acquisitions. Spending sales proceeds to cover today’s operating expenses, or yesterday’s bills, is not on that list.

This is unconvincing. After all, the purpose of an endowment is, at least in part, to cover today’s operating expenses; if you deaccession art and put the proceeds into an endowment, you’re basically taking something which used to be part of your cultural patrimony, and turning it into cash to be invested in securities and hedge funds and the like. You’re also intending to use some part of that cash pile every year to help cover your expenses. Why sell 40 paintings today, put all of the proceeds into a fund, and then use the fund to cover your expenses? Why not sell one painting, use the proceeds from that to cover your expenses, and then keep the rest where they belong? I’m sure there are answers to that question, but there isn’t an obvious bright line between the two.

In any case, it would be good to have the Berkshire Museum’s take on deaccessioning. How bad do things need to be, before you pull the emergency deaccessioning cord? Is deaccessioning OK even for successful institutions, if they say want to do something expensive with their architecture? Did you make this decision just because it would improve your program, or was it the only solution to an existential crisis? And if it’s the latter, why aren’t you being open about your financials?

Basically, it’s time for answers and openness. Your decision was presented to the public as something of a fait accompli. The least you can do is be willing to answer a few detailed questions about how you arrived at your conclusions.

Pantries > libraries

Back in May, Kriston Capps ripped into the Little Free Libraries movement, with some decent arguments on his side.

Little Free Libraries are tiny huts where people can leave books, or take them, with no money changing hands. They’re intended, Capps says, to be a “heart-warming civic-minded gesture,” but he makes the case that they’re worse than that. The reality is that they’re “performative community enhancement,” he says, quoting a pair of soi-disant radical librarians. The argument goes that as “a highly visible form of self-gratification cleverly disguised as book aid,” the libraries “serve as a vehicle for virtue-signaling” much more than they actually serve a useful purpose.

The most persuasive part of the argument, however, is empirical: the Little Free Libraries are generally found in rich neighborhoods which are already well served by Big Free Libraries (or, as they’re also known, just “libraries”).

Via

That’s why I’m not convinced by Capps’s attempt to read his argument across to pantries. Little Free Pantries are similar, on their face, to Little Free Libraries: they’re boxes where people can either donate or pick up food, toiletries, and the like. Sometimes, the two even appear side by side.

“The Little Free Pantry model is feel-good, curb-side philanthropy,” says Capps, “but some of the criticisms that apply to Little Free Library also stand up against the free grocery box model.”

As far as I can see, however, they don’t.

First, and most importantly, there aren’t large state-supported institutions which already have the capacity to provide all the food and toiletries that anybody might want, all for free. If there were no libraries, then the Little Free Library system would be much more important than it is.

Capps also complains that “an LFP can’t accommodate quantity or variety—much less fresh fruits and vegetables—and therefore should not be relied on for meeting pervasive need.”

This is a weird complaint, which I think is grounded in Capps confusing charity for philanthropy. Of course the little pantries should not be relied on for meeting pervasive need, that was never the intent. If there’s pervasive food insecurity in society, the only way to effectively address that is at the societal level – which is to say, by government. And so, let’s by all means try and build the kind of society, and the kind of government, which minimizes or even eradicates food insecurity. That’s a noble cause for any philanthropy.

But charity is different: it sees immediate need, in the here and now, and attempts to address that need, as imperfectly as it can. If two people need a can of beans, and you only have one can of beans, that’s no reason to withhold the can from both of them. Helping one person is better than helping none; helping a few people less than they need is better than not helping them at all.

Little Food Pantries are charity, not philanthropy: they’re a way of helping out at the margin. And yes, you can even leave fruit and vegetables in them, if you want. Food tends to leave the pantries quickly: there’s a very good chance that fresh food will be collected and eaten long before it goes bad.

Which is why I don’t like Capps’s “philosophical” objection to Little Free Pantries: the idea that “every free grocery box that goes up is an indictment of a meager social safety net”. I mean, yeah, sure, you can see them that way if you want, but by the same token, if looking at free grocery boxes helps prod you into doing something more systemic, then that’s just an extra bit of good they’re doing.

Capps is probably right that “a free grocery box is a sign of societal failure,” but to paint that as a problem with the grocery box is a classic example of shooting the messenger. Because it turns out that the messenger is doing a great job!

Free grocery boxes are good on a number of levels, beyond the direct utility of the groceries to the people who take them. People like to be able to give in different ways; it feels very different to take ten dollars’ worth of groceries and put them in a box than it does to donate ten dollars of cash to a food pantry. What’s more, if you’ve done the former for a while, that increases the likelihood that you’re going to do the latter.

Little Food Pantries are also a way of being able to visualize the effect that you’re having in the world: when you return to see that someone has taken the food you left last time, you know that it has directly benefitted a person or a family in your own town. And an empty food pantry is a reminder to keep on giving, for which there is no real corollary in the world of cash.

There’s also the fact that people who are donors one day can become recipients the next. There’s a stigma associated with food insecurity, and one of the great features of Little Food Pantries is that there are no judgments: if you have extra food you can leave it, if you need food you can take it. The community, in a small way, is coming together to help itself. It’s not trying to create a two-class system where some people give and others take; it’s just creating a resource for everybody. Finally, in contrast to Little Free Libraries, there’s no evidence that food pantries are being located mostly in rich areas.

Which is not to say that there’s nothing problematic about these things. Look at this Instagram post, for instance: it’s incredibly twee, and hipsterish, and even comes with a caption saying “too cute”. There’s nothing cute about hunger, or the need to alleviate it.

Too. Cute.

A post shared by The Little Free Pantry (@littlefreepantry) on

Overall, however, it’s a bit facile to take the real problems with Little Free Libraries, and to assume that Little Free Pantries suffer from the same ailments. They don’t.

Saving forests saves lives

Wanna read a new scientific paper about deforestation? Two brand new ones came out on Thursday.

Read this one first, from Science, if only because it’s only going to be freely available online for two weeks. It’s a fascinating study which shows that if you pay Ugandan forest owners just to keep their forests in existence, that significantly decreases deforestation. And the cost is small: about $20 per hectare per year. A hectare of forest absorbs more than that in carbon each year.

No, per the NYT headline, this is not “a cheap fix for climate change”: we’re going to have to do a lot more than mitigate the pace of deforestation if we want to have a chance at meeting that goal. But it is a reminder that incentives matter, and that at the margin, small sums can tilt the balance in surprisingly meaningful ways.

What’s more, preventing deforestation has substantial benefits which have nothing at all to do with climate change. Indeed, the second paper shows that preventing deforestation saves lives in a very simple and direct manner.

Specifically, there’s a very nasty and untreatable disease called Hantavirus Cardiopulmonary Syndrome (HCPS), which is fatal in more than half of all cases, and which is transmitted by rodents. Those rodents, in turn, tend to get eaten by the diverse range of fauna found in forests, but are particularly happy being able to munch away on vast fields of sugarcane. The result is that if you cut down forest and replace it with sugarcane, you inevitably increase the local rodent population, which in turn directly increases the number of people who are going to die from HCPS.

The point is that there are lots of reasons to preserve the kind of biodiversity that can only be found in forests, and while slowing the rate of climate change is certainly one of them, it’s probably unhelpful to always push it front and center as the main one. The fact is that saving forests saves lives, both directly and indirectly. So let’s do it for that simple and near-term reason, and let’s pay for any necessary incentives through public-health resources rather than climate-related funding. Then the long-term benefits for the planet will be welcome gravy on top.

The downside of giving money to public-health charities

My Twitter followers are a very smart bunch, in general, and so I expected the wisdom of crowds to win out when I put this question to them on Monday.

Boy I was wrong. The true answer, as detailed in the first chapter of my friend Charles Kenny’s new book, is that Afghan life expectancy rose an astonishing 20 yearsbetween 2004 and 2010, from 42 years to 62 years. In terms of development aid effectiveness, it was one of the most astonishing wins of the 21st Century.

This public-health miracle didn’t even cost very much: about $4.50 per person per year, paid by the Afghan Ministry of Public Health with the help of USAID. That money vastly increased vaccination rates, saved 100,000 deaths per year of children under the age of 5, and improved health outcomes for adults too. If you’re one of the people looking for bang-for-the-buck case studies in development aid, Afghanistan from 2004 onwards is a great place to look, especially since the improvements managed to take hold in a notorious failed state.

Of course, it’s not easy to audit exactly where that money went, and in a country like Afghanistan, it’s easy to believe that some of it was trousered by corrupt officials. Which leads to the question at the heart of Kenny’s book: Is corruption, in and of itself, a reason not to do stuff? And can it be counterproductive to worry too much about corruption?

Certainly corruption can render certain actions useless, or worse. If you give a town money to buy much-needed electricity, but all that money is diverted to a local warlord who uses it to buy guns, then you have caused more harm than good.

On the other hand, if you’re clearly getting positive results from your actions, how much does it matter if you’ve marginally increased the amount of graft along the way? Suppose for instance that you give the same town money to buy electricity, and they do use it to buy electricity, but some of the electricity they buy has been stolen from the state-owned power company by employees illegally tapping the power lines. In that case, the good caused by the introduction of electricity would outweigh the harm caused by the corruption.

As Kenny says, it’s crucial not to use corruption as an excuse for “avoiding the moral responsibility to act”. If you ask Americans how much foreign aid ends up in the hands of corrupt officials, for instance, the median answer is 60%. That’s a great reason to cut foreign aid – or at least it would be, if it was anywhere near the truth, which it isn’t. What is true is that an enormous amount of foreign aid goes into internal compliance functions, and to US and other western companies which can prove their clean hands to the satisfaction of the western bureaucrats. Haiti is the most ignoble example: just 1% of the aid promised to the country in the wake of the 2010 earthquake went to the government. The rest trickled down through a network of NGOs, who ended up unhelpfully dominating the domestic economy as a result.

Which is where the charity angle comes in. Huge amounts of foreign aid end up flowing into the NGO sector, often to extremely efficient, effective, and well-run organizations. Still, every dollar of foreign aid which goes to NGOs is a dollar which doesn’t go directly to local governments. And that’s a problem.

After all, the Afghan government surely learned a lot in implementing the USAID program. If USAID had instead gone around the government, and instead asked say Partners In Health to do the same thing, then a lot of institutional knowledge about how to make the country healthier would have remained within PIH, rather than entering Afghanistan’s nascent bureaucracy.

It’s incredibly rare for individuals to target their philanthropic donations at national governments of any stripe. (The CDC Foundation is probably the most prominent exception to the rule, and it’s not exactly focused on raising small-dollar donations.) But when you give money to US or European charities working in developing-country public health, you are in a way saying that you don’t trust the local government to deliver results, and that you’d rather give your money to, well, a white savior.

In the Afghan case, the US Special Inspector General for Afghanistan Reconstruction ended up recommending that the health program be suspended, not because it found any evidence of corruption, but just because “financial management deficiencies” meant that they didn’t know whether, maybe, some corruption might be going on. Probably a sophisticated American NGO would not have had such deficiencies. But the Afghan program was working, and working very effectively. That’s ultimately what matters. When you add NGOs to the development mix, it’s important to remember what you’re subtracting at the same time.