"Wireless service providers around the world are helping raise money for people affected by the tsunami in Southeast Asia. Four wireless carriers in Italy began sending subscribers text messages inviting them to donate to charities supporting rescue efforts. Subscribers can send a text message to a designated number, the cost of the text message is then donated to the fund. By December 30, 2004 the effort had raised 15 million Euro. Wireless carriers around the world have mimicked this initiative and continue to support recovery efforts. (Source: Wall Street Journal, AFP)"
This is an incredibly good example of application of behavioral economics. Charitable giving has always been a puzzle for neo-classical economists. Charity and altruisitic behavior clearly go against the concept of the rational asset-maximizing being that economic theories take as a good approximation of human behavior. Many papers have been written on charitable giving and analysits have pointed to other types of utility derived from giving (tax breaks being one of the major ones). In the example above, nobody is getting tax breaks or recognition. However, there is something about mental accounting (see Richard Thaler's paper entitled "Mental Accounting Matters") or even discounting combined with peer pressure that really worked. Of course, it would have been impossible without the extreme level of convenience of simply sending a text message. The price is very low, potential for peer pressure is very high (imagine doing this with a group of friends and everyone sending a text message donation rather than texting each other for a day), satisfaction ... well satisfaction is guaranteed. So maybe, maybe American's are not a selfish nation, but rather our charitable giving mechanisms are so outdated, they create too many opportunity costs for the actual act of giving. People would be willing to give if they were reminded about it and given an easy opportunity to do so. Go Europe.
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