EA Concept: Thinking at the Margin

Thinking at the margin: Thinking about what the next or additional resources are worth.

This question divides people into two camps.

Team Water will say: obviously water is more valuable. If we didn’t have water, we’d all be dead.

In contrast, Team Diamonds will say: Obviously diamonds are more valuable. If you think water is more valuable, then how about we make a little trade? I’ll give you a gallon of water and you give me a twenty-carat diamond. Sound fair?

So which team is right?

They both are, depending on what exactly we mean.

Drinkable water is in one sense extremely valuable because it’s necessary for us to keep living. This makes the average value of drinkable water high. But we’ve already got a lot of water, so the value of an additional gallon of water (in developed countries) is very low.

In contrast, even though the average value of diamonds is much lower than that of water, the value of an additional (or “marginal”) diamond is much higher. The reason, simply, is that there aren’t that many diamonds available on the market: they are therefore scarce in the way that water isn’t.

This “water and diamonds” paradox shows the importance of what economists call thinking at the margin: assessing the value of an additional thing— what is known in economics as its marginal utility— rather than thinking about the average value of that thing.

Example 1: GiveWell GiveWell recommends charities based on how much good additional donations would do. They examine the overall quality and cost-effectiveness of charities as well as whether how they would use additional funding.

This is because GiveWell doesn't want to know how much good the average donation does, they want to know how good the next donation will do. Put another way, they want to know about the marginal value of donations.

Example 2: Evaluating problem areas Effective altruists sometimes evaluate potential focus areas on the ITN framework which has three criteria:

Neglectedness means that EAs prefer problems that others aren't working on.

This might seem strange. Isn't it better to focus on problems where lots of people agree that the problem is extremely important?

One reason to prefer neglected problems is that the fewer people working on the problem, the more likely it is that your marginal contribution will do a lot of good.