Enhancing Private Donations in the Fight Against COVID-19

Enhancing Private Donations in the Fight Against COVID-19

In recent weeks, crowdfunding campaigns for donations to hospitals, in Italy and elsewhere, have dramatically multiplied.

Amplified by social media postings, such campaigns make it extremely easy for everyone to contribute with a small or a large sum to cope with the covid-19 emergency, reducing (one hopes) the risk of a collapse of national health services. In Italy, for example, top fashion influencer Chiara Ferragni and her husband have raised more than 4m euro to build a new intensive care unit at a hospital in Milan in less than two weeks through a Gofundme campaign.

The problem with such campaigns, meritorious though they of course are, is that there is no way for the donor to know which hospital or geographic area is most in need of their donation. Of course, intuitively where the number of infections is higher, there is more use for additional funds, but that’s a pretty crude metric: a given area with a high number of infections may have a much better network of hospitals than another with a lower number of infections and may be less in need of additional cash than the latter. Hence, one’s social media feeds risk being much more decisive in the allocation of vital private funds than if there were no information asymmetry as to where funds are most needed.

China’s solution has been unsurprisingly top-down and centralized, as Syren Johnstone has reported in this Blog: ‘Beijing has ordered all public donations for the Wuhan crisis to be funnelled to five government-backed charity organisations,’ which carries the risk of funds mishandling, as Johnstone also reminds us based on past experience with the same solution. Western democracies may, however, prefer tools that are more in line with commitments to individual freedom and decentralised decision-making, if not with people’s greater distrust in the government.

One way forward would be for governments to collaborate with donation crowdfunding portals such as GoFundMe and JustGiving. These portals could aggregate all crowdfunding campaigns in a single page in favor of hospitals and other units of the NHS (one example of this strategy already exists in Italy: see here). The Government, for its part, could use the data on the disease and its trends to create a summary indicator of the needs of individual hospitals, cities and counties, provinces or states. For example, an algorithm could predict, area by area and hospital by hospital, the difference between the free beds in intensive care units and the foreseeable number of patients in the following ten to fifteen days, the gap between masks available and the amount needed not to endanger the health of nurses, doctors and hospital patients, and so on: possibly, the data available at the central level will not be so granular, but surely Governments already have verified information to evaluate where the funding gaps are greatest: using the appropriate models, those data could be easily converted into a single funding-gap score to facilitate comparisons.

When used by donation crowdfunding portals, this objective, reasonably reliable and ideally regularly updated score would allow potential donors to make better choices about the hospital or the area to which to donate. (Because the data fed into it would be the same the government already uses to allocate scarce public funds orders of magnitude greater than prospective donation flows, the increase in the risk of cheating on the part of potential recipients should be low and one can assume that governments already have systems in place to verify the data.) For example, donors could choose from week to week whether to send funds to their area of ​​residence or to the hospital closest to their parents’ home, depending on where the emergency is greater from time to time.

The advantages of this mechanism are obvious. First of all, it would not replace but complement and reinforce all current mechanisms, including the campaigns of social media influencers: influencers themselves could choose their beneficiaries more effectively. Second, individuals’ incentives to donate would be reinforced, as they would know that they are helping where help is most needed. Nor would there necessarily be the risk of an excess of resources in the direction of a given hospital, provided the score was updated daily, having regard to the progress of existing fundraising campaigns. 

Private donations are of course not a complete solution to the Covid-19 health care emergency. But a more efficient allocation of this exceptional form of funding is in everyone’s interest, and it would also give greater satisfaction to the many who in these days are providing excellent proof of their generosity.

This post is an adapted translation of an op-ed published in the Italian daily il Foglio and available (behind paywall) here.

Luca Enriques is Professor of Corporate Law at the University of Oxford. 

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