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Applications of Behavioral Economics in Philanthropy: Understanding Loss Aversion and Risk Tolerance in Grantmaking

John R. Ettinger and John T. Ettinger


Never leave a birdie putt short.” ‐ ‐ Traditional Golf Exhortation

It is demonstrable statistically that professional golfers are more accurate when they putt attempting to avoid bogey (a loss to par) than when they putt trying to make birdie (a gain to par), notwithstanding that the same amount (one stroke) is at stake. Also, in blatant disregard for the famous golf aphorism above, it can be shown that these highly experienced golfers putt the ball less hard in the case of birdie opportunities than they do when trying to avoid bogey. The fact that these surprisingly systematic patterns were found through a careful study of 2.5 million putts on the PGA Tour is certainly testament to academic thoroughness. More importantly, though, the imaginative researchers present this as evidence of: (a) in the case of the greater accuracy, the valuing of avoiding losses more than commensurate gains (loss aversion) and (b) in the case of the variations in the forcefulness by which putts are struck, the tendency to be “risk averse” in the domain of gains and “risk taking” in the domain of losses. 1   Given the countless hours golfers of this caliber spend seeking a metronome‐like consistency to their stroke, these asymmetries in putting results go at least a little way to addressing the concern that “the greatest challenge facing behavioral economics is demonstrating its applicability in the real world.” 2

This paper considers how individuals incorporate in philanthropy unavoidable considerations of loss and risk in decisions which are made under conditions of uncertainty, albeit tested by means of a “laboratory” experiment employing hypotheticals based on grant‐making choices. Are natural and fundamental behavioral patterns exhibited in personal decision‐making carried over into decisions made in the philanthropic context, or do new behaviors emerge when one moves from personal choices to philanthropic ones?

* The authors wish to acknowledge the support of ideas in their work in connection with this project.

1 Devin G. Pope and Maurice E. Schwertzer, “Is Tiger Woods Loss Averse? Persistent Bias in the Face of Experience,

Competition and High Stakes,” American Economic Review 101 (February 2011)

2 Steven D. Levitt and John A. List, “Homo Economicus Evolves,” Science 319 (2008)

Survey Results (Behavioral Economics) V2 7 7 15 (final)