Will donations create jobs?

I picked up the brochure on Starbucks new job creation donation project.

The brochure explains that donations will be used to give grants to community development organizations that loan money to community oriented businesses.  For a $5 donation, a community development organization can lend $35 to a business.  And you get a bracelet that says “Indivisible”.


The project sounds great.

It took me a little bit to figure out the logical flaw.

But, it occurred to me that this is a version of the Broken Window Fallacy.

It took me a little bit to recognize it since there is no destruction (breaking of windows) here.  But the Broken Window Fallacy isn’t about breaking windows.  The fallacy lies in not considering what would have happened anyway.

What would have happened if I spent the $5 on something else, like more coffee beans? How many jobs would have been created from that?

Probably about the same, or more, as what’s created from the $5 donation.

Starbucks’ efforts isn’t really about creating jobs.  Starbucks’ efforts are about creating seen jobs so it can tell you stories about them to make you feel like you are doing something good.  Their efforts ignore that you are doing just as good by spending or otherwise investing that $5, but the problem is that good is unseen and harder to tell a story about.

So, technically, yes, donations will create jobs.  It’s just not clear if they create any more jobs than if the money been used for something else.

Broken Window Fallacy

Based on this, where Rep. Keith Ellison believes government regulations create jobs, I recommend he read up on the Broken Window Fallacy.

He’s focusing on the seen and ignoring the unseen.