What Does an Economist Make of the Ice Bucket Challenge?

As almost everyone knows by now, the ALS Ice Bucket Challenge is a charity stunt to raise money for amyotrophic lateral sclerosis or ALS, a progressive disease of the nervous system that affects roughly 30,000 Americans annually. Each recipient of the challenge faces a choice: dump a bucket of ice water over your head within 24 hours, or donate $100 to an organization that funds research into the disease. The decision is made, the challenge is completed, the result is broadcast on a social network, and the challenged becomes the challenger, ensuring that the pattern will continue.

Since the first ice bucket fell in the name of ALS, the challenge has gone viral, inspiring nearly $100 million in charitable donations (compared with $2.6 million during the same period last year), 1.9 million new donors, and more than 2 million Facebook videos.

How did the ALS Ice Bucket Challenge turn into a ubiquitous social media phenomenon over the course of just a few weeks? We asked Professor Florian Ederer to share his perspective as an economist who has studied social media.

Q: Can you speak about the Ice Bucket Challenge from an economist's perspective?

The whole phenomenon is an economist's delight, as there are so many angles to it: the explosive growth, the potential crowding out of other donations, the question of how to harness social challenges for charity donations in the future…

Q: What causes something like the Ice Bucket Challenge to go viral?

There are many reasons, though the most important are: a) exponential growth due to every participant naming three more potential participants, and easy tagging via Facebook and Twitter, b) the 24-hour deadline that causes the nominated participant to act quickly, c) the formulaic participation that already worked so well with the Harlem Shake, d) a visceral stunt similar to the Gangnam style videos, e) easy participation, as no editing is required, and f) social proof, authority, and fear of missing out.

The ALS Ice Bucket Challenge offers an example of a brand harnessing the energy of a narcissistic fad on social networks in service to the brand itself: an act that is incongruous, easy to do, and screams "look at me." Yet here, the incidental meaning is not at all dissociated from the personal meaning. I'm making myself uncomfortable for ALS. I'm recruiting the anti-ALS cause to enhance my personal capital.

Q: What are the motivations behind this large-scale participation? Do you think economic motivations outweigh charitable motivations?

I doubt that many people really take the challenge to avoid donating to ALS. It would be much easier to just ignore the challenge and not donate $100. But most people on Facebook, myself included, love to broadcast and share and the ice bucket challenge gives them a perfect excuse to do so, especially since they can do so while feeling good about helping a good cause.

Q: What kind of impact will the Ice Bucket Challenge have on the brand awareness of ALS research?

I think it is a similarly defining moment for ALS as the Livestrong bracelets and pink shirts were for cancer. But I sincerely doubt that there will be any lasting impact on contributions after the fad of the Ice Bucket Challenge has died down. In fact, ALS may dangerously remain tied to the Ice Bucket Challenge and hence suffer lower contributions in years to come.

Q: Some social media campaigns are meticulously planned, while others, such as the Oreo Blackout Super Bowl tweet, are largely reactive. Do you think there is an advantage or benefit to the latter?

Truly viral campaigns are rarely ever planned and few, if any, are as powerful as cause-related brands. More frequently brands ask how they can become incidental props in the viral stunts. The challenge that brands encounter, however, is that their involvement could come off as merely jumping on the bandwagon, because spreadable stunts tend to carry no meaning beyond the stunt itself. Take "planking" for example. An early Facebook fad, planking is the act of lying face-down in an incongruous place. It is the epitome of digital narcissism and any hint of motive other than "look at me" just clouds the picture.

Q: Will the success of the Ice Bucket Challenge have an impact on charity donations in general?

Holger Sieg at the University of Pennsylvania and his co-authors have shown in a series of papers that private benefits such as private dinner parties and special events have a significant impact on charitable contributions. The increase in social capital that results from participating in the Ice Bucket Challenge is another such private benefit. Furthermore, Rachel Croson, Stefano DellaVigna, and their sets of co-authors have documented that social comparisons and social pressure also are important driving forces for charitable contributions. Increased giving today resulting from such social comparison does not diminish charitable giving in the future. In contrast, there is a big debate when it comes to blood donations of whether monetary incentives crowd out blood donations in the future. However, nobody has ever documented spillover effects from one charity to another, so I doubt that charitable giving in general will benefit from the Ice Bucket Challenge. In fact, preliminary evidence suggests that due to moral licensing, the ice bucket challenge has crowded out contributions to other charities. The recent trend of ice bucket participants donating to charities other than ALS may, however, temporarily counteract this trend.

Q: What would you do if challenged?

I'd drop some ice water on myself and donate $100 to the Eastern Sierra Avalanche Rescue Center.

Interviewed and edited by Amy Kundrat.

Above: Yale School of Management students take the ice bucket challenge on August 29, 2014.

Related:
Yale SOM and Global Network schools participate in the ice bucket challenge.
Senior Associate Dean David Bach take the ice bucket challenge outside Edward P. Evans Hall.