The Nonlinear Library EA - On Estimates of how much Zakat there is by Kaleem
Jun 11, 2024
05:53
Welcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: On Estimates of how much Zakat there is, published by Kaleem on June 11, 2024 on The Effective Altruism Forum.
The most infuriating academic urban legend I have come across whilst doing my research.
Context:
I am researching the cost effectiveness etc. of starting a new organization which redirects zakat to effective charities. One part of that scoping process is to figure out what the market cap/fundraising ceiling within the zakat sector is. I thought this would be really easy because someone else must have already done this, so I googled it…
All over the internet, people repeatedly claim that every year that there is between $500Bn and $1Trn given as zakat. However there is (basically) never any citation for this claim anywhere you read it. If you do a load of rabbit-holling (which I've done so that you don't have to - you're welcome), you'll discover that in the few instances when this claim has been cited, the citation leads to this paper[1].
After a couple of minutes and some control-F-ing, you'll realize that the $500bn-$1trn estimate isn't even mentioned in this paper.[2] The author, Stirk, claims that estimates of $200Bn-$1Trn have been cited, and then links to a web article . It seems like the estimate actually comes from this anonymous web-article, which attributes the estimate to an unnamed financial expert in Dubai.
At this point, you (and I) are both thinking to yourself : "It cannot possibly be true that every estimate of annual global zakat on the entirety of the English internet is based on this random unsubstantiated anonymous quote?!". Well, it seems like this is true. And I've been looking for contrary evidence every week since December 2023, to no avail.
Sanity Checking the estimate:
I think it makes sense to sanity check the estimate people are using: can it even be possible that there is between $500Bn and $1Trn given as zakat every year? I think the answer (thankfully) is Yes!. Here are some ways to reverse engineer the estimate that are all quite plausible. Worth noting for the following calculations, I'm holding the number of Muslims constant at 2 billion, the average percentage of wealth due in zakat every year at 2.5%.
1. It doesn't seem insane to suggest that on average, Muslims give $250-$1000 as zakat every year
1. Especially since the bottom ~5% of the wealth distribution probably don't have to pay zakat.
2. Even if only the top 1% of the wealthiest Muslims were responsible for all zakat, that they'd be giving $25,000-$50,000 a year.
1. This would put their mean net-wealth at $1M-$2M. Seems reasonable (e.g. pages 21-26 of the 2013 credit Suisse wealth study suggested that 1.1% of the global population had net wealth of over $1M).
3. Could 2.5% of all Muslim wealth be $1Trn? That would mean that total Muslim wealth is $40Trn.
1. Global net-wealth is estimated between $400-700Trn. If Muslims are ~20% of total population, then they'd be worth ~ 20% of $400-700Trn, which is $80-140Trn.
2. Seems reasonable then that Muslims are worth at least $40Trn, which makes the $1Trn figure plausible.
3. Also seems plausible that the mean net-worth of Muslims is ~$20k.
Pessimistically however:
1. Some estimates I've seen that make the 500Bn-1Trn figure seem unlikely are that the US gives ~$2Bn, the UK ~1Bn, and Saudi ~$18Bn in zakat every year. These are probably 3 of the top 10 countries where I'd expect the net-worth of Muslims to be the highest. It seems really unlikely that the rest of the world would make up at least $480Bn.
1. On the other hand, most Zakat is not reported/informal, and the figures above are formally reported zakat donations.
2. Because Zakat is voluntary/unreported, we don't know how much Muslims are actually giving, or how many Muslims are fulfilling their zakat obligations.
1. This means it could actually only be a small fracti...
The most infuriating academic urban legend I have come across whilst doing my research.
Context:
I am researching the cost effectiveness etc. of starting a new organization which redirects zakat to effective charities. One part of that scoping process is to figure out what the market cap/fundraising ceiling within the zakat sector is. I thought this would be really easy because someone else must have already done this, so I googled it…
All over the internet, people repeatedly claim that every year that there is between $500Bn and $1Trn given as zakat. However there is (basically) never any citation for this claim anywhere you read it. If you do a load of rabbit-holling (which I've done so that you don't have to - you're welcome), you'll discover that in the few instances when this claim has been cited, the citation leads to this paper[1].
After a couple of minutes and some control-F-ing, you'll realize that the $500bn-$1trn estimate isn't even mentioned in this paper.[2] The author, Stirk, claims that estimates of $200Bn-$1Trn have been cited, and then links to a web article . It seems like the estimate actually comes from this anonymous web-article, which attributes the estimate to an unnamed financial expert in Dubai.
At this point, you (and I) are both thinking to yourself : "It cannot possibly be true that every estimate of annual global zakat on the entirety of the English internet is based on this random unsubstantiated anonymous quote?!". Well, it seems like this is true. And I've been looking for contrary evidence every week since December 2023, to no avail.
Sanity Checking the estimate:
I think it makes sense to sanity check the estimate people are using: can it even be possible that there is between $500Bn and $1Trn given as zakat every year? I think the answer (thankfully) is Yes!. Here are some ways to reverse engineer the estimate that are all quite plausible. Worth noting for the following calculations, I'm holding the number of Muslims constant at 2 billion, the average percentage of wealth due in zakat every year at 2.5%.
1. It doesn't seem insane to suggest that on average, Muslims give $250-$1000 as zakat every year
1. Especially since the bottom ~5% of the wealth distribution probably don't have to pay zakat.
2. Even if only the top 1% of the wealthiest Muslims were responsible for all zakat, that they'd be giving $25,000-$50,000 a year.
1. This would put their mean net-wealth at $1M-$2M. Seems reasonable (e.g. pages 21-26 of the 2013 credit Suisse wealth study suggested that 1.1% of the global population had net wealth of over $1M).
3. Could 2.5% of all Muslim wealth be $1Trn? That would mean that total Muslim wealth is $40Trn.
1. Global net-wealth is estimated between $400-700Trn. If Muslims are ~20% of total population, then they'd be worth ~ 20% of $400-700Trn, which is $80-140Trn.
2. Seems reasonable then that Muslims are worth at least $40Trn, which makes the $1Trn figure plausible.
3. Also seems plausible that the mean net-worth of Muslims is ~$20k.
Pessimistically however:
1. Some estimates I've seen that make the 500Bn-1Trn figure seem unlikely are that the US gives ~$2Bn, the UK ~1Bn, and Saudi ~$18Bn in zakat every year. These are probably 3 of the top 10 countries where I'd expect the net-worth of Muslims to be the highest. It seems really unlikely that the rest of the world would make up at least $480Bn.
1. On the other hand, most Zakat is not reported/informal, and the figures above are formally reported zakat donations.
2. Because Zakat is voluntary/unreported, we don't know how much Muslims are actually giving, or how many Muslims are fulfilling their zakat obligations.
1. This means it could actually only be a small fracti...