Good point but there is one small but assuming...

If total aid does not rise - then of course the aid to Indonesia/Sri Lanka/India/Malaysia etc. diverts aids to other nations. But then "but" is that the marginal benefit MAY be greater in these nations than in other nations. OK, the marginal benefit is really high in any nation facing massive number of deaths and the Tsunami area is not the only place in dire need. So as I argue that the shift in aid resources is allocating these funds more optimally, I'm making one hell of an assumption.

Good point. A lot of charitable giving in the United States goes to causes, not to people. I have no doubt that the Humane Society and Defenders of Wildlife do notable work. They don't do it on behalf of people who just lost their homes and families in the blink of an eye. But, having said that, we don't know where money is being diverted from -- if it is being diverted from, say, AIDS relief the calculation has to be different.

Another point worth researching (and someone has probably done this already) is where charitable giving comes from. It is no more than common sense to assume that the majority of charitable donations comes from a minority of donors, in other words the people with the money. Tsunami relief donations could be swelled by contributions from people who otherwise don't give much to charities at all, or from groups (like immigrant communities) who have special cause to give a lot more for this purpose than they normally do. Either factor could reduce the size of whatever diversion the tsunami relief effort has caused.

Also: the tsunami hit right at the end of the year, when (1) people in a number of businesses get year-end bonuses and are feeling more generous and (2) people are looking to push donations up to get within this tax year. So it probably sucked away a larger share of donations than if it had happened at another time of year.