Testing a radical idea: Giving cash to the poor
Here’s a radical thesis about the best way to eliminate poverty: Give money.
Don’t give stuff. Also, don’t give conditional money, either, expecting the recipient to do something you want them to do.
I’m intrigued by an international charity called GiveDirectly, which puts this radical thesis to the test. I understand this “just money, no stuff, no strings attached” approach runs contrary to our most cherished charitable instincts. It also goes against our typical “Don’t give a man a fish, teach a man to fish” plans, delightful as that cliché may be.
International groups addressing poverty usually focus on building infrastructure capacity in poor areas — stuff like digging wells for clean water, or building housing. Other groups might provide a family with a goat, enroll a girl in school, or teach sustainable farming techniques.
These are all supernice, well-intentioned plans. One teensy problem, however, is that international development like this might not really work very well for eradicating poverty.
I named “give only cash, no strings” above just a “thesis,” because I don’t actually know if it’s better than traditional poverty-relief or traditional development projects. But a series of well-conceived experiments are going on right now to test the thesis. And they are on the cusp of launching an even bigger test.
A group of economists who believe in the thesis of “cash only, no strings” founded GiveDirectly, an organization that I think of as a radical critique of both traditional development organizations and traditional povertyreduction schemes.
Here’s what it does: It just give cash, unconditionally, to poor adults in Africa. Right now it mostly operates in Kenya and Uganda but is also expanding into Rwanda.
GiveDirectly doesn’t demand recipients raise a specific protein-rich crop, get sober or build a type of fuel-efficient oven out of local mud.
They simply transfer money to households in extreme poverty, accessible through a mobile payments system. And then they let the poor recipients themselves figure out what they need. In that way it’s the simplest poverty-eradication plan imaginable.
Governments around the world have experimented — even before GiveDirectly — with programs like this, known in policy wonk circles as “unconditional cash transfers.”
Unlike most development or poverty-relief charities, however, GiveDirectly measures the results of their programs using the gold standard of data analysis, a series of randomized control trials. That means picking randomly selected cash recipients according to a set of criteria (poverty being one criteria, obviously) and then comparing their outcomes with people under the same conditions who didn’t receive any cash. Then they try to improve their program design, based on the evidence.
GiveDirectly spokesman Max Chapnick said the charity raised and earmarked close to $40 million for direct cash transfers last year. That’s not as big as international development organizations like Save The Children or Oxfam or international governmental aid, but it ain’t chicken feed either.
If radical disruption of an industry, evidencebased giving, randomized control trials and continuous design improvement all sounds very “Silicon Valley” to you (it does to me) then you will not be surprised to learn that Facebook co-founder Dustin Moscovitz, and Google.org are early and aggressive backers of GiveDirectly.
But what if poor people quickly spend their unearned money on alcohol, drugs or other vices?
A research paper published in April 2016 found no increase in alcohol and tobacco consumption among GiveDirectly recipients from 2011 to 2013.
Not only that, but other research on unconditional cash transfers suggests this fear about cash transfers may be overblown. A December 2016 study from the University of Chicago of 19 cash transfer programs worldwide also found no increase in alcohol or tobacco use among recipients.
Or another big objection: What if “free money” discourages people from working?
An MIT study from 2015 of seven randomized controlled trials found no evidence that cash transfers discouraged work.
You can choose to believe these researchers, or your own lying eyes.
GiveDirectly’s next experiment, for which they’ve targeted a $30 million fundraising campaign, will be their biggest cash transfer program yet.
They have $23 million raised so far, but if they reach their $30 million goal, their next experiment will be in something known as Universal Basic Income (which wonks call UBI), which is closely related — but distinct from — unconditional cash transfers.
With their new plan, GiveDirectly will transfer cash to Kenyan households in three different ways to compare the effects on poverty:
1. 75 cents per day (the poverty level in Kenya in U.S. dollars) to every adult in 40 villages, paid monthly for 12 years,
2. 75 cents per day to every adult in 80 villages, paid monthly for two years; and
3. 75 cents per day to every adult in 80 villages for two years, but paid in a single lump sum.
Researchers will compare the effects on the health, well-being, poverty, education, stress and the impact on the local economy of households and villages between these groups. They’ll also compare the results to a control group of 100 villages that does not receive payments.
With their two-year and 12-year commitment to incomes, they will have a way to measure both short-term and long-term effects of the Universal Basic Income theory on poverty. This program is universal because every adult in a chosen village will receive income. GiveDirectly chose 75 cents per day because it approximates the poverty level in Kenya, qualifying as basic aide.
I know this all may sound a bit kooky and maybe too radical and hard to take. It goes against our charitable instincts. We naturally want to bequeath tangible goods instead of free money, and we want to control and improve the poor recipient’s behavior. But what if that approach — and a few centuries of failed development work — is totally wrong?
Every 10 year-old knows the coffee-mug wisdom: “instead of giving a man a fish, you should teach a man to fish.” What if we learned that all wrong?
As one of the cofounders of GiveDirectly, Paul Niehaus, cleverly tweeted recently: “The implicit hubris in ‘teach a man to fish’ is that we’re great at fishing lessons. We’re not.”