We should ask for two things from any redistribution system. It should do as much as possible for society, especially the poor. It should do as little as possible to encourage permanent poverty. And, whenever possible, it should help poor Americans find a path toward self-sustaining prosperity.
The conventional economic logic is that cash transfers are more effective at helping the poor than in-kind gifts, such as food stamps and housing vouchers. I am grateful for the freedom I enjoy when spending my earnings; surely, aid recipients also like autonomy. They can choose the spending that best fits their needs if they are given unrestricted income.
Glaeser traces the shift to concerns over the misuse of cash transfers, but laments the perverse incentives produced by in-kind transfers. ”The proliferation of in-kind programs leads aid recipients to spend on things that they value less and creates perverse incentives to earn less and save little,” he writes. “The problem with food stamps isn’t that we are giving too much to the poor.”
(HT: Marginal Revolution)