Would a Big Bucket of Cash Really Change Your Life? A New Freakonomics Radio Podcast

(Photo: epSos .de)

(Photo: epSos .de)

Why does poverty persist? Is economic mobility still a real part of the American dream? And if you gave every poor family a big bucket of cash, would it substantially change the trajectory of its future?

Those are some of the questions we ask in our latest podcast, “Would a Big Bucket of Cash Really Change Your Life?” (You can subscribe at iTunes, get the RSS feed, or listen via the media player above. You can also read the transcript; it includes credits for the music you’ll hear in the episode.)

It attempts to answer an e-mail we received from a reader named Thomas Appleton:

What would be the socioeconomic effects if the 50 wealthiest Americans each gave $50,000 to 50 different American families, repeating this practice annually with new beneficiaries? How about if these families were targeted in a limited area; say, across some of the poorest neighborhoods in Brooklyn?

As we explain in the podcast, even if we could get 50 wealthy people to give $50,000 to 50 families every year, we’d have to wait a long time to measure the long-term effects. So wouldn’t it be great if, somewhere in history, something like this already happened – that there’d been a huge cash giveaway that produced a magical dataset that some scholars could analyze in order to answer these questions?

Enter Hoyt Bleakley and Joseph Ferrie, economists at, respectively, the University of Chicago and Northwestern. They are the authors of a fascinating new paper called “Shocking Behavior: Random Wealth in Antebellum Georgia and Human Capital Across Generations.” In the podcast, you’ll hear Bleakley describe an 1832 land lottery in Georgia that randomly rewarded roughly 20 percent of its participants with a big, valuable tract of land. Pairing this data with U.S. Census data, Bleakley and Ferrie were able to see what happened to these newly wealthy families — if, for instance, their children became more educated, and were more successful down the road.

So what happened? I’d tell you the answer right here but I know how much you love to be surprised. Also: you guys are so sharp that I’m guessing you’ve already guessed the answer by now. If you need a hint: think about what happens to modern lottery winners.

While the Georgia land lottery happened a long time ago, the research findings could hardly be more timely. Income inequality is a huge concern these days, as is the question of whether cash transfers –  conditional and/or unconditional — are a viable means of lifting poor families out of poverty. I cannot say this podcast will necessarily change your mind if you have a deep-set opinion about the wisdom of cash transfers, but it is certainly good to hear about the long-term evidence from such a large-scale intervention.

Feedback welcome, as always. And thanks, Thomas, for kicking off a good conversation.

Audio Transcript

[MUSIC: Louis Thorne, “La Sauterelle”]

 

Stephen J. DUBNER: The other day, we heard from a Freakonomics Radio listener named Thomas Appleton. He’d been talking with a friend about giving money to charity, and he had this idea:

 

Thomas APPLETON: I was wondering what would be the socioeconomic effects if the 50 wealthiest Americans each selected 50 needy American families and gave each one a one time gift of $50,000 and repeated the process every year with new beneficiaries? And what if these efforts were concentrated in, for instance, some of the poorest neighborhoods in Brooklyn?

 

DUBNER: That’s an interesting question. In economic terms, Thomas is asking about the effects of a geographically concentrated, one-time unconditional cash transfer – and whether, for instance, it will lead to real, intergenerational income mobility. (Although the way he put it is, I admit, much more exciting.) Alright then, why don’t we try it? Let’s see, 50 families, $50,000 each  – that’s $2.5 million a year. So who out there wants to fund our experiment? Hello? Anybody? Nobody? I guess this is what happens when you give your podcast away for free: nobody wants to pay for anything any more. All right, then, we’ll have to find another way to answer Thomas’s question.

 

[THEME]

 

[MUSIC: Pearl Django, “Saskia” (from Modern Times)]

 

ANNOUNCER: From WNYC: This is FREAKONOMICS RADIO. Here’s your host, Stephen Dubner.

 

DUBNER: Okay, so here’s the question we’re trying to answer today: if you’re thinking about helping poor families, how effective would it be to simply give them a big pile of cash? Would that change the course of their trajectory over time? Giving away $50,000 may sound like a lot of money, but if it means helping not only this one family but the next generation, and the next, it’s probably a bargain, right? Now, there are a couple of problems with trying to answer this question. The first is that none of you are willing to give me $2.5 million to fund the experiment. But there’s also this: in order for it to be an experiment, we need to randomize who gets the money – which also means having a control group, so we can measure the effect of the money.  And also, we need a lot of time. Even if we could give $50,000 to 50 families today, we want to see the long-term effect of that money – how it affects their children and their grandchildren. So wouldn’t it be great if, somewhere in history, something like this already happened – that there was some magical dataset that a couple of scholars could analyze, and write a paper that answers these questions … ?

 

Hoyt BLEAKLEY: The paper is “Shocking Behavior: Random Wealth in Antebellum Georgia and Human Capital Across Generations.”

 

DUBNER: Well hello! That’s Hoyt Bleakley.  He’s an economic historian at the University of Chicago, currently a visiting scholar at Princeton. He did this research with Joseph Ferrie, an economist at Northwestern.

 

DUBNER: So the shocking behavior that we’re talking about is the shock to the system, which is this lottery, this land lottery that happened in Georgia in the early 19th century, yes?

 

BLEAKLEY: That’s right. So there’s sort of a little known fun fact from antebellum days which is that the State of Georgia opened up almost three quarters of its territory to white settlers through a system of lotteries, as in actually pulling names out of a barrel to randomly give out land rights.

 

DUBNER: Now, this land we should say had been confiscated from the Indians, right?

 

BLEAKLEY: That’s correct. So that’s the less fun part of the fact, which is of course this happened because of the displacement of the Cherokee and the Creek. And in fact this particular episode we look at is what gave rise to what’s called the Trail of Tears where the Cherokee were force marched to Oklahoma under some depraved circumstances.

 

DUBNER: Okay, so the government of Georgia had a lot of land, and they used to give land away in a different way, right, a somewhat less random way?

 

BLEAKLEY: That’s quite a lot less random, something that looks a lot more similar to the way it had been done for much of the east of the U.S., which is to say that they would issue grants, or they would have people go out and claim land, and they would be entitled to a certain claim, but they would also have to show evidence that they’d done something with it.

 

DUBNER: Got you, so I could say I’ll commit to farming this land and hiring certain people if you give me the land, something like, some kind of contract like that.

 

BLEAKLEY: Yeah, that’s right, some evidence of having done something with it. That’s right.

 

DUBNER: Okay, and why did this lottery come about? What precipitated the need?

 

BLEAKLEY: Well, so take yourself back to that map that you may have seen in 11th grade in high school history where the colonies, you know, the new states were claiming land all the way out to the Mississippi. You might have seen this thing where there is a super elongated map of New York, and Georgia, and Virginia, all claiming out to the Mississippi. So some enterprising set of gentlemen decided that they were going to start selling that land that Georgia was claiming, opening it up for settlement. And the way they did this was they basically bribed a majority of the legislators in Georgia to make this happen. This generated such a scandal because in part it wasn’t clear Georgia actually had title to this land, you know, was legally able to give out the land. Eventually they gave it up. This land was in the state of Mississippi eventually. But further it generated such a throw-the-rascals-out movement that when they came around to allocating the part of the state that really was part of Georgia, politicians opted for what they viewed as the most incorruptible, the most transparent mechanism possible. And they came upon the lottery as such an idea. And so they went and surveyed the land into a bunch of parcels, set out a grid. And after that time they started pulling names out of barrels. And essentially every white male who had lived in Georgia for a few years was eligible to participate. And there was so much money on the table from participating. Right? It cost you 12 cents to register.

 

DUBNER: And could you by more than one ticket, or everybody could have just one?

 

BLEAKLEY: No, this was, don’t think that his was go to the store and buy a ticket. It’s simply...

 

DUBNER: It’s not Powerball.

 

BLEAKLEY: No, you’re basically eligible for one registration. And we estimate that approximately 100 percent of the people registered.

 

DUBNER: Wow, okay. So if we forget the fact, or deny the fact that the land was confiscated from Native Americans, then this is a pretty equitable way to distribute the land, yes, in that it’s not giving advantage to people who either have a, you know, corrupt legislator in their family, friendship, or whatnot, right?

 

BLEAKLEY: Yeah, I mean you could say that, at least ahead of time it’s an equitable way to do it because everybody gets the possibility of winning. Of course some people win, some people lose, which ends up being central to the way we, you know, perform our research.

 

DUBNER: Okay so tell me just a quick couple facts about this. What share of, you said that there was virtually 100 percent participation because it was pretty much free to sign up to try to win some land. What share of people then won? What were my chances of winning?

 

BLEAKLEY: Yeah, so it was little shy of 20 percent of the people won.

 

DUBNER: And then how much land are they winning, and I want to know what that land is worth. And I also want to know how I can convert that land into value. In other words, can I sell it right away or do I have to actually go and farm or build something on it?

 

BLEAKLEY: Sure, so in the particular one we analyzed, they were winning 160 acre parcels in the northwest part of Georgia, so think Atlanta and to the northwest of that. We estimate that they were winning numbers in the hundreds of dollars, maybe $500 to $800 dollars if you value this in 1850 units which is when we observe them.

 

DUBNER: Let’s put that in constant dollars then. It’s worth roughly what today?

 

BLEAKLEY: Well, it’s worth a lot. It’s worth a lot in the sense…It’s a little bit hard to convert that into a number today because prices are so different so let me give you two ways of thinking about that. One is that’s pretty close to the median level of wealth. You know, think about a bell curve of wealth. We’re basically taking some amount of money that’s approximately equal to where half the people are above and below that, of the non-winners.

 

DUBNER: And you’re saying that’s total wealth, all their assets would be worth that much?

 

BLEAKLEY: Well we don’t observe you know if they own stocks or bonds, or something like that, but essentially everybody either had their wealth either in land or slaves, and that’s what we do observe.

 

DUBNER: Ok. So in other words, if I am essentially penniless, but I happen to be a white male living in Georgia for a few years and therefore I’m entitled to enter this lottery, I can overnight have the same amount of wealth that is the median wealth in Georgia?

 

BLEAKLEY: That’s right.

 

DUBNER: So for certain people then it will be a life-changing event, not for all but for some, yes?

 

BLEAKLEY: It should be, yes, that’s right.

 

[MUSIC: Jonathan Geer, “Draggin The Bow”]

 

DUBNER: Okay, so it’s 1832, and the state of Georgia is giving away a bunch of land via a lottery. Roughly 1 in 5 people who enter the lottery will win. Economically speaking, it’s a pretty substantial windfall. And for a pair of 21st century researchers, it’s a pretty big windfall too. This kind of organic randomization, it’s what economists call a natural experiment. It doesn’t happen every day.

 

BLEAKLEY: I’m a big fan of the libraries that are run as open stacks where you can kind of walk up to the books and you can look at them and pull them out, and you can smell them and everything. You know you get up close and personal with them because a lot of stuff, good stuff, happens by accident. And in this case, I’ve done a lot of work looking at the economic history of the southern U.S., which has put me in that part of the library and I've seen references to the lottery system of Georgia, which for a while I just thought, well what could this be, this is some sideshow, I don’t know what that is. But I was walking past the Georgia section at the University of Chicago library at some point and see this title that says “The Cherokee Land Lottery,” big, thick book, walking past it. You know how this is, your brain, it takes a second for you brain to tell you legs to stop moving. And so I finally, a couple stacks down I turned around and said I got to go look at this book. I pulled this book out and there are a series of these books about the lotteries that describe the participants’ names, actual winners, what they won, that sort of thing. And at that point, you know, I was stunned. Can this really be that they randomized wealth? And I got on the horn with Joseph Ferrie, who is my coauthor at Northwestern University. He’ spent a lot of his career tracking people through these historical records. And I said you know, we got to follow up on these people because this was potentially a life changing event for them.

 

DUBNER: And not necessarily life changing for you guys, but it’s kind of a diamond in the rough, or maybe not even in the rough. But to find a pile of data like this, which as you put it is a shock to the system. In other words, it’s the kind of experiment that an economist today would love to run, but you can never get permission to, and here it’s been run, right?

 

BLEAKLEY: Yeah, so the reason why I got so excited about this is, of course, one of the big questions within economics is about the inequality of outcomes, the distribution of wealth, the distribution of income. And further that this seems to be something that to a large degree or to some degree is transmitted across generations. And you know, there’s a lot of questions as to why there’s this kind of persistence, why the distribution seems to have such a spread to it.

 

DUBNER: So I guess if I were to guess what you’re thinking then, I would guess that you’re going to say well okay, so here’s the perfect tool to tease out the question of: do people whose children and grandchildren do better than them do so because of money and because they use money in a certain way, or are there other explanations for it? Is that what you were concerned and excited about?

 

BLEAKLEY: That’s exactly right.

 

[MUSIC: Dan Sistos, “Caravan Jam” (from The Road to Euphoria)]

 

DUBNER: Coming up on Freakonomics Radio: what did Hoyt Bleakley learn? What did the families who won the land lottery do with their windfall? Did their wealth grow and grow over the generations?

 

BLEAKLEY: I was surprised. I think that I would not have expected this at all

 

DUBNER: And what do we know about contemporary lottery winners?

 

BLEAKLEY: If you want to be depressed you should read either the academic literature or the journalistic accounts of lottery winners because they basically waste it, right, blow through the money very quickly and often times end up worse than how they started, many of them.

 

[UNDERWRITING]

 

[MUSIC: 3 Leg Torso, “B&G’s” (from Astor In Paris)]

 

ANNOUNCER: From WNYC: This is FREAKONOMICS RADIO. Here’s your host, Stephen Dubner.

 

DUBNER: So a pair of economists, Hoyt Bleakley and Joseph Ferrie, found a fascinating data set from a fascinating moment in history -- a big land lottery in Georgia in 1832. They realized they could use this data, along with U.S. Census data, to follow families over time, comparing lottery winners to losers, to see how this shock of sudden wealth affected those families. Did the kids in these families acquire more “human capital,” as economists call it? Did they get more education, and did they parley that education into even more wealth a generation or two down the road?

 

BLEAKLEY: So, we see a really huge change in the wealth of the individuals, but we don’t see any difference in human capital. We don’t see that the children are going to school more. If you father won the lottery or lost the lottery the school attendance rates are pretty much the same, the literacy rates are pretty much the same. As we follow those sons into adulthood, their wealth looks the same, you know, in a statistical sense. Whether their father won the lottery or lost the lottery their occupation looks the same. The grandchildren aren’t going to school more, the grandchildren aren't more literate.

 

DUBNER: Wow. Alright, so two questions for you. One: were you surprised? I would have certainly assumed that the families who won the lottery and had a lot of money would have used it to do what we think most parents should do with their kids, which is get them more education, get them more prepared for a good career and so on. Were you surprised?

 

BLEAKLEY: I was surprised. I would not have expected this at all. This was a period where people were sending their children to school to a small degree. This is a period where it looked like poverty, at least in the cross section seemed to be an impediment to doing that,  you know, school attendance rates of the very rich versus the very poor differed by 60 percent. And yet when you used this, you know, random wealth drop to move the very poor into the middle, it did not move them along that path, which you observed.

 

DUBNER: So my next question then would be where does this money go? You’re saying that the next generation doesn’t maintain the wealth, what happens to this wealth then? Does it just dissipate?

 

BLEAKLEY: Where did it go? Well, you know, this is a period where you didn’t necessarily have access to good retirement assets apart from the stuff you owned right around you. You could imagine that the families that won used this for themselves, right, sent their children off to do something else.

 

DUBNER: To do something else meaning what they would have done what the parents not won the money?

 

BLEAKLEY: Yeah, basically.

 

DUBNER: Now, could it be that what you found is true for this particular setting, the agrarian Southern U.S. in the 19th century, and for whatever reason human capital just wasn’t so valued and wasn’t sought after.

 

BLEAKLEY: The question is how generic or how much does it generalize to other contexts. And I think you've hit on the key thing, which is how much was human capital valued and how much was human capital constrained. On the former question, I guess I would say it looks like human capital was valued in the sense that people did send their children to school, people who were literate did make more money, people who had more money did make those investments in their children with a greater, you know, propensity. It just maybe wasn’t that the constraint was particularly important, at least to the men who won or lost the lottery, that’s a key point, which is that there may have been a lot of money on the table, but they just didn’t care because they didn’t care enough about their kids.

 

DUBNER: But you know, it gets to a few questions, a few issues that we’re talking about a lot these days in society, generally, income inequality and income mobility, the whole idea of the American Dream as one could do much better a generation down the road, that our economy affords that opportunity. What you’ve identified in one setting is where a shock of wealth didn’t snowball and turn into a “better” life for the generation and the next generation. So I’m curious if you can extrapolate or generalize at all to you know, the broader U.S. or maybe to the present day from what you’ve learned. I mean, if we look at a map of the U.S. today that shows where income mobility is high and low, the deep South including Georgia is pretty much the headquarters of low income mobility. So is it that you’ve found an example of that or is it that you found something larger than that, which is that wealth alone is not what turns into greater generational wealth?

 

BLEAKLEY: I would make two observations, one is that we actually observe pretty strong persistence of outcomes across generations in our sample of lottery losers, right, so think of that as the control what it would have been absent that. And the numbers that we get from that are actually comparable to what we get for modern estimates of persistence of wealth, of persistence of education, literacy, etc. And so I don’t think that this is a particularly exceptional thing in the sense that there is mobility, but there’s also persistence. And we kind of fall within the range of that.  But it still comes back to the question of whether, you know, I think is as true today as it is then, is are the disadvantages that might be present for children that are in poor households are they present because there’s not enough resources, there’s not enough money at the poor household, or is it because there’s not enough of something else? Right? Maybe the resources have to come from outside the household, be it say a good public school. Maybe the resources have to come from the parents, but the parents don’t know how to provide it in terms of nurturing, in terms of reading and communicating ideas to their children, etc.

 

DUBNER: But if we wanted to blow your research up, your research concerns a small place in time, and a small geographical place. If we wanted to totally and irresponsibly explode it and try to create some grand generalizations, we would say, well look, plainly the viewpoint, which holds that giving people, giving poor people money, just giving them money doesn’t work, because they don’t use it to produce what we, the people who give them money want them to use it for, which is to make their lives and their children’s lives appreciably better through getting more education and so on, right? It’d be very easy for let’s say a politician who believes in that position to read your paper and say, hey, I’ve got a University Of Chicago and a Northwestern economist telling me this is hardcore proof of what I’ve been saying all along. Is it?

 

BLEAKLEY: Well, certainly for these...If the politician were contemplating, you know, giving wealth to these people in the 1830s, certainly that policy would be, that analysis would be right on. As you said, there are issues about generalizing it. But let’s do the wild extrapolation. I think you’re right to say this is not evidence that what’s missing is money at the household level, right, because we don’t know that it would be spent on these things that we want. That doesn’t mean that there’s nothing to be done, it’s just it doesn’t mean that money is the solution, right, or at least money that gets given to them, to those fathers, mothers.

 

[MUSIC: Louis Thorne, “Mon Verrerie”]

 

DUBNER: It’s funny, Hoyt, because we actually had a listener write to us recently and say, you know, I really like your show, but god it’s depressing. It’s like you take all this good news out there, and all these good ideas, and good plans, and nice intentions and show how, you know, people game the system, or they don’t work. Now, I disputed this a little bit. I actually think that we’re extremely optimistic and kind of hunting always for ideas that do work well. But I’ll be honest with you, you’ve depressed the crap out of me, Hoyt. Because you’ve taken a very basic idea and belief, which is that poverty is addressable by a very simple intervention, which is giving money to poor people, and you’re saying based on this evidence that’s just not a solid argument, at least when made that narrowly, right?

 

BLEAKLEY: No, that’s right. There may be something that you can give to them, but money is not that something, at least in this episode.

 

DUBNER: Alright, let me ask you this, not that this is going to be any less depressing, but it might be a little more entertaining. Have you looked at all on literature on modern lotteries and what happens to people who win them, and whether they do a better job of encouraging human capital acquisition among their offspring?

 

BLEAKLEY: Oh, no if you want to be depressed you should read either the academic literature or the journalistic accounts of lottery winners because they basically waste it, right, blow through the money very quickly and often times end up worse than how they started, many of them. Now it bears mentioning that what distinguishes that group from this one is that it’s a very select group of people who go play the lottery every day at the convenience store, right? We economists like to refer to the lottery as a tax on people who don’t understand math, because, you know, in statistical terms it’s a negative expected value, right? You pay more in than you expect to get back out. And that’s different from what we saw in the Georgia lotteries to allocate land because these people, they understood expected value, because they paid 12 cents to basically get 100 dollars of expected value. So that is a pretty clear decision. But I think it helps understand, to some extent, our results in the sense that when you select a particular group of the population and you either give them money or you cajole them to get more schooling by bribing them with a cash transfer or cellphone minutes or what have you, you have to ask whether there is some other set of characteristics that they have that makes it hard for them then to take advantage of those opportunities. And maybe there’s an intervention that helps them better manage those other characteristics, right, that makes it such that that’s less of a disadvantage for them. Whereas giving them something, you say well, this was great for me, it will be great for you, that’s perhaps not the right approach.

 

[MUSIC: Pearl Django, “Rhythm Oil” (from Mystery Pacific)]

 

DUBNER: So … did we depress you too? I hope not but I suspect that we may have. Okay, how about this then: why don’t you send us some non-depressing ideas for future episodes. Our e-mail is radio@freakonomics.com. And maybe we can turn your ideas into “Freakonomics Radio: Good News Edition.” It might be the shortest podcast we’ve ever made. Or maybe – who knows – maybe you will overwhelm us with uplifting ideas for future episodes. In which case we’ll be the ones who won the lottery. And we promise not to blow it.

 

[CREDITS]

 

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 106

View All Comments »
  1. Brad C says:

    What about looking at a set of highly paid professional athletes that rose out of poverty? Seems that would be a good place to find relevant data.

    Thumb up 1 Thumb down 0
    • James says:

      I don’t think that’s really comparable, since in order to become a highly-paid professional athlete, a person must generally have the determination & self-discipline needed to spend years training to excell at the sport. Even then, there are many stories of athletes whose self-discipline didn’t extend to financial matters, and thus wound up broke when their playing days were over.

      Perhaps a better data set might be successful rap “artists” and suchlike.

      Thumb up 1 Thumb down 0
    • Caleb b says:

      Most of them are broke within 3 years of retirement. So I guess that answers that.

      Thumb up 0 Thumb down 0
    • bcarson says:

      As I mentioned in another post (prior to seeing this one), 78% of NFL players are broke in 5 years after retirement, and for the NBA, where the average salary is the highest of any sport, the number is 60%. The median salary in the NBA is 2.33 million$, the NFL median is $770,000.

      This is evidence that wealth is not simply the result of income. That intergenerational wealth is the result of passed down culture, not wealth, and that longterm financial stability is as much about financial planning as it is current income.

      Thumb up 1 Thumb down 0
  2. Katherine says:

    Here’s a few feel-goo suggestions:
    What is education really worth?
    (I know you’ve already hit on this.. but extrapulate. I’m a teacher and never get tired of that)
    Which charities do the most good?
    I’ll let you define the parameters of each. :p

    Thumb up 0 Thumb down 0
  3. Thought Experiment says:

    Hmm … This story raised a lot of questions for me.

    I could imagine a lot of contextual factors that could explain why being given land in the 19th century in a place newly opened up for development would not be linked to your children being more likely to be educated, or with those persons becoming more well off than their neighbors in that period.

    For example, I would imagine that the children who’s parents were given the grants would be more likely to be working on that land/farm rather than going to school – probably a smart move as turning the land into wealth would require a big investment of labor, and ostensibly farming or working the land somehow could be the children’s future.

    And how available was education for all these people in that area at that time? Spread out over all these acres of land?

    Beyond that, even today, being a successful farmer is complex – very capital intensive – requiring many additional upfront investments from the farmer (especially at that time) in terms of labor, seeds, stock, etc. that cannot be recouped if the project fails (i.e. weather, etc.). And if a whole lot of land was given away to development in the same region at the same time, perhaps it creates a glut in the market for the products coming from that land? And all the landowners would face the same events and pressures at the same time – meaning that the same events would effect them all in similar ways – driving prices for supplies and land values down in the same moments?

    To the degree that there would be benefits from development, wouldn’t the whole community of people benefit from the development of that land? Not just the land owners – meaning that the land giftees would not be so much better off than others in their community?

    For example, perhaps those who are less tied to such an un-liquid gift – their neighbors who instead were selling the tools and seeds to farmers, lumber people, etc. would be better off in the end – just as likely to be successful, or more. Just as likely to send their kids to school (or not) – that is, at the degree to which education was perceived – or even had anything to do with social mobility at that time.

    I wonder if there is data on people who sold the land soon versus those who held it? Though here again, the value of the land might have been deflated by the sudden increase in people with land to sell at that moment.

    It feels like the research might be taking a 21st century lens – where education is strongly linked to social mobility, where land itself is an easily trade able commodity, where investment resources that can be used to turn land into wealth are easily attainable, and where landowners aren’t trapped by extremely local market forces – and applying it to a very different period.

    Thumb up 2 Thumb down 2
  4. Cathy says:

    I am wondering how this jibes with the recent podcast suggesting that the solution to charity was to give cash directly?

    Thumb up 1 Thumb down 0
  5. Manuel Perez says:

    Excellent presentation, guys!
    How about looking at the results of the 1960 and on programs and projects that helped young teenagers start their own businesses? I don’t remember all the details, but they were even promoted on TV… Was there a difference in success rates from other entrepreneurs of their own age? Did these programs have any long term effects?

    Thank you!…………. Manuel Perez

    Thumb up 0 Thumb down 0
  6. Dan D'Errico says:

    In a similar vein, I have heard that the poor cannot manage money and this is one of the reasons they are poor in the first place. This may seem self-evident. But let’s you only have $200 this week. You need to decide whether to use that money for medicine, food, the electric bill, subway fare, etc. This is a very intense balancing act that borders on a survival skill. And think of the stress! I would like to see a rich guy count his pennies like this. Of course, if the poor person wins the lottery, all of the penny-pinching may go out the window. But even if the poor person spends all of his money, at least he is stimulating the economy for others!

    Thumb up 0 Thumb down 2
  7. Barbara says:

    I must have missed something here. I suppose some of these winners had capital and farming experience and no local responsibilities so they could pack up, move to the country and start breaking the land. But if it happened to me, I wouldn’t know how to begin. Could your average lottery winner buy a mule and a wagon and a plow and enough food to get through to the next harvest, and port it way out there? What about his little children and his elderly, dependent parents – would they get loaded in with the plow and provisions and the seed and come along?

    I don’t know- to me, this study leaves out some important stuff about the nature of a gift. I think the better study would be about modern prize winners given cash without unreasonable requirements for taking advantage of the money. (As I understand it that has no better outcome.)

    It would be good to see a study of the long-term effects of small third-world loans such as Kiva provides – maybe in another generation that can be done.

    Thumb up 0 Thumb down 0
    • Joe J says:

      In 1830s the US was very much still an agrarian nation, especially in Georgia. Farming experience would be as common as knowing how to drive today. As to the mule and plow, usually each family farm wouldn’t need to own one, at least till the farm grew past family farm size, since effectively you would only use it a short time each year. A group of farms might need one, renting or trading it among themselves.
      Also with this study it was a 3 generation study, long past when other startup costs would have vanished.

      Modern prize winner fare much worse, though as stated it is a self selected sample.

      Thumb up 1 Thumb down 0
      • James says:

        The problem is that all the farms tend to need the mule & plow at pretty much the same time. A mule can plow roughly 1-5 acres a day, depending on soil type &c. For farms on this previously-unfarmed land, I’d guess somewhere at the lower end of that range. So if you’ve got 40 acres of your land under cultivation, you need the mule for a month or so to do spring plowing. And your neighbors need their mules for the same month.

        Thumb up 0 Thumb down 0
      • Joe J says:

        As I said once you have grown out of family farm stage. But people forget how much food 1 acre gives. With modern fertilizers and crops, you can feed a person for a year off of 1 acre. in the 1800s it was closer to 2 acres to feed a person. 40 acres is way past family farm size. So in a week on the low end, you could plow enough for a family. In later years it would take a day or two. Next year expand the farm adding a few acres, also not all crops are planted at the same time.
        Breaking new ground is much harder, so 1 acre is about right. Working a plow especially on unbroken land was a skilled trade, one which you would rent the plow, team, and plowman, usually for some % of your harvest.

        Thumb up 2 Thumb down 0
      • James says:

        Joe J: But a family farm needs to do more than just grow enough food to feed a family. It needs to produce a surplus that can be traded for all the things that can’t be grown on the farm.

        Also most crops do get planted within a period of a couple of months in the springtime, at least in the more northerly climes that I’m familiar with, so all farms within an area tend to be doing the same thing – plowing, planting, harvesting, etc – at pretty much the same time.

        Thumb up 0 Thumb down 0
      • Joe J says:

        Eventually, but this is a discussion of year 1, and that you don’t try to break all 40 acres first year. You might reach it in 5 or 6 years, but I doubt it, because you would need help harvesting that much anyway.
        A modern example is if you are thinking of going into the restaurant business, you don’t open 18 locations on day one, you open one and if it is successful you expand in later years.

        Thumb up 1 Thumb down 0
  8. tb917 says:

    Poverty cannot be entirely explained by economics; there are other sociological factors at work, which is why most charities don’t just focus on giving away money to end poverty. Instead they raise money to offer social services, such as the educational opportunities for children, job training for parents, and efforts to educate entire communities about sound financial planning. To the extent that they do give families money, it’s only to ensure that their children are going to school with a full stomach, that their parents have appropriate clothing for a job interview, or that the heat stays on while the family is working to get back on its feet. Giving away money does actually work if it is translated into services for the poor rather than a simple gift of cash. This is why social services organizations exist and why donating to them is not a waste of money—just in case people are thinking is all is lost after listening to this interview. It really doesn’t tell the whole story about the work being done to lift people out of poverty in America and around the world.

    Thumb up 0 Thumb down 0