What Do You Want to Know About Fighting Poverty With Cash Payments?

Screen Shot 2013-11-04 at 9.25.49 AMIf you happen to be in New York on Mon., Nov. 11, you might want to come see Richard Thaler and Dean Karlan talk about “using evidence and behavioral economics to fight poverty.” The event (info here) is run by the Innovations for Poverty Action, of which Karlan is president. I will moderate the Thaler-Karlan discussion — which means I get to ask them any questions I want about whether and why it is a good idea to fight poverty by giving cash directly to poor people rather than the traditional means of directing aid toward institutions and hoping that it trickles down fruitfully. (There are, of course, more options than just those two.)

In our recent podcast called “Would a Big Bucket of Cash Really Change Your Life?,” we looked at whether a windfall helps a family across the generations. The short answer, at least in the case of the 19th-century land lottery that we discussed: no.

IPA and others have found that giving cash directly indeed moves the needle in the right direction — but one obvious question is whether that momentum can be maintained, and if a family that starts doing better in the short term can create long-term gains for their children, grandchildren, etc. 

What other questions shall I ask Thaler and Karlan? I’d love to have your input. They are both bright guys,  so I’m sure they can handle anything related to econ or development, but I’d particularly like to know what you want to learn about the idea of cash transfers, whether conditional or un-. Thanks in advance. 

Eric M. Jones

“Would a Big Bucket of Cash Really Change Your Life?”

I am willing to try it.

Kunal Mathur

This becomes more important when being applied to developing /Poor Nations. In India we have states in North Eastern States where the percentage of population have a bank account is as low as 8%.

How then, will the cash be given to them?

If institutionalized distribution is a can of worms right now, direct case will be a barrel of snakes. Am I wrong?


What do you think of GiveDirectly?

Do you prefer conditional cash transfers over free cash transfers?

Do you see cash transfers as a big deal in of themselves, or could they end up being the benchmark by which all interventions are measured (i.e, if you're going to ask me to donate money so you can buy poor people a cow, can you prove to me that the impact is greater than just giving them cash)?


If the direct transfer approach is indeed successful in the developing world, is it generalizable to poverty in the developed world? Would we be better off replacing in-kind programs like SNAP (food stamps) with their cash equivalents? What evidence exists on this topic, and what challenges might you anticipate in carrying out a program like GiveDirect in the developed world?


1 how much you willing to give
2 no money without idea
3 teach them something valuable in their communities that they can use to make money
4 why they are poor
5 what's their first difficult
6 what's their first community


Hi Steve,

Love your website, books and podcast. The talk on the 11th sounds really interesting and I would appreciate it if you could ask the speakers a few questions;

I recently read a book, Tax, Lies and Red Tape by a South African economist, Dawie Rood, in which he mentions something related to the topic discussed above. A study he and his team did found a correlation between the increase in social grants and sin tax in South Africa – more social grants were paid out and more sin tax was collected than previously recorded. The social grants in South Africa are distributed by means of cash payments to the individual - well not physical cash, but bank deposits that the owner can draw from an ATM. Now whether this is causal is another question, but being a South African myself who grew up amongst poor people, I have seen that cash in the wrong hands is causal of money being spent on the wrong things especially alcohol which in turn leads to domestic violence. Perhaps my sample was too small and Richard and Dean's research have more evidence to prove differently, but I would like to know if such a program of giving cash directly was tried:
a) How do you prevent the cash being spent on the wrong things as I assume giving cash to a person would come with no rules or would?
b) How will you distinguish between someone that is able to spend it on the right thing vs the wrong thing and who will determine what is right or wrong?
c) Is there turning back if your measurements start to show that the program isn't working (assuming that you will have certain KPIs etc).

Another Steve


Robbin Ezinga

The question is not "How much does a bucket of cash help?" The question is "How much does a bucket of cash help compared to a goat worth the same amount?"

It's all about the comparisons. We don't really have a baseline, and that's the real problem with all these charities. Cash is getting studied, and that's a good thing even if cash ultimately doesn't help much. If this process helps charities become more effective, it's a win for everyone.

Enter your name...

I'm not sure that "compared to a goat" is the right comparison. How about "compared to paying for their daughter's school uniform and tuition"?


This becomes more important when being applied to developing /Poor Nations. In India we have states in North Eastern States where the percentage of population have a bank account is as low as 8%.

How then, will the cash be given to them?

If institutionalized distribution is a can of worms right now, direct case will be a barrel of snakes. Am I wrong?

Kevin Savage (@KevinSavage11)

Isn't this basically just a compelling case to stop giving people 'stuff' because 'we know what they need' and to replace any 'stuff giving' with cash? And continue working on all the other difficult challenges of development?

Is this really just pointing to the need for a universal social protection floor? And what's the appropriate role for charities like Give Directly in that?

What does 'fighting poverty' mean, particularly in contrast to achieving human development? Social transfers can protect people, and help them make investments. Ask Karlan to define poverty and define development.

Aren't conditionalities on cash transfers essentially just a means to make them politically palatable to donors, and, as part of that, to ensure that they meet the donor's objectives?

Just how many trials have been done that compare UCTs with CCTs, 'head to head' in an RCT?
And isn't there a fundamental problem with the objectives to be measured (the conditions vs. peoples' real preference)?

Has anyone every asked the people involved whether they'd prefer a CCT or UCT or just some stuff?

Most of the UCT evaluations have not dealt with fungibility and this is a problem for making comparisons. A CCT/UCT RCT would deal with this I suppose.


Kevin Savage (@KevinSavage11)

Final question. A bit harder or more philosophical and ethical.

Though it's implicit in the comparison question when figuring it what to actually measure.

Who are we to judge the objectives?

UCT effectiveness is defined by the giver with respect to the giver's ideas of what people should do.

The equally important point of cct is that it's up to the receiver. That's the beauty of them. In addition to being cheaper.

So. Question: who are we to judge people's spending?

Enter your name...

> Who are we to judge the objectives?

I think this is a general problem. We "prove" that women are worse off in the workforce than men by counting dollars in the bank, rather than counting meaningful human relationships or the satisfaction of working. A heroin distributor is "better than" a new school teacher by this measurement—but is he really "better"? Should we measure women's achievement according to the masculine standard of money? Should we measure poor people's achievements according to the wealthy person's standard?


Ask if there are any perverse incentives created by sending money from some to others.


You will chair an interesting discussion. Consider the following 2 questions for your panelists.
1. Do recipients have any preferences for timing and frequency of payments?
2. If recipients were allowed a choice between one public service that they already receive and its equivalent in cash, which service would they forego?


Some questions I am interested in having answered....

1) In America, would the giving of cash (rather that Food Stamps, etc.) save the country money...or cost us money?

2) Could we automate the giving of money (e.g., load a card with so much "cash" every month) so as to significantly reduce the bureaucracy that is now needed to distribute benefits...or would we require MORE bureaucracy?

3) I wonder if putting money in a SAVING ACCOUNT for people (a version of Social Security, I suppose) would work better? Especially if a person could not access that money for 10 years or so? This might even be used to motivate certain actions.

4) Would it help people if we gave them 90% in cash...the rest being invested for their CHILDREN (accessible perhaps only for their child's education or their child's adult purchase of a home)?

I could go on. But I think you see that I'm trying to figure out if there is an optimal way of doing this--AND if it actually helps the country.



In countries rich in natural resources but rife with corruption, nepotism and outright kleptocracy, how o
would giving money to its poor help ? It will feed them for sure, but does absolutely nothing for them in the long term, unless you wish to keep supporting the poor while allowing the very small elite to totally monopolise the country's wealth.

Enter your name...

Which matters more: short-term or long-term gains?

We'd like give someone a small amount of money (or other support) and have both the immediate and long-term needs disappear. But which is more important? If you have to choose between the two, what would you do for a person who is both hungry and unskilled? Feed him now, even though he'll probably be hungry in the future, or leave him hungry today and teach him a job skill so that he won't be hungry next year?

Enter your name...

Which matters more: interventions that help individuals as individuals, or interventions that help everyone?

For example: Is it more effective to spend a given sum of money on teaching job skills to a certain number of people, so that they can earn more money, or is it more effective to spend that money on ending corruption and improving property rights (e.g., providing clear land title so that your capital improvements to that land won't be taken away from you), so that they can reliably keep whatever money they earn?

Enter your name...

The analogy I have in mind is with medicine: probably the greatest improvement to people's health is not a drug or a surgery or a piece of information (like putting babies to sleep on their backs to reduce suffocation or the value of eating vegetables), but putting chlorine in drinking water.

This helps everyone, rich and poor alike. It is an "environmental" rather than an "individual" intervention. It does not require individual cooperation or depend on your individual response to the intervention. You can't convert it to some other use: money for baby food can become money for beer or money for prostitutes, but a fair and impartial judicial system, or the certainty that if you build a nice house on a piece of land, that nobody will "suddenly discover" that they actually own it all, can't be misappropriated.


We must turn it into a game show. Money or the goat.

Surely an impoverished girl in India bares little difference to the $100 sports shoe wearing homie with a nicotine habit?

Can we fight corruption with goats?