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. 

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  1. Eric M. Jones says:

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

    I am willing to try it.

    Well-loved. Like or Dislike: Thumb up 15 Thumb down 1
  2. Kunal Mathur says:

    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?

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  3. vimspot says:

    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)?

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  4. Matt says:

    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?

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  5. elhadji says:

    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

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  6. Steve says:

    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).

    Cheers
    Another Steve

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  7. Robbin Ezinga says:

    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.

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    • Enter your name... says:

      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”?

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  8. Hasan says:

    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?

    Thumb up 0 Thumb down 0