Fighting Poverty With Actual Evidence: A New Freakonomics Radio Podcast

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IPA

(Photo: Innovations for Poverty Action)

Our new podcast is called “Fighting Poverty With Actual Evidence.” (You can subscribe to the podcast 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.)

Not long ago, we put out a podcast that asked the question “Would a big bucket of cash really change your life?” That episode looked at whether winning a land lottery in antebellum Georgia significantly altered a given family’s financial future. University of Chicago economist Hoyt Bleakley, who studied that 1832 lottery, told us this: 

BLEAKLEY: 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 your 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 in a statistical sense. Whether their father won the lottery, lost the lottery, their occupation looks the same. The grandchildren aren’t going to school more, the grandchildren aren’t more literate. 

But one case study can’t definitively answer the larger question: what’s the best way to help poor people stop being poor? That’s the question we address in this new podcast. If features a discussion that Stephen Dubner recently moderated in New York City with Richard Thaler and Dean Karlan. Thaler is an economist at the University of Chicago, and a co-author of Nudge: Improving Decisions About Health, Wealth, and Happiness. (Both the British and U.S. governments now have “nudge” units, focused on using behavioral economics for policy improvements.) Karlan is a professor of economics at Yale and founder of the nonprofit Innovations for Poverty Action (IPA), which hosted the New York event. IPA, which Karlan founded, is trying to figure out how to best alleviate poverty. The answer, as you might expect, isn’t so simple. 

In some situations, giving money directly to poor people works well; in others, less so. IPA studied the efficacy of a cash-transfer experiment in Kenya run by the nonprofit GiveDirectly. For background, you might want to see how The Economist described the experiment, and also what NPR’s Planet Money had to say.

Karlan-Thaler-Dubner_NYC

(Photo: Daniel Goodrich)

The tenor of the Freakonomics Radio conversation was, as you might guess, a bit different. Here’s what transpired when Dubner asked Karlan to describe how the poor Kenyan families used the cash:

KARLAN: So they actually didn’t find money going into alcohol. It was a pleasant surprise…

THALER: What a waste. All that money and no fine wine.


Arnaud G.

Hello,

When I saw the title of the podcast I was really excited... Finally, you were going to talk about the "Poor Economics" by Abhijit Vinayak Banerjee and Esther Duflo.

You did not... *sigh* This podcast is fine as a fine wine though.

The studies shown in Poor Economics" are interesting, very well presented and match so well the title of "Fighting Poverty With Actual Evidence", a must read for the people that ever wondered why do the poorest people in the Indian state of Maharashtra spend 7 percent of their food budget on sugar.

PS : I really appreciate your work, I discovered Freakonomics about a month ago and already listened every episodes. Got me thinking about going back to study economics.

John Glazebrook

Fighting poverty.Well on the surface the "Fighting Poverty wjth Evidence" radio program sounds find.But it really is only focusing on a micro level model which also included some distractions about the poor misspending money on alcohol and prostitution.At the macro level there is substantial evidence that markets(private enterprise) and governments waste resources that could otherwise be better directed.How much money is wasted by big business on advertising budgets designed to influence consumers to gamble and eat unhealthy food?How much taxpayers money is wasted by western governments on military interventions and wars?Many taxpayers would not object to paying more taxes if governments provided evidence to show they were reducing poverty.I also found it strange that this program had absolutely nothing to say about population growth and world poverty?Why only call for evidence-based microprograms and not say anything about the need for evidence-based macro-level public policies? John Glazebrook (jdglazebrook@gmail.com)

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Al

I agree that a look at the macro level is needed. If we look at the "War on Poverty" in the US started in the 60's under LBJ we can see that the percentage of people in poverty has not gone down since then. This would be a good place to start when talking about "evidence-based" solutions.

Regarding how resources are used, I'd have to politely object to the way you've characterized things. I don't know how one could objectively say resources could be better used in certain circumstances. If you throw out an empty milk carton, are you "wasting" it because I might be able to use it for art or to build a musical instrument from it? The argument comes down to property rights. It exists or it doesn't. Private companies can do whatever they like with private property just as you or I can. The government may not do as they like because the property (tax money) is not theirs. Just for your own records, I highly object to government using my tax money for anything despite what evidence they can or can't provide because they are using force to solve the problem. I will help the poor as I see fit on a peaceful and voluntary basis.

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steve

Contrary to your statement, the war on poverty has been quite succesfull since LBJ. However, the poverty institutions within the U.S. government can't have this. They need more funding like an addict needs more drugs. So, what they do is subtract all government assistance from a persons income before determining whether they are in poverty or not. With the assistance a large number of people are living above the poverty line but are counted as if they are not.

James

There are a couple of points here that I wonder about. First, what exactly do we mean by poverty? Is a subsistence farmer in say Kenya, living in the context of a traditional culture, really "poor" in the same way that the lowest rung in the US is poor? Seems to me that the Kenyan is in a real sense moderately successful within his cultural context, while the American is not. That means we are really looking at two quite different conditions, which might respond quite differently to different kinds of aid.

Second, I ran across an interesting slideshow http://www.sfgate.com/news/slideshow/17-things-rich-people-do-74597/photo-4563965.php about the ways in which rich American/western people seem to think differently than poor ones. This hit home to be because, despite having been raised in poverty and spending roughly my first decade of adulthood being poor, I somehow acquired most of the rich habits listed there - and these days, I'm quite prosperous, if not actually rich. Cause and effect?

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Scot B

In my opinion, the same things that help people build wealth in developed societies also work well in developing societies. Education (how to take care of your health, how to maintain your stuff, how to build capacity, how to work well with others), self discipline, ethics, access to capital, a reliable legal system, and protection of private property rights. If any of those things are missing, each is a difficult problem to solve on their own and in many societies several are problems.

Juan N

great podcast... as always... I was drawn to check out the transcript to find out more about survey methods such as "list randomization", how to find a % of the truth, or enough of it to make decisions...
The concept of having half truths to make evidence based decisions seems contradictory, but I guess it´s better than nothing at all.

amanda

Back in the dark ages everybody knew some things. If a kid was hungry, you fed him, Corporations even corporations did not want the chemical plant next door exploding. The time of the windfall to the monopoly style of privatization/deregulation is starting to end or at least slow. If Elizabeth Warren gets to be president then one concept will finally be used, anti-trust. Only when we drop down from 20% to the 5% of Finland in poverty can we have good schools and education. How the heck can we get down to that if we don't educate kids? If a kid is hungry then feed him. Provide a surplus of jobs and tax the rich. That is so easy to do in a scientific way. We will see if the political will of all of us can trump the Bill Gates propaganda. Corporations are two year olds whose constant impoverishment of their customers does not bode well for their future. We have to be the adults in the room. It saves them. It then saves us. Save the middle class. or else.

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John Glazebrook

I believe Amanda has made the most interesting comments on poverty.Poverty is essentially a "macroeconomic" problem when our dominant institutions (corporate and government) waste finite resources on militarism,propaganda and advertising, and adopt austerity policies, reduce spending and cut jobs.
Further,no thought has been given to what is the meaning of education and if formal "schooling " is the best way to provide "education "services.
Many formal schooling systems in America and elsewhere are expensive to operate and can leave students starting their working life with a debt.
By defining "poverty" as essentially a microeconomic problem are we really in denial about macroeconomic policy and institutional failures?
Sincerely, John Glazebrook

Eric J

Getting back to the original question, what amount of money would elevate the family from poverty. From my own personal experience, I can say no amount will solve the problem. $10,000 or $100,000, it doesn't matter, it will not change the behavior that caused the poverty in the first place. My family experience matches the Georgia study. A family member living paycheck to paycheck making about $24,000 a year for a family of 3, received a $36,000 inheritance. It took 18 months to burn through the money to the point of foreclosure on a single-wide trailer. This family member grew up in a middle class family with 2 professionals as parents and graduated in the top 5% of the high school class and attended but did not finish college. While working a low paying job is a result of not finishing education, the overspending that caused foreclosure and bankruptcy is a choice. Most swamps can never be filled in with money. There will never be enough.

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Ng Yih Yng

On a related note,
Singapore has no poverty line. So technically nobody in the entire country is defined as being poor. Do you think it's important to have such a definition and what are the implications if such a line was never drawn?

http://sg.news.yahoo.com/poverty-line-not-useful-for-singapore--says-pm-lee--reports-051543857.html

Anne

I would like some evidence-based means of removing the systematic exploitation that propagates poverty. For example, once you've transferred the cash, how do you stop all the landlords, banks, food vendors, etc. from raising the prices on the rents, loans, and goods that these poor consumers must purchase?

James

Market economics, of course. The same thing that stops landlords &c from raising prices beyond what the market will support in more prosperous areas. Why don't I have to pay $50 for a pizza in my neighborhood? I have the money...

Gerardine Luongo

Wow, the discussion doesn't really add much to the question of evaluation

Bill R.

I applaud the attempt to gather evidence but I'm suspicious of monitored populations and pilot programs. It's one thing for a small population to be monitored and compared against a control and quite another for an entire population to be afforded the proven fix.

Dustin

There is an established method for handing out free bags of cash to those in need, at least those seeking higher education. It is called a "scholarship." However, to get one of those money bags, you have to actually convince somebody on a committee that you are "worthy" of getting it in the first place.

Wouldn't it make more sense, at least on paper, to put some kind of screening mechanism in place? What I'm trying to say is that instead of passing out wads of bills randomly to drunk/gambler poor folk and industrious/dilligent poor folk, why not attempt to favor the latter by some sort of pre-disbursement interview? You might see less money being wasted or spent frivolously and more actual economic benefit.

Maybe these researchers are doing that already...

Joe J

Attempts to do that would be met with charges of racism, regardless of who received money or what criteria was chosen.

Shamari

i feel that the people with money are aware that people are in poverty and are poor and they have money but they dont do anything or pay attention. but if it was them on the other hand they would want help. its sad to know some people dont help those in need.

Voice of Reason

I think that it's pretty unfair to do a study where you give a family enough to suddenly have more than they will ever need. It's uneconomic and unfair to be expected to provide that, and the family will suffer from the shock that comes with it.

Maybe instead of a study where you give one family $20,000,00, you give 200 families $100,000, and see the impact that it has. To make things even more interesting, maybe give those families $20,000 a year for five years. I think that you would find that the families would have their basic necessities met, and with more people, you would have a greater liklihood that some of them would choose to invest that money back into education.

Zachary White

For all of you that like data in the global development sector. This is a thing that is happening.

http://www.globalwaterforum.org/2013/12/01/improving-global-impact-how-the-integration-of-remotely-reporting-sensors-in-water-projects-may-demonstrate-and-enhance-positive-change/

If you want anymore info I'd be glad to answer any questions.

Zachary White

I'd like to add that IPA does amazing work in the global development sector. I had a chance to work beside their team in Kenya on one of their RCT projects.

Lightengine

All forms of deprivation are symptoms of poverty. Poverty is the inability of the individual to create value for himself and for others. Evolution required that we be innately self-sufficient.

Every individual requires five resources to be enabled to create value.
1. Conditioned positive persistence. 2. Knowledge of technologies to create value. 3. Enterprises to provide the resources with which to create value. 4. Hygiene and health. 5. Security of self and security of rewards.

The underlying cause of our long lasting economic recession and high Federal deficits are $700 billion annual trade deficits that reduce the demand for about 70 million jobs by moving enterprises off shore and bleeding capital out of the country. We have about 40 million underemployed and about 30 million unemployed. With corporate profits going off shore our corporate tax revenue is at an all time low despite having the highest corporate tax rate in the world. Our individual income tax, social security tax, and Medicare tax revenues are also at the lowest level because we have too few people engaged in the wage earning economy. The top ten percent of wage earners pay 70% of income taxes. We could raise the top tax rate from 35% to 50% and only cover 21% of the Federal deficit. The accumulated trade deficits and accumulated Federal deficits track perfectly. Every dollar of trade deficit causes about two dollars in reduced revenue for the Federal and State governments. The hard lesson is that tariff free trade is only free when it is balanced. The trade deficit is 46% energy and 41% China.

We need to become energy self-sufficient as soon as possible and we need to reverse the priorities of the Commerce Department from helping to outsource to helping to in-source.

http://orcosportsmans.com/Pages/NewContract.htm
http://orcosportsmans.com/Pages/Underlying.htm

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Michelle

I just listened to your podcast Fighting Poverty with Actual Evidence in Kigali, Rwanda. I've been working at the Ministry of Agriculture & Animal Resources (MINAGRI) the last year and I was actually saving this podcast to listen to since I witness this every day!

I just wanted to give a really interesting tidbit of information about fighting poverty in Rwanda using agricultural means. MINAGRI has many programs and projects with the idea of sustainability behind it, and has actually lifted 1 million people above the poverty line in 5 years (amazing considering their experience during the Genocide just 20 years ago). But one program comes to mind, and it's called Girinka Program, also known as One Cow per Poor Family Program.

I mention this because the idea is that AI-impregnated Heifers are donated to vulnerable families in the poorest communities of Rwanda. The reason their impregnation is so important is because the 1st female calf born is required to be passed on to another neighbor. (These cows are only given to those with land, the average amount of land per farmer is .75ha.)

They call it a home-grown solution in Rwanda, mainly because this program builds on the foundation that the Rwandan people already know; receiving a cow is the best gift of life they can get. Increasing income by producing milk, lifting malnutrition statuses, creating biogas and manure are all activities that farmers will do with just one cow. On top of this, passing calves on to neighbors rebuilds the trust that Rwandan people lost during the Genocide with their very friends and neighbors.

MINAGRI also has realized that farmers cannot just be given cows as assets, and so their implementation agencies provide continuous extension support and training. As a result, Rwandan farmers have become increasingly successful in the production of milk, developing the foundation of a dairy industry with milk collection centers around the country. Milk production has increased from 92,628 tons to 489,961 tons since 1999.

I just thought this would be an interesting tidbit, since it almost exactly replicates the goat example you had given during the podcast. Also that this is being implemented in real life, and I truly believe that Rwanda is one African country "doing it right," fighting hunger and poverty through the efficient use of donor aid and the creation of sustainability so that they can relieve themselves of donor aid at the same time.

Thanks a lot! I only recently discovered Freakonomics Podcast and will continue to enjoy it in the future.

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Brigitte D.

Regarding your podcast, "Fighting Poverty with Evidence" if you want to examine the efficient use of resources (public or private) I would suggest you examine the results of the Chicano Movimiento in California regarding education. While I cannot speak for K to 12 improvements. Access to higher education in public institutions for Latinos (now 38% of California's plurality) opened up on an unprecedented basis. Targeted at Latino students who were A.) not encouraged to pursue higher ed in public school despite grades and ability and B.) Students who were the first ever to pursue higher education, and C.) woking class or poor. There was a combined political and community will that created increasing cohorts of Latino students in the 70's and 80's. I see anecdotal evidence that the children and grandchildren of these initial college grads were likely to pursue education. It would be very interesting if you were able to investigate the effects of that public investment for not only the individual families, but California as well.
Love your podcasts!

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MaK

What I find extremely funny is that mr. Thaler says at about 20 min spot that "Danish don't have much concern for privacy". He says this because of the Nordic way of gathering register data on various things. I live in Finland myself and we have pretty much the same system in this sense but I have never felt that it was some sort of problem on my privacy, on the contrary.

Back to the point, now what I find funny is that an American guy says that the Danes don't care much for privacy, yet, you guys have the NSA, FBI and CIA and a crazy legal system that allows imprisoment of people on grounds that would be totally untolerable in this part of the world.

Keep up the good work there, cheers.

emkule

So many questions.

The results that showed the Kenyans spent their money on building their businesses and really not on alcohol and gambling, was curios. The first question is how consumer driven is Kenyan society? I'd say, compared to most developed countries, we're really low on the consumer culture index. When one hears ads on radio and TV about loans and financial support, a majority of the ads are geared towards starting a businesses and education...not much about buying cars, furniture or a house or 'things'...(phones being the exception) Perhaps people are already nudged into using money constructively through cultural influence?

Also, we have a cultural context here when looking at prosperity. In many cultures within Kenya, wealth is defined as running a business, owning more cattle, owning more land or educating children. So it wouldn't be far fetched to know that most people that were given the money would use it constructively on one of the above. Actually, is there prior evidence that has shown 'poor' Kenyans use their money in an irresponsible manner? I doubt it. Also, the idea of branding and brand names and the consciousness of style, seems to be something that is relatively new, therefore it's unlikely excess money will be spent on 'stylish' items...items that marketing and advertising push excessively in other economically stable countries.

I would also like to add that even if there was a village chap that wanted to spend his $1,000 dollars (the amount it seems was given as free money) on alcohol he'd be a very brave man. Alcohol costs around 30 cents a cup for the common traditional brew. He'd basically have to drink close to 100 cups a day to blow that money, a feat that even the best drunkards wouldn't imagine to complete. Therefore, even if the village drunk got his $1000, he'd still have a considerable amount left over to participate on things that would deem him successful (especially if he had a wife with good common sense.)

However, either way you look at it, giving anyone $1000 dollars immediately lifts them out of poverty...they have a $1000!

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