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

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(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.


The illustrious ecophilosopher Chris Rock does a great bit on this.

It comes down to the difference between being rich and having wealth.

Wealth takes time to build. Rich can be fleeting.

steve cebalt

So true, JPB. "Rich can be fleeting." I am reminded of the great economist W.C. Fields, whose view on allocating a monetary windfall was this:

“I spent half my money on gambling, alcohol and wild women. The other half I wasted.”

Good topic, good podcast.


I think it was George Best, English Footballer

"I spent a lot of money on booze, birds and fast cars. The rest I just squandered"


I was surprised to not see mentioned any consideration of the impact of the war 30 years later on multi-generational outcomes. Those who won the lottery may not have been able to follow an upward trajectory because of disruptions in the economic system that they knew.


Even beyond this, consider the impact of later westward migration.

I'm also more than a little curious as to whether there is in fact sufficient data to accurately track what happened to the following generations. Say Joe Lotterywinner has four kids starting in 1832. In 1849 there's the California Gold Rush, so the most ambitious kid heads west, and we lose track of him. Maybe he parlays the few nuggets he found into a grocery store, or railroad shares, moves to a mansion on Nob Hill, and forgets about the poor relatives back home. A few years later, another one goes off to homestead in Montana or Oregon, and we lose track of him too... Do his descendents still (like some of the families hereabout) hold thousands of acres of land? How on earth could anyone possibly track this sort of thing accurately enough to create usable data?

Enter your name...

It seems like you'd have at least as much trouble tracking the non-winners, so this probably comes out in the wash.


Long term gains have to be more important to people who acquire money who aren't used to having it.


My house has been through 4 natural disasters in the past 3.5 years:
A massive flood in 2010
Hurricane Irene in 2011
Hurricane Sandy in 2012
Supermegablizzard Nemo in 2013 (including a fire in the house due to a faulty candy.)

We weren't poor before, but we certainly are now. $50,000 wouldn't change are lives, but it would definitely do a lot to bring us back up to where we were before.


$50,000? Sure. That ought to be enough to get one person an associates degree. And once you have that, the money just starts flowing in.


I think it is interesting to consider the same scenario today. You are randomly given $100,000 (~10 acres) of land. What do you do with it? Does it change your life and that of your descendants forever? Probably not, because, truly, that isn't enough to change your life. If you are not already in the top half of the wealth distribution you're not going to quit your job and move to your new parcel. Because there's now a lot of land sellers and few buyers, your land isn't even really worth the face value so you get maybe 80%. You might sell the land and pay down some debt, buy some stuff, and invest whatever is left, but it isn't really that much unless you get lucky again.

Additionally, since the outcomes being measured are based on children's education and success, are there even schools available? If you move to the newly distributed parcels then there aren't any schools there. How many schools were available in rural Georgia (and what was the wealth distribution between rural and urban Georgia)? Keep in mind that travel to school is on foot, and boarding school is expensive.

Even if someone wanted to keep their land, do they have the resources to exploit it?


Enter your name...

They weren't given "$100,000" or "10 acres"; they were given enough farm land to support a family on. It's the agrarian equivalent of giving someone a good job.

C R Steven

What about the aggregate demand increase to raise all boats and increase opportunities? It would seem that influx of money in a community would increase wealth across the board. Reminds me of the small Texas town that half the people won the lottery. Not sure how that turned out in the long run.


Perhaps I'm misunderstanding some of the facts discussed in this podcast, but I heard a number of notable flaws in the reasoning used in this study/discussion.

To begin with, having a physical commodity (land) worth a certain value of capital ($) is not equal to actually having that value of capital. Being gifted a large tract of land may represent a significant economic boon to an individual, but it doesn't quite directly equate with a gift of direct liquid capital (the "bucket of cash").

The researcher places great value on continued education and upward generational mobility. He points out that there was a clear link between a college education and multigenerational success at the time. He doesn't explain whether this link to education and success was commonly understood and valued enough to be considered important by the winning families. Given the relatively small percentages of the US population to receive university educations into even much of the 20th Century, I question whether this "common knowledge" of contemporary society and a data expert would necessarily have been even known to the winners. Compulsory education for primary and secondary school did not even become law in Georgia until 1916.

My assumption while listening to this was that the gifted properties were primarily intended for farming use. In that case, a lot of land could mean a reliable and steady profession for an individual and their descendants... eliminating the need for an advanced education to ensure a stable life for future generations. Even if these families did understand and value educational opportunities for their children, the complete lack of liquid capital as part of this significant financial gift means that using the gift to better educate their children would require having to liquidate at least some of the gifted commodity. In other words, selling off land to finance this education. Which could mean at least a short term loss of regular income.

And finally, as another commenter already mentioned, the economic impact of the Civil War on the rural communities of the South should also be considered. It's entirely likely that the winning families and the control group had similar levels of financial success over time because all of their cumulative wealth was reduced to near zero following the war. So any gains made by the winning families in the 1-3 generations following the land gift might have been negated by the devastation of the Southern economy.

Overall an incredibly interesting study and discussion. But given these potential fallacies, I question whether the findings support the generalized conclusions suggested as concern the role of large cash gifts on improving lives.



Yeah, I'm wondering if these people had to pay taxes on this land. Maybe that was mentioned when I was distracted.

Steve Gibson

A wise man once related to me : If all the wealth in the country was seized and distributed evenly amongst all the inhabitants it would take about 20 years before it wound up in the same hands as it did before the redistribution. Equal Opportunity does not result in equal outcome. You can't redistribute a work ethic.

Working class

I'm sorry, but you sit in an office all day right? And make more than blue collar workers that bust their ass all day. Don't ever mention work ethic again.

What about the rich children who had all of their wealth handed to them? And their rich parents who had the same thing happen?

Some people start at the top of the ladder, some start at the bottom. Take the wealth from those who barely had to lift a finger, and then tell them to earn it back. Do not smugly act like at the upper class has worked hard for all they have. Someone else has worked hard for them.


Sorry, but at least some of us here on the borders of the uppper class - say the top quintile - did work hard, in the blue collar sense, to get where we are today. If today I can work from home (not an office) using a keyboard, it's because I got pretty darn tired of picking fruit, driving a tractor around a field in a Bakersfield summer (before tractors had air-conditioned cabs), putting in 100+ hours a week toting bags of cement, and suchlike, and took steps to change that. Further, because I had no desire to go back to that sort of work, I made sure I didn't spend every cent of my now-higher paycheck. I saved & invested, and now, a few decades from those fields, I don't have to work at all to survive.

So if I, who am not all that extraordinary a person (much as I'd like to think otherwise :-) can do this, why can't most of the rest of the 80%?


An idea for a "Good News" podcast: the Early Retirement Extreme movement, wherein average americans are retiring after as little as 5 years of employment. These concepts are described on the blog by the same name, as well as the blog Mr. Money Money Mustache, and the classic book "Your Money or Your Life"


Except the bad news is that if everyone did the frugality thing, the economy would collapse. It depends on people buying unneeded consumer junk in order to create jobs for people making unneeded consumer junk, so that they can become part of the economy and use their pay to buy more unneeded consumer junk, thus creating more jobs...

Now if your background is in physics (as mine is), this all starts to look rather like perpetual motion.


Ah yes, the old 'your consumption is my income and my consumption is your income' chestnut. Unless of course I don't value what your providing me and then you're just sucking the life out of me for no return. Which is better: to collapse or to explode?


Could it be the satisfaction of pent up demand? For instance, if you give someone $50k who has been living below their needs isn't it likely that a large portion of the $50k would go to 'righting the ship'? If so, the true societal benefit would have already been materialized at the time of the distribution. In order for an experiment like this to show improvement it would seem to me that the money would have to be distributed to participants who were already able to meet their needs prior to the distribution.

As far a question for future podcasts. I'd like to know what is the 'magic value' that would be necessary to set a doctor/hospital visit so that the people who had a legitimate need would go but wouldn't deter those who could not afford it not to go. For instance, would the system hit its 'right setting' if everyone who accessed the system was charge $452 every time they accessed the system? (Every doctor visit, every hospital visit - etc.)



Related to Brad's comment about the difference between winning a thing and winning money, is there any evidence that lottery winners could actually extract any value from the land they won? I assume people could really only do one of two things if they won a plot: farm on the land to make money from it, or sell the land to someone who could. Some (most?) winners wouldn't be able to start a farm from scratch, and who knows what kind of value they could get by turning around and selling the land.


So, how does this story square with the recent Planet Money article on giving direct cash to families in Africa.....that seemed to have a positive impact


Julien Couvreur

I was thinking about that too. I doubt that this charity has accumulated enough data over enough time to study the long-term effects of the donations.
The question is not just whether the recipients are better off, but whether their children fare better than otherwise.

Caleb b

Given that modern lottery players are overwelmingly poor and uneducated, it does not surprise me at all that a sudden windfall of cash does not actually help them all that much. 1) being poor means you probably have poor friends/family that want/need part of that win 2) you have, as one person already put it, pent up demand to right the ship 3) if you are like most Americans, you are financially illiterate, so you might make very bad choices of savings/investing/purchasing 4) people with more education will probably scheme a way to rip you off 5) you have "dream" wants that are probably expensive, like a flashy car that you pay the asking price for bc you want it right that minute

One other note, given that taxes and the time value of money, you really usually only get about 25% of your prize money....so for many wins, that really cuts down on the whole transfer.


You can do that study right now. According to a Cato Institute study recently quoted in Forbes, if you meet certain requirements in Hawaii or D.C., you can get government benefits exceeding $50,000 per year. Go find some of those people and see how it's working out for them. I am fully aware that those type of benefits are not something you can get for a lifetime, but I would bet you can find some families that have benefitted for generations and are in the same boat now as two or three generations ago. One of the things we really need to teach people in this country is how to spend their money.


Only those with money say it doesn't matter

Brad C

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.


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.


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

Thought Experiment

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.



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