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