Does the Absence of Cash Help Cut Crime?

A new working paper (abstract; ungated PDF not available) by Richard Wright, Erdal Tekin, Volkan Topalli, Chandler McClellan, Timothy Dickinson, and Richard Rosenfeld analyzes the effects of delivering welfare benefits via Electronic Benefit Transfer (EBT) instead of checks (which are easily converted to crime-fueling cash):

It has been long recognized that cash plays a critical role in fueling street crime due to its liquidity and transactional anonymity. In poor neighborhoods where street offenses are concentrated, a significant source of circulating cash stems from public assistance or welfare payments. In the 1990s, the Federal government mandated individual states to convert the delivery of their welfare benefits from paper checks to an Electronic Benefit Transfer (EBT) system, whereby recipients received and expended their funds through debit cards. In this paper, we examine whether the reduction in the circulation of cash on the streets associated with EBT implementation had an effect on crime. To address this question, we exploit the variation in the timing of the EBT implementation across Missouri counties. Our results indicate that the EBT program had a negative and significant effect on the overall crime rate as well as burglary, assault, and larceny. According to our point estimates, the overall crime rate decreased by 9.8 percent in response to the EBT program. We also find a negative effect on arrests, especially those associated with non-drug offenses. EBT implementation had no effect on rape, a crime that is unlikely to be motivated by the acquisition of cash. Interestingly, the significant drop in crime in the United States over several decades has coincided with a period of steady decline in the proportion of financial transactions involving cash. In that sense, our findings serve as a fresh contribution to the important debate surrounding the factors underpinning the great American crime decline.

What's the Best Way to Deliver Food Aid?

The question of how best to deliver food aid is a controversial one.  In recent years, economists like Dean Karlan and Ed Glaeser have suggested that direct cash transfers are the most direct, efficient means of delivering aid to struggling families in the U.S. and elsewhere.  In response to the debate, the International Food Policy Research Institute (IFPRI) collaborated with the U.N. World Food Program (WFP) on several studies. Here's the Ecuador study comparing the effects of aid in the form of cash, food baskets, or supermarket vouchers.  And here's a summary of their findings in Ecuador, Niger, Uganda, and Yemen, which were also discussed at a recent IFPRI seminar:

Findings revealed that there is no one “right” transfer modality. The relative effectiveness of different modalities depends heavily on contextual factors such as the severity of food insecurity and the thickness of markets for grains and other foods. In three countries (Ecuador, Uganda, Yemen), cash had a relatively larger impact on improving dietary diversity as did vouchers in Ecuador, but in the fourth country (Niger), food had a larger impact on dietary diversity. Cash assistance was always significantly more cost-effective to deliver. In fact, researchers determined that if they repeated the study, but only distributed cash, they could feed an additional 32,800 people with the same project budget.

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

If 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.

One Step Closer to a Cashless Future

If you're wondering what our cash-free future may look like -- what will it do, e.g., to panhandling? -- consider a trip to Sweden. The Associated Press reports on that country's progress towards phasing out hard currency:

"In most Swedish cities, public buses don’t accept cash; tickets are prepaid or purchased with a cell phone text message.

Does Dodd-Frank Have You Reaching for Your Cash?

In a society steadily moving toward a cashless future (if not yet a penniless one), we may be seeing a return to cash transactions in some cases, for a surprising reason:

A new law that was supposed to reduce costs for merchants that accept debit cards has instead sent Mr. Scherr's monthly processing bills much higher and forced him to reassess the way he does business.

That's from an interesting Wall Street Journal article about an unintended consequence of the Dodd-Frank financial-overhaul legislation.Vendors used to pay on a sliding scale for debit-card transactions; Dodd-Frank set a flat fee, which can lead to higher payments on small transactions:

Many business owners who sell low-priced goods like coffee and candy bars now are paying higher rates — not lower — when their customers use debit cards for transactions that are less than roughly $10. ... "Overnight, the variable costs of a transaction have tripled," says Mr. English, who runs a marketing company that devises payment programs for vending machines. Some machine operators will raise prices and offer 25-cent discounts for cash starting in January, he says.