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Research Finds Outright Grants of Cash are an Effective Form of Aid to the Poor
- argumentum 13y agoThis is only "surprising" to those who think they know how other people should live. I've always favored this approach (a minimum income, or negative income tax .. whatever you want to call it) as a replacement to all other forms of welfare. If I am to spend my tax money on those in need, I do not want more than half of it going to upper middle class bureaucrats and middle class administrators.
- logicallee 13y agoI think with that last sentence you mean 80%. 20% payout to the end beneficiary is quite common.
- purplelobster 13y agoThat's in charity organizations, doubt that's true for government. Anyone have actual numbers on typical government overhead?
- thrownaway2424 13y agoDepends on the program, but generally it ranges from 0 to 20%, most being right around 10%. This changes when republicans win on their "voucher" planks, when suddenly the overhead skyrockets because there are for-profit entities in the loop.
- thaumasiotes 13y agoAs I understand it, the idea of a voucher is that the for-profit entity receives the money after the end beneficiary does, which wouldn't affect how much the end beneficiary gets. What are you talking about?
- rsynnott 13y agoA lot of "voucher systems" (a) impose overheads, which are generally paid by the donor and not the participating company or (b) use hidden, non-open-market (and potentially higher) pricing.
- thrownaway2424 13y agoSome programs, like schools, dispense services rather than cash. If you're talking about direct payment programs these are extremely efficient: 4.5% for SCHIP in 2005, for example. Other direct payment programs have higher overhead because they are means-tested (another conservative victory) and it costs money to administer means-tested programs. Amusingly, the US state of Florida in 2011 enacted another one of those republican favorites, the drug test for welfare recipients. In practice it cost more to administer the drug tests than they saved by throwing the positive results out of the program, because it turns out that welfare recipients are far less likely than the general public to use drugs.
- gnaritas 13y agoRepublicans seem to despise moochers more than wasting money, despite all their claims to be doing it to save money.
- argumentum 13y agoI figured it was more like 80-90%, but didn't want to take the time to look up #s, hence .. "more than half".
- grandalf 13y agoExactly, the idea that someone should buy food for their kid rather than a big screen TV is extremely paternalistic.
- deleted 13y ago[deleted]
- waqf 13y agoThe idea that people need to be told to buy food for their kid rather than a big screen TV is paternalistic, yes.
- code_duck 13y agoSadly, some people absolutely need to be told to buy their kid a jacket vs. a large bag of cocaine.
- femto 13y agoThe point of the study is that these cases are a minority, and that it works to initially assume that the money will be used to buy a jacket.
- _delirium 13y agoI agree! This is why I've long argued that companies should be required to pay a portion of their employees' paychecks in nontransferable vouchers. If parents want to blow their I-Bank or Google paychecks on MacBooks, cocaine, and hookers, after responsibly buying jackets and healthy food for their kids, that's their prerogative. But the first $n0,000 should be paid out in restricted vouchers to make sure they provide for their kids first.
- derefr 13y agoAnother way to do this would be to have a Basic Income that pays out to minors separately from their parents, but into an account/card that, for minors, is restricted to certain products/services (somewhat like how foodstamps work, but more generally toward childcare/food/clothing/education-type products.) The parents would have power over the child's account, just as parents do today, but only given the same restrictions.
- pmorici 13y agoHow do you feel about things like Social Security Disability benefits? By most accounts there is some very real abuse of that social welfare program that could cause it to not be there for people who legitimately need it. http://www.cbsnews.com/video/watch/?id=50156574n http://www.cbsnews.com/video/watch/?id=50156574n
- lawnchair_larry 13y agoThe cost of the abuse does not exceed the cost of losing the program entirely and leaving the non-abusers high and dry. It's not an ideal situation, but we are worse off if we throw the baby out with the bathwater.
- Shivetya 13y agoNo one suggests losing the program in its entirety, responses of like yours are straight up hyperbole. It is not a valid rebuttal to those looking to make corrective changes. Far too many abuses are allowed to go on simply because of such arguments thereby reducing the aid we could give to truly needed people. I am all for helping those in need, nearly 2% of my gross salary goes to CHOA each year, but damn if I am going to believe that there are people on one if not more of the hundred of government programs who don't deserve to be there. The best way to help people is to get more diligent about policing those we do help. Are they getting the right help is the question that we must answer.
- mfringel 13y agoIf your win condition is "eliminate all cheaters", you've already gone to "ditching the program in its entirety". Human systems have defectors, otherwise game theory wouldn't exist. If your win condition is "eliminate most of the cheaters", I'd like some proof that we're not already at the Nash Equilibrium for that with the current system.
- rsynnott 13y ago> The best way to help people is to get more diligent about policing those we do help Would the cost of doing that exceed the savings? If so (and that seems rather likely; the vast majority of social welfare recipients do _not_ cheat), it seems rather impractical. In practice, people cheat in all systems, and a certain amount of cheating is built into the assumptions for any well-designed system. For instance, tax authorities do not audit everybody, because it would be impractical; in not doing so they accept a certain amount of tax fraud. Shops don't watch everyone who comes in the door all the time, because it would be impractical; in not doing so they accept a certain amount of theft (most of what accountants call 'shrinkage' is employee and customer theft).
- cjbprime 13y agoIf you find this persuasive, consider donating to http://www.givedirectly.org/ http://www.givedirectly.org/, which performs unconditional cash transfers to the poorest people in Kenya. Give Directly is the subject of this writeup[1] on GiveWell, and this excellent episode[2] of This American Life. [1]: http://www.givewell.org/international/top-charities/give-directly http://www.givewell.org/international/top-charities/give-dir... [2]: http://www.thisamericanlife.org/radio-archives/episode/503/i-was-just-trying-to-help http://www.thisamericanlife.org/radio-archives/episode/503/i...
- milsorgen 13y agoAre there any similar programs for people in developed countries?
- cjbprime 13y agoWell, there's http://www.nbcnews.com/business/2-800-month-every-adult-it-could-happen-switzerland-8C11354757 http://www.nbcnews.com/business/2-800-month-every-adult-it-c... . I wouldn't donate to it, though -- Switzerland doesn't need the money. (And if we're performing a comparison, neither do other developed countries compared to the people being targeted by Give Directly's program. We should give to wherever it will do the most good, right?)
- juliajuli45 13y agomy classmate's half-sister makes $72 every hour on the internet. She has been without a job for eight months but last month her payment was $16159 just working on the internet for a few hours.Here's the site to read more...... ------------------->http://www.works23.com http://www.works23.com
- justin66 13y ago> We should give to wherever it will do the most good, right? It's not obvious that the welfare of Kenyans is more important than, for example, the welfare of Americans or Swiss. > Switzerland doesn't need the money I don't know much about Switzerland but the same sort of rationale could be used for directing charitable donations to Africa instead of America. Meanwhile, a lot of people in the United States suffer in various ways. The "that country has so much money that people there certainly don't need any donations" line of thought is very obviously wrong.
- asperous 13y agoI think the context is super important here. "gave cash to groups of young people so they could learn a trade and start their own businesses." In Uganda. These people were pretty much starving before. “These were mostly farmers who had work 10 to 20 hours a week and earned about $1 a day," With different people, culture, attitudes, environment the effect might be completely different in America, for example.
- KatherineJMoses 13y agouptil I looked at the receipt which had said $9272, I didn't believe that my mom in-law woz realie bringing in money in there spare time on there computar.. there friends cousin haz done this 4 only about eighteen months and recently cleard the mortgage on their place and bourt a great opel. additional info ========================== http://WWW.WORKS23.COM http://WWW.WORKS23.COM
- breischl 13y agoIn addition... <blockquote>To get the cash, applicants had to form a group with others in their village and submit a proposal showing how they planned to use the money</blockquote> It's not clear how selective they were, but it does sound more involved than just "fill out this form and get your cash." So it's a group of people that were selected, or at least self-selected, for some minimum amount of initiative and ambition. The title of the article invites comparisons to social safety net programs in the developed world, but this sounds more like a combination of the educational and small business grant programs. It also seems like it would not be broadly applicable - you couldn't just carpet an area with $400 grants and expect the same kind of success rate.
- ma2rten 13y agoIn addition... The simple fact that someone came after those people to check what they did with their money, for the purpose of the research, probably influenced the result (at least if they knew or suspected that beforehand). If they said they would use the money for business, but then instead spend it alcohol and gambling, that would be very embarrassing. If on the other hand, a program like exists this for a long time and everyone knows nobody will check what you do with the money, abuse would become very likely, imo.
- sliverstorm 13y agoThe one-time grant model seems like it could be important; you don't develop the whole cargo cult dependence when it is a one-time windfall only.
- e12e 13y agoThere's always the risk that one of the recipients will become so successful that they start doing this themselves... ;-)
- mh_yam 13y agoIt's all about state of mind. People who actually want to make a living, start businesses, create wealth, and live responsibly VS those who just want to be parasites. Attitude is what matters...
- photorized 13y agoUse of funds makes all the difference. Sometimes, a person needs a little push - or some initial help to get off the ground. What are your views on all the entrepreneurs seeking funding - would you consider them parasites?
- hristov 13y agoThe problem with cash grants is something that does not show up when there is a Columbia professor watching things. And that is that the money gets stolen. Many poor countries suffer from corrupt callous and cruel leadership. And this means that the people in power tend to steal from the poor. Thus, if some organization tries to give cash to the poor there is a high likelihood that the money will be stolen and sent to a swiss bank. It is much more difficult to steal bags of grain with "US AID" printed on them. They are heavy transport is expensive and no-one will pay full price for bags of grains that say US AID on them because they will know it is stolen. If you want to re-bag the grain, it will be a lot of work, and you will have to hire many workers some of which may inform the US embassy. Thus, once the US government dumps a bunch of grain in a poor place, even the evil corrupt warlords tend to leave most of it to the poor because it is too difficult to steal it and sell it. There is a similar problem with cash crops. Initially when I heard activists complain about cash crops, I said "what is the problem? Farmers should farm cash crops in order to get the maximum amount of money for their land and labor." Well the problem is that if you plant cash crops (such as coffee, cocoa, etc.) you have to sell them to get some money out of them. But the local corrupt official and/or warlord will take control of all the merchants and make sure the farmers receive very little and take most of the money for himself. If, on the other hand the farmers plant ordinary food, it is very difficult for warlord to steal it. He will have to make his troops do actual agriculture work to steal the food, and they hate that. So this will only work for countries with relatively strong civil society and there are very few of those among the poor countries.
- cjbprime 13y agoI don't think this has been a significant problem for Give Directly, which sends money to people directly via the M-PESA cell phone network, in reasonably small amounts at a time, and with unpredictable timing. There's no easy access point for a corrupt official to swoop in and become involved.
- twotwotwo 13y agoRight. That's important to make this program work, and it's an unusual set of circumstances. Not many places have both extremely poor people and a high-quality mobile payment network! Bad stuff can still happen: people could potentially be swindled or harassed out of their cash once they get it. But at least getting it there is a huge step. Also, perhaps one thing you can take from this is that a full-featured mobile payment network needn't be thought of just as conveniences for the first world. It also makes stuff like this possible.
- jasonlmk 13y agoA similar research based on the land lotteries in Georgia in 1832 and in Oklahoma in 1901 showed that outright increases in wealth (i.e., winning the lottery) had little or no effect on generational wealth. There was also another similar research on the land lotteries which showed negative effect on generational wealth. http://www.stanford.edu/group/SITE/archive/SITE_2010/segment_5/segment_5_papers/bleakley.pdf http://www.stanford.edu/group/SITE/archive/SITE_2010/segment...
- skadamat 13y agoKiva.org anyone? I"m shocked this hasn't come up in this thread
- dualogy 13y agoJust from the headline, I thought this would be an Onion article..
- aaronchriscohen 13y agoI wonder if requiring applicants to "form a group with others in their village and submit a proposal showing how they planned to use the money" had anything to do with their success. It's not like they just dropped money out of a plane. And the fact that these grants were funded by a World Bank loan seems to undercut the headline even more.
- yaix 13y agoThe only way countries have /ever/ developed is by the production of value, products that a market wants to buy, usually an export market. Handing out free money doesn't help to achieve that goal. It just perpetualtes dependence. It seems to be the "new hip thing" within the aid-industrial complex, though. I hope it will not do too much damage to these societies, like many of the previous "effective forms of aid" did.
- tedsanders 13y agoI think the argument is that initial capital can jumpstart that production of value. If you spend 10 hours a week maintaining your straw roof, and then someone buys you a metal roof, you can now spend those 10 hours a week on an exportable trade/product.
- yaix 13y agoI know that argument, but it is incorrect. Production needs to be efficient in order to compete. Efficiency needs knowledge. These "groups of poor" lack that knowledge. And the amount of free money is way to low to produce anything with enough surplus value. How many unskilled carpenters, metal workers, and hair stylists do they need? I am currently in Kenya, and the amount of barber shops is amazing. Production of value is stuff that a country can export, to earn hard currency that can buy knowledge to increase the country's production efficiency. Like Taiwan did, and Korea, and Malaysia, and China, and any country that has ever successfully developed in the past 70 years. But the aid curse will not allow it, unfortunately.
- nostrademons 13y agoI think both these explanations are missing that there are many factors behind successful economic development, and increasing one factor of production will help if it is the limiting factor, but hurt if it is already abundant. If you give money to people who already have technical know-how, a willing market, a solid distribution network, and a stable legal system but just lack access to capital, it will usually have very good returns. If you give it to people who have none of these, it will get spent on whatever good happens to be available, usually booze. If you replace the government of a country that has capital, an educated populace, and solid infrastructure but suffers from endemic corruption and lack of solid legal foundations, you will probably also help spur economic development. What I wish more poverty-alleviation problems did was focus on identifying and eliminating bottlenecks to economic growth. The casual American readership loves to think there's one solution and then loves to argue over what it is, but I don't think it works that way. Poverty is complex; the reason that inner-city Baltimore is poor is very different from the reason Kenya is poor, which is different from why rural China is poor.
- ig1 13y agoI've only read the article and not the underlying paper, but it seems to be saying a $400 grant yields an average annual return of 40% - it would seem that would make it viable as a loan scheme rather than a grant scheme (maybe in terms of a loan that automatically gets written off after X years so it's a pseudo-grant). It's important to note also that they're using the group effect that are also popular among microlenders, in that the grants are made to groups of individuals so you'll have some degrees of the individuals checking up on each other.
- pesenti 13y agoI wonder if this could be applied to rich countries: give $500/month to each adult citizen. No questions asked. Unlike many existing programs for the very poor (http://en.wikipedia.org/wiki/Revenu_minimum_d'insertion http://en.wikipedia.org/wiki/Revenu_minimum_d'insertion) it would not dissuade them from working (if you work you just earn more) and would be really easy to administrate (there are no criteria).
- Figs 13y agoWouldn't that just cause inflation?
- pesenti 13y agoNot if you finance it through taxes and elimination of other programs for the very poor like food stamps.
- Figs 13y agoIt seems to me that if everyone has an extra $500, the likely result is rent, etc. rises to compensate, and you wind up with essentially the same social situation just with all the prices offset slightly. If you give everyone $500 and then take $500 back from most people in taxes that just seems like you're shifting around the conditional evaluation of the necessity of aid to the IRS instead. It's still conditional aid, it's just more obscure how it works.
- vbuterin 13y agoYou would need to make living on $6000 a year practical as well. It's not as hard as people think, as if you're not working you don't need to locate yourself in a city or bother with transportation, but there are structural changes that need to be made. The big two are probably housing deregulation (consisting of (i) seriously scaling back zoning laws and (ii) removing laws limiting occupation density) and fixing the health care system (no easy answers there). It's a complicated issue.
- cjbprime 13y ago
- sandGorgon 13y agoI remember there was an article on HN not so long back about why poor people dont trust banks. Well, without bank accounts how do you process billions of dollars of micro-cash payments ? Actually, this is the biggest reason for the build out of the Aadhaar project or the Indian biometric ID project. It is less for reasons of trying to track the common citizen (although I dont doubt for a moment, it will come to be used like that), but to ensure credible, direct debit of cash to the poor.