13 ms·

GiveDirectly Gives Poor People a Year's Income

267 points by bcx 11y ago

GFischer 11y ago
Very interesting, and a stark contrast to the article about the Red Cross relief: https://news.ycombinator.com/item?id=9664983 https://news.ycombinator.com/item?id=9664983 jbniche points out: "Just think the impact that would have had if it had been divided up and given directly to each Haitian adult. The adult population of Haiti is roughly 6 million, so we're talking about almost $100 per adult Haitian. Roughly, it's about 1/8 of the per capita GDP of Haiti. Imagine what you could if you were a poor American and received 1/8 of the American per capita GDP after a disaster (~6000 USD). That's a new roof, or a replacement vehicle, etc. It's not life changing, but it would have been very significant, and massive in scale." https://news.ycombinator.com/item?id=9666390 https://news.ycombinator.com/item?id=9666390 and the article supports his point, saying that "A 2013 study in Uganda found that people who received cash enjoyed a 49 percent earnings boost after two years, and a 41 percent increase after four years, compared to people who hadn't gotten a transfer. Another study in Sri Lanka found rates of return averaging 80 percent after five years. In Uganda, not only were the cash recipients better off, but their number of hours worked and labor productivity actually increased." But for smaller amounts (like the U$ 100 proposed), "One program gave $200 to at-risk Liberian men who were either homeless or who made their income from dealing drugs or stealing. The lead researcher, Chris Blattman, summarized the findings in an op-ed in The New York Times: "Almost no men wasted [the money]. In the months after they got the cash, most dressed, ate and lived better. Unlike the Ugandans, however, whose new businesses kept growing, the Liberian men were back where they started a year later. Two hundred dollars was not enough to turn them into businessmen. But it brought them a better life for a while, which is the fundamental goal of any welfare program. We also tested a counseling program to reduce crime and violence. It worked a little on its own, but had the largest impact when combined with cash.""
- nmrm2 11y ago
  Development and emergency response are very different problems. $100 or even $6000 isn't useful if there's no way to get to the things you need to buy, or if local scarcity pushes prices for bare necessities obscenely high. Vaccinations, blankets and tents, food, etc. can be hard to find in a disaster-stricken area. Heck, even finding a way to get at the money can be difficult if the roads and electricity are out. (I'm not defending the Red Cross, but I would unsurprised if "just give them money" is less effective in the case of disaster relief than in the case of development.)
  - rosser 11y ago
    I'm not defending the Red Cross... Probably a good thing, because AFAICT, they're pretty much indefensible at this point.
    - pvaldes 11y ago
      I'm not having any problem and not feeling ashamed at all defending the Red Cross instead. If you just give poor people any money in Port au Prince after the earthquake, you simply atract predators that will beat and steal those people living in the streets easily, collecting all this money in the blink of an eye. Rich people in Haiti did not seem to care much for the bad luck of the poor people either.
    - vijayr 11y ago
      Not sure how the non profits work, but aren't there laws to force them to publish all their fundraising data and expenses data? Last week there was an article on how a cancer nonprofit raised tens of millions of dollars, only to be swindled by the family running it. They were during it for a while before getting caught.
  - TylerE 11y ago
    It's even worse as pumping lots of cash into a small area is only going to cause local hyper-inflation.
    - rosser 11y ago
      ...only going to cause... I think this and other efforts are pretty clearly demonstrating that this doesn't necessarily happen. EDIT: Not to say it can't happen, but I'm pretty tired of this quasi-religious assertion that giving money to poor people will just inflate that money into meaninglessness, particularly when it has repeatedly not happened.
      - nmrm2 11y ago
        But rapid price inflation for certain goods seems much more likely in the context of a natural disaster. Without a coordinated response, for a certain amount of time there will only be X tents reachable from the affected area, where # of people who need tents >> X. Ditto for vaccines and non-perishable food. Absent (enforced) price controls or incredibly nimble infrastructure repair, rampant price inflation for bare essentials seems more likely than not. (edit to avoid further confusion: The point of this post is simply to point out that local economies behave very differently after a disaster. In particular, if you need X of something in order for people to not die and you only have << X available (perhaps 0), then cash handouts aren't really helpful in the short-term.)
- topynate 11y ago
  Maybe the solution is to give money to people who are poor and either working or not able to, and give a decent paying job to everyone else. Edited to add: and looking at the concerns of one of the aid recipients, something should probably also be done about radio programmes spreading conspiracy theories about devil worshipping aid workers.
  - TeMPOraL 11y ago
    > Edited to add: and looking at the concerns of one of the aid recipients, something should probably also be done about radio programmes spreading conspiracy theories about devil worshipping aid workers. I don't have any idea what and how can be done with that, given that the first world's situation is much, much worse in that regard. Most of what the media does is regurgitate bullshit about everything; we may not have "devil worshipers", but we do have "big pharma".
- trhway 11y ago
  going by that logic US should just have given Afghanistan and Iraq people those $2T+ the US spent on the wars there instead... Given 33M population of the each of the both countries, it would be just meager $30K/person (half a Hellfire)
  - nmrm2 11y ago
    I'm not sure why you're being down-voted. $2T in well-placed handouts seems like a pretty effective way to win "hearts and minds". The test mentioned at the end of the article ("would just handing citizens of this country the cost of a war be more effective at regime change than toppling the regime?") seems like a good initial test when evaluating whether war is necessary. In general, soft power as an alternative to hard power is a serious question in national security strategy -- trhway's comment is not a troll, it's something security/IR researchers and policy makers take quite seriously.
  - TeMPOraL 11y ago
    I don't see much wrong with that logic; frankly, it sounds to me like much better solution than what's happening now. And if they really, really need to kill some people, then Operation Penny-Drop still sounds much better than what they do now. http://www.thebestpageintheuniverse.net/c.cgi?u=penny_drop http://www.thebestpageintheuniverse.net/c.cgi?u=penny_drop (warning about the site: contains lots of offensive and obscene language that can mask the author being usually right about things)
- shkkmo 11y ago
  Which just dovetails with my thoughts after reading the Red Cross article. How much more effective could they have been if they had used the money to start a "non-profit incubator" in Haiti. They could have increased funding to successful organizations, cut off funding to unsuccessful ones, and possibly found ways to get around the numerous issues plaguing non-profits that could then be shared with other NGOs.
  - JoeAltmaier 11y ago
    Pretty first-world view. They were dying for lack of clean water, and what they needed was ... a non-profit incubator?
    - shkkmo 11y ago
      What they needed was to provide resources, tools and support to the locals to solve their problems. I think it's more 'first-world' to bring in foreigners to solve their problems for them. The article directly talks about how the Red Cross did a very poor job of hiring locals, especially in positions responsible for making choices, and had a tendency to dismiss their value.
- maged 11y ago
  I read a comparison of the Liberia to Uganda, Kenya examples before that said its because Liberia('s slums) are at a worse of starting point. For the programs to be effective it needs to target extreme poor who still at least have access to infrastructure and resources to develop. If that isn't there then charity would be more effective in developing those things.
kelukelugames 11y ago
When I get home I'm going to read the article thoroughly and do some digging. I've heard of organized charities failing miserably but this sounds too good to be true.
- notahacker 11y ago
  A few points to start you off. Randomised Controlled Trials aren't at all novel or unusual in international development, despite what the article says. (though some of the parties conducting them aren't particularly inclined to share the data, especially the microfinance guys...) The survey referenced is here http://www.princeton.edu/~joha/publications/Haushofer_Shapiro_Policy_Brief_2013.pdf http://www.princeton.edu/~joha/publications/Haushofer_Shapir... The margin for error in these studies is high. The study notes that their relative measure of "women's empowerment"[1] for women whose neighbours received money increased by a similar degree to the food security of people that actually did receive money. Plausible? The only viable causal mechanism the survey authors and I can think of that leads women who haven't received any money to be more "empowered" as a result of a few neighbours receiving it is the spreading of rumours that aid money is linked to people treat their women (something randomised study authors would really prefer didn't happen. Subjects trying to second-guess the surveyors' intentions is a big problem) The only other hypothesis that seems to fit is secular trends or differences in village behaviour contaminating the study results, despite the best efforts to control for them. Either way that result is unhelpful, not least because it puts into perspective the surprisingly small proportionate increase in food security Taking the statistics at face value, they strongly suggest the recipients don't waste the money and don't have it stolen from them, but the non-cherry-picked stats aren't as spectacular as the article makes out Ultimately, it shows that households receiving $287 in cash had $278 more in wealth later on. Their businesses are larger but generate no more profit than before. People receiving a total of $1085 are only $531 better off in assets and actually have slightly worse returns on the businesses than the people who received lower handouts[2] The one thing this wealth does enable people to do is consume more, quite a lot more ($40 more for people previously spending presumably because they have less need for savings or debt repayments. Whether this pattern continues further into the future (and how that affects their income/assets) isn't studied. Effects on the other villagers' income and wealth appeared negative, but not to a statistically significant degree. I'm reasonably convinced that at this end of the scale the cash transfers are better than the more fashionable approach of loaning the small amounts of money (with high overheads and commensurately high interest payment burdens on the recipients) but the study supports the view that its a band-aid rather than a solution. [1]which, reading the full text, is actually a measure of reduced domestic abuse [2]whilst not statistically significant, the result that larger handouts resulted in a smaller increase in revenue is unhelpful
alaskamiller 11y ago
They made a real-time dashboard for a crowd-sourced remittance program.
rtkwe 11y ago
It feels odd to call this a startup instead of a charity or non-profit. The normal goals of a startup vs a charity, which seems a better description for the things this company/group is doing, don't match well to me (edit in italics: forgot to finish writing this sentence). Nothing particularly wrong with calling it a startup I guess, just strikes me as odd. This seems to be part of a larger turn towards more data and study driven aid than was the standard. Hopefully the larger nation state players can get around to using aid programs to reap longer term improvements vs the current short term and occasionally overall harmful effects some programs have been reported to create.
- up_and_up 11y ago
  > It feels odd to call this a startup instead of a charity or non-profit. Everybody is spinning their small business or new charity as a `startup`. Maybe culturally they are aligned with startup principles but my idea of startup was a small group of people looking to shake things up (a market, a technology, etc) rapidly, grow fast and cash out. A guy selling shaving cream on etsy is not a startup by this definition.
  - rtkwe 11y ago
    I think that's part of it. Working on or being a startup brings a certain cachet to it and is more likely to get media attention vs just being a new small business or new charity. A normal new business calling itself a startup doesn't strike me as oddly as charity based groups. At least with a normal for-profit business the goals are roughly aligned and similar whether you're looking for the explosive growth or long term growth and stability, you're still in it to make money instead of charities which should be operating completely opposite.
- caublestone 11y ago
  "And despite some skepticism, GiveDirectly's financial support is growing (from $5.5 million in 2013 to an expected $40-50 million this year), driven in large part by younger donors working in tech or finance, according to Niehaus." And according to PG, http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html
brador 11y ago
@5% average yearly return, Bill Gates + Warren Buffet could do this for 8 million people a year, every year, forever, and not eat a cent into their initial capital. For scale: that's the population of Switzerland.
- Beltiras 11y ago
  Gates&Buffet are both very invested in philanthropy and extremely data oriented. If they were made aware by someone they actually listen to, they just might do it.
  - criley2 11y ago
    8 million is not a lot. There are >7000 million people in the world. It takes the two richest people to provide for 0.0022% of the people on the planet. Too high of a cost for too low of a return. I believe those men think they can solve more than 0.0022% of a problem with their fortunes.
    - brador 11y ago
      Money doesn't vanish into a black hole. It flows. Those 8 million will no longer have to worry about feeding themselves, educating their children, paying their rent. They can create. A % will create businesses to take advantage of the money flow, supporting themselves and their communities, paying taxes, jobs, export. Over a single generation you could move from 5% literacy to 95%, for 8 million families. That's a lot of kids and a lot of creators. Fewer babies next gen too if history is right. Those 8 million will essentially have their greatest fears and worries removed and replaced with joy and freedom. Just imagine the possibilities.
      - oldmanjay 11y ago
        >Those 8 million will essentially have their greatest fears and worries removed and replaced with joy and freedom. well, for a while. then the money runs out.
    - 11y ago
Bostonian 11y ago
A program that gives money to the poor creates a disincentive to get out of poverty through work. The welfare gain from the poor having more money should be weighed against the welfare loss of their working and saving less.
- chaz72 11y ago
  That's an interesting theory. Do you have data?
  - filoeleven 11y ago
    I do! But it's from the article and it supports the opposite conclusion: > Longer-term research into anti-poverty interventions is rare, but it exists for cash transfers. A 2013 study in Uganda found that people who received cash enjoyed a 49 percent earnings boost after two years, and a 41 percent increase after four years, compared to people who hadn't gotten a transfer. Another study in Sri Lanka found rates of return averaging 80 percent after five years. In Uganda, not only were the cash recipients better off, but their number of hours worked and labor productivity actually increased.
    - Lawtonfogle 11y ago
      >and it supports the opposite conclusion The opposite conclusion in a false dichotomy. There are multiple ways to give money. The way the US does it in some cases, where earning 5K more in a given year can cost 10K in benefits, does creates a perverse incentive. The way this charity does it, you get 1K and that's it; it does not create perverse incentives. Consider the following example. In one example, a person receives X a week to help, but the aid rolls back when they get a job, M dollars less of aid for each dollar earned. So a job comes along where they can earn Y dollars for 40 hours of work. We could call M the means testing coefficient or something fancy like that. Say that M is 1, and Y < X. In this case, they will now spend 40 hours of their week for no immediate benefit. Having a job may lead to possible longer term benefits (say beginning a career where eventually Y > X), but the cost of 40 hours of their life a week for such little possible benefit would make not working the better choice. If X > Y, but only by a small amount, and M is 1, then they will see some small benefit, but spread over 40 hours it may still not make the job worth it. And if M > 1 and Y < X, it would actually be harmful to get a job. On the other hand, say that M was .25. In this case, taking the job would almost always be beneficial, despite the relationship between X and Y. As for this charity in question, M is 0 (but the aid lasts only for a year). It is the least likely to cause any such harm to getting a job (except for when M is negative, which is to say the more you earn, the more aid you get, which oddly enough happens in some cases of corporate welfare).
javajosh 11y ago
A detail popped out at me: that they picked people based on the material of their roof. Organics get money, metal doesn't. I predict a "fashion" trend in the poor architecture of the region to eschew better roofs even if you can afford one. I also think that an editor of a newspaper in Kenya and Uganda should do a cartoon where a villager uses his GiveDirectly money to buy a better roof, and then the company takes the money back and accuses the villager of fraud.
- cbr 11y ago
  I know you're joking, but buying better roofs is actually the most common thing for recipients to do with the money. Metal roofs require so much less upkeep that they're a very good investment, saving a lot of time in avoided maintenance over many years.
- savanaly 11y ago
  What is being done to address the perverse incentive this creates to not upgrade your roof if you have non-metal? As economists I know they know this, thanks to the Lucas Critique ;) But I didn't see what was being done about it.
  - reagency 11y ago
    GD grants are so small that a roof is worth more than a grant.
    - savanaly 11y ago
      If we grant your condition of the grant being small relative to the value of the roof, the following scenario might play out. Suppose GD will give 10 if you have not upgraded your roof. Suppose a roof costs 100 and benefits you 150. Suppose fertilizer costs 100 and benefits you 145. In the absence of any potential GD grant then buying a new roof is both socially optimal and the thing the farmer is incentivized to do. But with the potential for a GD grant then buying a new roof is still the socially optimal choice, but the farmer is no longer incentivized to do it. Thus, a farmer might forgo buying a new roof in the hopes of securing a cash reward, which is inefficient.
tempestn 11y ago
This sounds great, and I'm certainly interested in following their progress. I am curious what the effects are on those who don't receive the transfers. (Those who don't meet the requirements, or live in neighboring towns, for instance.) While I'm certainly not saying it outweighs the positive effects, there must be some negative unintended consequences. Someone uses the funds to start a business, which is enough to make an existing business in the field unprofitable for instance. I wonder how much research has gone into those types of side effects. My understanding is also that direct cash infusions can have undesirable macro effects - basically Dutch Disease caused by aid money instead of natural resources. Again I'm curious to what extent those effects are understood. If anyone has knowledge or links to resources along those lines, please share! I did find this somewhat more critical review[1] but it still just focuses on the recipients, rather than knock-on effects. [1] http://www.ssireview.org/blog/entry/givedirectly_not_so_fast http://www.ssireview.org/blog/entry/givedirectly_not_so_fast
- MichaelDickens 11y ago
  Lots of research has been done on GiveDirectly's effects. See here: http://www.givewell.org/international/top-charities/give-directly#Dothecashtransferscauseproblemsandcomplicationsthatoffsettheirpositiveimpact http://www.givewell.org/international/top-charities/give-dir...
  - tempestn 11y ago
    Thanks. From that page, the part that most directly addresses my concerns is this: > Do grants distort local markets? It seems possible to us that a large infusion of cash into an area could alter economic opportunities for both recipients and non-recipients. Such effects could be positive (for example by spurring investment and job creation or by increasing the availability of retail goods) or negative (for example, by leading primarily to local inflation). The limited evidence addressing this issue in the RCT of GiveDirectly's program in Rarieda[1] and the broader literature on cash transfers points to no distortion. There is an ongoing RCT[2] of GiveDirectly's program that is testing for macroeconomic effects. Not a ton of concrete results as yet, especially for the larger macroeconomic effects, but at least from that one study the local effects appear to be minor. Certainly more research would be valuable. [1] http://www.givewell.org/international/technical/programs/cash-transfers#Whatarethepotentialdownsidesoftheintervention http://www.givewell.org/international/technical/programs/cas... [2] http://www.givewell.org/international/top-charities/give-directly#GE http://www.givewell.org/international/top-charities/give-dir...
abetusk 11y ago
Does anyone know why there isn't an entry for this organization in charitywatch.org?
- ceras 11y ago
  I haven't heard of Charity Watch, but GiveDirectly is one of GiveWell's top recommended charities: http://www.givewell.org/international/top-charities/give-directly http://www.givewell.org/international/top-charities/give-dir... For background, GiveWell is the most prominent charity evaluator in the effective altruism space, and does much closer inspection of its recommended charities than anyone else. They're highly data-driven and fully transparent. They not only vet the charities expenditures, but the core mission itself to ensure it's a highly effective way at reducing suffering: http://www.givewell.org/international/top-charities/give-directly http://www.givewell.org/international/top-charities/give-dir... You can rest assured that GiveDirectly has been well-vetted.
mx10 11y ago
They should give it to them in monthly chunks rather than a yearly lumpsome. When you're poor it's easy to be financially irresponsible.
- matthewowen 11y ago
  I believe this has been tested, and lump sums are better: they allow people to make capital investments.
- MichaelDickens 11y ago
  GiveDirectly does monthly in some areas and semi-annually in others [1]. They are also conducting an RCT on allowing recipients to choose their preferred transfer schedule [2]. [1] http://www.givewell.org/international/top-charities/give-directly#GrantStructure http://www.givewell.org/international/top-charities/give-dir... [2] http://www.givewell.org/international/top-charities/give-directly#Behavioral http://www.givewell.org/international/top-charities/give-dir...
- matt4077 11y ago
  Read some of these financial diaries from Kenia (which were features in Gates' Annual letter): http://www.fsdkenya.org/our-work/financial-diaries/15-publications-main/173-dia-publications.html http://www.fsdkenya.org/our-work/financial-diaries/15-public.... These people sometimes make bad decisions, but by and large they're more responsible than most people I know.
- TeMPOraL 11y ago
  This is a very patronizing and disrespectful attitude, not to mention a wrong one, based probably on an assumption that those people are poor in the first place because of being "financially irresponsible". If anything, poor people are usually much better at managing money that those well-off, because they only have so little of it and are one mistake short of starving to death. This seems to be just one of those misconceptions like drug abuse, which AFAIR studies actually found more common in well-off people than in poor ones.
cbeach 11y ago
“Aid is just a stop-gap. Commerce—entrepreneurial capitalism—takes more people out of poverty than aid.” --Bono Bono's brave enough to admit this. Kenyan economist James Shikwati: "for God's sake, stop the aid:". http://m.spiegel.de/international/spiegel/a-363663.html#spRedirectedFrom=www&referrrer=https://www.google.co.uk/ http://m.spiegel.de/international/spiegel/a-363663.html#spRe...
- cbr 11y ago
  Reading the interview you link it's pretty clear that the kind of aid Shikwati is arguing against is very different than the kind GiveDirectly does. For example: A portion of the corn often goes directly into the hands of unscrupulous politicians who then pass it on to their own tribe to boost their next election campaign. Another portion of the shipment ends up on the black market where the corn is dumped at extremely low prices. Local farmers may as well put down their hoes right away; no one can compete with the UN's World Food Program. Shikwati objects to food dumping, which is a serious way that an activity we classify under "aid" can be harmful: it supports governmental corruption and undercuts farmers and businesses. But identifying individual poor households and transferring money to them directly, with strong monitoring and evaluation, is so different that calling them both "aid" is kind of misleading.
- BigChiefSmokem 11y ago
  Please that's the same bull Ronald Reagan used to spew - That poor people are poor because they choose to.
  - MCRed 11y ago
    No, it's not. Let me give you an example. In africa there used to be a great many tailors. This was a profession that was viable and quite respected on the continent long after the western world had gone to pre-made clothes. In part this was because the country had not modernized. Then the aid came. The aid came in many forms, but one of the forms was millions upon millions of T-shirts and jeans. The entire profession of being a tailor has been eliminated (of course except for the very rich people.) I'm not saying africans should be tailors, but pointing out that aid distorts the market, and distorts the economy and can undermine it if it's not well thought out. This is what Bono was saying and this is one of the lessons that GiveDirectly seems to have learned.
ARothfusz 11y ago
Given that most startups fail, one could consider the whole startup ecosystem a form of charity that, hopefully, produces enough wealthy people to keep the wheels turning. With luck, some of the beneficiaries of GiveDirectly prosper enough to start their own charity some day. The ultimate Y-combinator function?
zobzu 11y ago
I like the transparency that there seems to be around this as it makes me more likely to donate the money. It seems to mean that basically they get 9% of donations to cover various costs. Both non-negligible but also not too bad. Still would like to know what the "overhead costs" are.
- reagency 11y ago
  When you go to the grocery store, do you interrogate to find out what they spend overhead costs are, or do you ask if the product is worth the price?
  - MCRed 11y ago
    In the case of buying a product you can evaluate the product directly. This is much harder with charity, so you can look at their financial efficiency to see if your money is helping people or helping the operators of the "charity" to get rich.
  - tomjen3 11y ago
    Apples to Oranges. The grocery store can set the money on fire for all I care. The charity, not so much.
pfh 11y ago
This seems like the form of charity most respectful to the recipient.
nether 11y ago
An American architect tried building a school in post-earthquake Haiti. He struggled for a while with growing cost estimates, finding materials, and cutting through corruption and bureaucracy. At the end he thought that just giving them cash would have been better. > If you could turn back the clock would you just write a check to all the parents of the kids who go to that school? > “Definitely,” Meyers said. http://thebillfold.com/2013/05/giving-money-directly-to-poor-people/ http://thebillfold.com/2013/05/giving-money-directly-to-poor...
mckoss 11y ago
Alaska paid residents $1,800 in 2014 under its Permanent Fund program (a negative tax).
datashovel 11y ago
90 cents on the dollar is extremely efficient. And from the sound of it all the studies indicate it's extremely effective as well. Don't tell FOX News, as I'm sure they'll find a way to give this a negative spin.

267 points by bcx 11y ago

Very interesting, and a stark contrast to the article about the Red Cross relief: https://news.ycombinator.com/item?id=9664983 https://news.ycombinator.com/item?id=9664983 jbniche points out: "Just think the impact that would have had if it had been divided up and given directly to each Haitian adult. The adult population of Haiti is roughly 6 million, so we're talking about almost $100 per adult Haitian. Roughly, it's about 1/8 of the per capita GDP of Haiti. Imagine what you could if you were a poor American and received 1/8 of the American per capita GDP after a disaster (~6000 USD). That's a new roof, or a replacement vehicle, etc. It's not life changing, but it would have been very significant, and massive in scale." https://news.ycombinator.com/item?id=9666390 https://news.ycombinator.com/item?id=9666390 and the article supports his point, saying that "A 2013 study in Uganda found that people who received cash enjoyed a 49 percent earnings boost after two years, and a 41 percent increase after four years, compared to people who hadn't gotten a transfer. Another study in Sri Lanka found rates of return averaging 80 percent after five years. In Uganda, not only were the cash recipients better off, but their number of hours worked and labor productivity actually increased." But for smaller amounts (like the U$ 100 proposed), "One program gave $200 to at-risk Liberian men who were either homeless or who made their income from dealing drugs or stealing. The lead researcher, Chris Blattman, summarized the findings in an op-ed in The New York Times: "Almost no men wasted [the money]. In the months after they got the cash, most dressed, ate and lived better. Unlike the Ugandans, however, whose new businesses kept growing, the Liberian men were back where they started a year later. Two hundred dollars was not enough to turn them into businessmen. But it brought them a better life for a while, which is the fundamental goal of any welfare program. We also tested a counseling program to reduce crime and violence. It worked a little on its own, but had the largest impact when combined with cash.""

nmrm2 11y ago
Development and emergency response are very different problems. $100 or even $6000 isn't useful if there's no way to get to the things you need to buy, or if local scarcity pushes prices for bare necessities obscenely high. Vaccinations, blankets and tents, food, etc. can be hard to find in a disaster-stricken area. Heck, even finding a way to get at the money can be difficult if the roads and electricity are out. (I'm not defending the Red Cross, but I would unsurprised if "just give them money" is less effective in the case of disaster relief than in the case of development.)
- rosser 11y ago
  I'm not defending the Red Cross... Probably a good thing, because AFAICT, they're pretty much indefensible at this point.
  - pvaldes 11y ago
    I'm not having any problem and not feeling ashamed at all defending the Red Cross instead. If you just give poor people any money in Port au Prince after the earthquake, you simply atract predators that will beat and steal those people living in the streets easily, collecting all this money in the blink of an eye. Rich people in Haiti did not seem to care much for the bad luck of the poor people either.
  - vijayr 11y ago
    Not sure how the non profits work, but aren't there laws to force them to publish all their fundraising data and expenses data? Last week there was an article on how a cancer nonprofit raised tens of millions of dollars, only to be swindled by the family running it. They were during it for a while before getting caught.
- TylerE 11y ago
  It's even worse as pumping lots of cash into a small area is only going to cause local hyper-inflation.
  - rosser 11y ago
    ...only going to cause... I think this and other efforts are pretty clearly demonstrating that this doesn't necessarily happen. EDIT: Not to say it can't happen, but I'm pretty tired of this quasi-religious assertion that giving money to poor people will just inflate that money into meaninglessness, particularly when it has repeatedly not happened.
    - nmrm2 11y ago
      But rapid price inflation for certain goods seems much more likely in the context of a natural disaster. Without a coordinated response, for a certain amount of time there will only be X tents reachable from the affected area, where # of people who need tents >> X. Ditto for vaccines and non-perishable food. Absent (enforced) price controls or incredibly nimble infrastructure repair, rampant price inflation for bare essentials seems more likely than not. (edit to avoid further confusion: The point of this post is simply to point out that local economies behave very differently after a disaster. In particular, if you need X of something in order for people to not die and you only have << X available (perhaps 0), then cash handouts aren't really helpful in the short-term.)
topynate 11y ago
Maybe the solution is to give money to people who are poor and either working or not able to, and give a decent paying job to everyone else. Edited to add: and looking at the concerns of one of the aid recipients, something should probably also be done about radio programmes spreading conspiracy theories about devil worshipping aid workers.
- TeMPOraL 11y ago
  > Edited to add: and looking at the concerns of one of the aid recipients, something should probably also be done about radio programmes spreading conspiracy theories about devil worshipping aid workers. I don't have any idea what and how can be done with that, given that the first world's situation is much, much worse in that regard. Most of what the media does is regurgitate bullshit about everything; we may not have "devil worshipers", but we do have "big pharma".
trhway 11y ago
going by that logic US should just have given Afghanistan and Iraq people those $2T+ the US spent on the wars there instead... Given 33M population of the each of the both countries, it would be just meager $30K/person (half a Hellfire)
- nmrm2 11y ago
  I'm not sure why you're being down-voted. $2T in well-placed handouts seems like a pretty effective way to win "hearts and minds". The test mentioned at the end of the article ("would just handing citizens of this country the cost of a war be more effective at regime change than toppling the regime?") seems like a good initial test when evaluating whether war is necessary. In general, soft power as an alternative to hard power is a serious question in national security strategy -- trhway's comment is not a troll, it's something security/IR researchers and policy makers take quite seriously.
- TeMPOraL 11y ago
  I don't see much wrong with that logic; frankly, it sounds to me like much better solution than what's happening now. And if they really, really need to kill some people, then Operation Penny-Drop still sounds much better than what they do now. http://www.thebestpageintheuniverse.net/c.cgi?u=penny_drop http://www.thebestpageintheuniverse.net/c.cgi?u=penny_drop (warning about the site: contains lots of offensive and obscene language that can mask the author being usually right about things)
shkkmo 11y ago
Which just dovetails with my thoughts after reading the Red Cross article. How much more effective could they have been if they had used the money to start a "non-profit incubator" in Haiti. They could have increased funding to successful organizations, cut off funding to unsuccessful ones, and possibly found ways to get around the numerous issues plaguing non-profits that could then be shared with other NGOs.
- JoeAltmaier 11y ago
  Pretty first-world view. They were dying for lack of clean water, and what they needed was ... a non-profit incubator?
  - shkkmo 11y ago
    What they needed was to provide resources, tools and support to the locals to solve their problems. I think it's more 'first-world' to bring in foreigners to solve their problems for them. The article directly talks about how the Red Cross did a very poor job of hiring locals, especially in positions responsible for making choices, and had a tendency to dismiss their value.
maged 11y ago
I read a comparison of the Liberia to Uganda, Kenya examples before that said its because Liberia('s slums) are at a worse of starting point. For the programs to be effective it needs to target extreme poor who still at least have access to infrastructure and resources to develop. If that isn't there then charity would be more effective in developing those things.

kelukelugames 11y ago

When I get home I'm going to read the article thoroughly and do some digging. I've heard of organized charities failing miserably but this sounds too good to be true.

notahacker 11y ago
A few points to start you off. Randomised Controlled Trials aren't at all novel or unusual in international development, despite what the article says. (though some of the parties conducting them aren't particularly inclined to share the data, especially the microfinance guys...) The survey referenced is here http://www.princeton.edu/~joha/publications/Haushofer_Shapiro_Policy_Brief_2013.pdf http://www.princeton.edu/~joha/publications/Haushofer_Shapir... The margin for error in these studies is high. The study notes that their relative measure of "women's empowerment"[1] for women whose neighbours received money increased by a similar degree to the food security of people that actually did receive money. Plausible? The only viable causal mechanism the survey authors and I can think of that leads women who haven't received any money to be more "empowered" as a result of a few neighbours receiving it is the spreading of rumours that aid money is linked to people treat their women (something randomised study authors would really prefer didn't happen. Subjects trying to second-guess the surveyors' intentions is a big problem) The only other hypothesis that seems to fit is secular trends or differences in village behaviour contaminating the study results, despite the best efforts to control for them. Either way that result is unhelpful, not least because it puts into perspective the surprisingly small proportionate increase in food security Taking the statistics at face value, they strongly suggest the recipients don't waste the money and don't have it stolen from them, but the non-cherry-picked stats aren't as spectacular as the article makes out Ultimately, it shows that households receiving $287 in cash had $278 more in wealth later on. Their businesses are larger but generate no more profit than before. People receiving a total of $1085 are only $531 better off in assets and actually have slightly worse returns on the businesses than the people who received lower handouts[2] The one thing this wealth does enable people to do is consume more, quite a lot more ($40 more for people previously spending presumably because they have less need for savings or debt repayments. Whether this pattern continues further into the future (and how that affects their income/assets) isn't studied. Effects on the other villagers' income and wealth appeared negative, but not to a statistically significant degree. I'm reasonably convinced that at this end of the scale the cash transfers are better than the more fashionable approach of loaning the small amounts of money (with high overheads and commensurately high interest payment burdens on the recipients) but the study supports the view that its a band-aid rather than a solution. [1]which, reading the full text, is actually a measure of reduced domestic abuse [2]whilst not statistically significant, the result that larger handouts resulted in a smaller increase in revenue is unhelpful

alaskamiller 11y ago

They made a real-time dashboard for a crowd-sourced remittance program.

rtkwe 11y ago

It feels odd to call this a startup instead of a charity or non-profit. The normal goals of a startup vs a charity, which seems a better description for the things this company/group is doing, don't match well to me (edit in italics: forgot to finish writing this sentence). Nothing particularly wrong with calling it a startup I guess, just strikes me as odd. This seems to be part of a larger turn towards more data and study driven aid than was the standard. Hopefully the larger nation state players can get around to using aid programs to reap longer term improvements vs the current short term and occasionally overall harmful effects some programs have been reported to create.

up_and_up 11y ago
> It feels odd to call this a startup instead of a charity or non-profit. Everybody is spinning their small business or new charity as a `startup`. Maybe culturally they are aligned with startup principles but my idea of startup was a small group of people looking to shake things up (a market, a technology, etc) rapidly, grow fast and cash out. A guy selling shaving cream on etsy is not a startup by this definition.
- rtkwe 11y ago
  I think that's part of it. Working on or being a startup brings a certain cachet to it and is more likely to get media attention vs just being a new small business or new charity. A normal new business calling itself a startup doesn't strike me as oddly as charity based groups. At least with a normal for-profit business the goals are roughly aligned and similar whether you're looking for the explosive growth or long term growth and stability, you're still in it to make money instead of charities which should be operating completely opposite.
caublestone 11y ago
"And despite some skepticism, GiveDirectly's financial support is growing (from $5.5 million in 2013 to an expected $40-50 million this year), driven in large part by younger donors working in tech or finance, according to Niehaus." And according to PG, http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html

brador 11y ago

@5% average yearly return, Bill Gates + Warren Buffet could do this for 8 million people a year, every year, forever, and not eat a cent into their initial capital. For scale: that's the population of Switzerland.

Beltiras 11y ago
Gates&Buffet are both very invested in philanthropy and extremely data oriented. If they were made aware by someone they actually listen to, they just might do it.
- criley2 11y ago
  8 million is not a lot. There are >7000 million people in the world. It takes the two richest people to provide for 0.0022% of the people on the planet. Too high of a cost for too low of a return. I believe those men think they can solve more than 0.0022% of a problem with their fortunes.
  - brador 11y ago
    Money doesn't vanish into a black hole. It flows. Those 8 million will no longer have to worry about feeding themselves, educating their children, paying their rent. They can create. A % will create businesses to take advantage of the money flow, supporting themselves and their communities, paying taxes, jobs, export. Over a single generation you could move from 5% literacy to 95%, for 8 million families. That's a lot of kids and a lot of creators. Fewer babies next gen too if history is right. Those 8 million will essentially have their greatest fears and worries removed and replaced with joy and freedom. Just imagine the possibilities.
    - oldmanjay 11y ago
      >Those 8 million will essentially have their greatest fears and worries removed and replaced with joy and freedom. well, for a while. then the money runs out.
  - 11y ago

Bostonian 11y ago

A program that gives money to the poor creates a disincentive to get out of poverty through work. The welfare gain from the poor having more money should be weighed against the welfare loss of their working and saving less.

chaz72 11y ago
That's an interesting theory. Do you have data?
- filoeleven 11y ago
  I do! But it's from the article and it supports the opposite conclusion: > Longer-term research into anti-poverty interventions is rare, but it exists for cash transfers. A 2013 study in Uganda found that people who received cash enjoyed a 49 percent earnings boost after two years, and a 41 percent increase after four years, compared to people who hadn't gotten a transfer. Another study in Sri Lanka found rates of return averaging 80 percent after five years. In Uganda, not only were the cash recipients better off, but their number of hours worked and labor productivity actually increased.
  - Lawtonfogle 11y ago
    >and it supports the opposite conclusion The opposite conclusion in a false dichotomy. There are multiple ways to give money. The way the US does it in some cases, where earning 5K more in a given year can cost 10K in benefits, does creates a perverse incentive. The way this charity does it, you get 1K and that's it; it does not create perverse incentives. Consider the following example. In one example, a person receives X a week to help, but the aid rolls back when they get a job, M dollars less of aid for each dollar earned. So a job comes along where they can earn Y dollars for 40 hours of work. We could call M the means testing coefficient or something fancy like that. Say that M is 1, and Y < X. In this case, they will now spend 40 hours of their week for no immediate benefit. Having a job may lead to possible longer term benefits (say beginning a career where eventually Y > X), but the cost of 40 hours of their life a week for such little possible benefit would make not working the better choice. If X > Y, but only by a small amount, and M is 1, then they will see some small benefit, but spread over 40 hours it may still not make the job worth it. And if M > 1 and Y < X, it would actually be harmful to get a job. On the other hand, say that M was .25. In this case, taking the job would almost always be beneficial, despite the relationship between X and Y. As for this charity in question, M is 0 (but the aid lasts only for a year). It is the least likely to cause any such harm to getting a job (except for when M is negative, which is to say the more you earn, the more aid you get, which oddly enough happens in some cases of corporate welfare).

javajosh 11y ago

A detail popped out at me: that they picked people based on the material of their roof. Organics get money, metal doesn't. I predict a "fashion" trend in the poor architecture of the region to eschew better roofs even if you can afford one. I also think that an editor of a newspaper in Kenya and Uganda should do a cartoon where a villager uses his GiveDirectly money to buy a better roof, and then the company takes the money back and accuses the villager of fraud.

cbr 11y ago
I know you're joking, but buying better roofs is actually the most common thing for recipients to do with the money. Metal roofs require so much less upkeep that they're a very good investment, saving a lot of time in avoided maintenance over many years.
savanaly 11y ago
What is being done to address the perverse incentive this creates to not upgrade your roof if you have non-metal? As economists I know they know this, thanks to the Lucas Critique ;) But I didn't see what was being done about it.
- reagency 11y ago
  GD grants are so small that a roof is worth more than a grant.
  - savanaly 11y ago
    If we grant your condition of the grant being small relative to the value of the roof, the following scenario might play out. Suppose GD will give 10 if you have not upgraded your roof. Suppose a roof costs 100 and benefits you 150. Suppose fertilizer costs 100 and benefits you 145. In the absence of any potential GD grant then buying a new roof is both socially optimal and the thing the farmer is incentivized to do. But with the potential for a GD grant then buying a new roof is still the socially optimal choice, but the farmer is no longer incentivized to do it. Thus, a farmer might forgo buying a new roof in the hopes of securing a cash reward, which is inefficient.

tempestn 11y ago

This sounds great, and I'm certainly interested in following their progress. I am curious what the effects are on those who don't receive the transfers. (Those who don't meet the requirements, or live in neighboring towns, for instance.) While I'm certainly not saying it outweighs the positive effects, there must be some negative unintended consequences. Someone uses the funds to start a business, which is enough to make an existing business in the field unprofitable for instance. I wonder how much research has gone into those types of side effects. My understanding is also that direct cash infusions can have undesirable macro effects - basically Dutch Disease caused by aid money instead of natural resources. Again I'm curious to what extent those effects are understood. If anyone has knowledge or links to resources along those lines, please share! I did find this somewhat more critical review[1] but it still just focuses on the recipients, rather than knock-on effects. [1] http://www.ssireview.org/blog/entry/givedirectly_not_so_fast http://www.ssireview.org/blog/entry/givedirectly_not_so_fast

MichaelDickens 11y ago
Lots of research has been done on GiveDirectly's effects. See here: http://www.givewell.org/international/top-charities/give-directly#Dothecashtransferscauseproblemsandcomplicationsthatoffsettheirpositiveimpact http://www.givewell.org/international/top-charities/give-dir...
- tempestn 11y ago
  Thanks. From that page, the part that most directly addresses my concerns is this: > Do grants distort local markets? It seems possible to us that a large infusion of cash into an area could alter economic opportunities for both recipients and non-recipients. Such effects could be positive (for example by spurring investment and job creation or by increasing the availability of retail goods) or negative (for example, by leading primarily to local inflation). The limited evidence addressing this issue in the RCT of GiveDirectly's program in Rarieda[1] and the broader literature on cash transfers points to no distortion. There is an ongoing RCT[2] of GiveDirectly's program that is testing for macroeconomic effects. Not a ton of concrete results as yet, especially for the larger macroeconomic effects, but at least from that one study the local effects appear to be minor. Certainly more research would be valuable. [1] http://www.givewell.org/international/technical/programs/cash-transfers#Whatarethepotentialdownsidesoftheintervention http://www.givewell.org/international/technical/programs/cas... [2] http://www.givewell.org/international/top-charities/give-directly#GE http://www.givewell.org/international/top-charities/give-dir...

abetusk 11y ago

Does anyone know why there isn't an entry for this organization in charitywatch.org?

ceras 11y ago
I haven't heard of Charity Watch, but GiveDirectly is one of GiveWell's top recommended charities: http://www.givewell.org/international/top-charities/give-directly http://www.givewell.org/international/top-charities/give-dir... For background, GiveWell is the most prominent charity evaluator in the effective altruism space, and does much closer inspection of its recommended charities than anyone else. They're highly data-driven and fully transparent. They not only vet the charities expenditures, but the core mission itself to ensure it's a highly effective way at reducing suffering: http://www.givewell.org/international/top-charities/give-directly http://www.givewell.org/international/top-charities/give-dir... You can rest assured that GiveDirectly has been well-vetted.

mx10 11y ago

They should give it to them in monthly chunks rather than a yearly lumpsome. When you're poor it's easy to be financially irresponsible.

matthewowen 11y ago
I believe this has been tested, and lump sums are better: they allow people to make capital investments.
MichaelDickens 11y ago
GiveDirectly does monthly in some areas and semi-annually in others [1]. They are also conducting an RCT on allowing recipients to choose their preferred transfer schedule [2]. [1] http://www.givewell.org/international/top-charities/give-directly#GrantStructure http://www.givewell.org/international/top-charities/give-dir... [2] http://www.givewell.org/international/top-charities/give-directly#Behavioral http://www.givewell.org/international/top-charities/give-dir...
matt4077 11y ago
Read some of these financial diaries from Kenia (which were features in Gates' Annual letter): http://www.fsdkenya.org/our-work/financial-diaries/15-publications-main/173-dia-publications.html http://www.fsdkenya.org/our-work/financial-diaries/15-public.... These people sometimes make bad decisions, but by and large they're more responsible than most people I know.
TeMPOraL 11y ago
This is a very patronizing and disrespectful attitude, not to mention a wrong one, based probably on an assumption that those people are poor in the first place because of being "financially irresponsible". If anything, poor people are usually much better at managing money that those well-off, because they only have so little of it and are one mistake short of starving to death. This seems to be just one of those misconceptions like drug abuse, which AFAIR studies actually found more common in well-off people than in poor ones.

cbeach 11y ago

“Aid is just a stop-gap. Commerce—entrepreneurial capitalism—takes more people out of poverty than aid.” --Bono Bono's brave enough to admit this. Kenyan economist James Shikwati: "for God's sake, stop the aid:". http://m.spiegel.de/international/spiegel/a-363663.html#spRedirectedFrom=www&referrrer=https://www.google.co.uk/ http://m.spiegel.de/international/spiegel/a-363663.html#spRe...

cbr 11y ago
Reading the interview you link it's pretty clear that the kind of aid Shikwati is arguing against is very different than the kind GiveDirectly does. For example: A portion of the corn often goes directly into the hands of unscrupulous politicians who then pass it on to their own tribe to boost their next election campaign. Another portion of the shipment ends up on the black market where the corn is dumped at extremely low prices. Local farmers may as well put down their hoes right away; no one can compete with the UN's World Food Program. Shikwati objects to food dumping, which is a serious way that an activity we classify under "aid" can be harmful: it supports governmental corruption and undercuts farmers and businesses. But identifying individual poor households and transferring money to them directly, with strong monitoring and evaluation, is so different that calling them both "aid" is kind of misleading.
BigChiefSmokem 11y ago
Please that's the same bull Ronald Reagan used to spew - That poor people are poor because they choose to.
- MCRed 11y ago
  No, it's not. Let me give you an example. In africa there used to be a great many tailors. This was a profession that was viable and quite respected on the continent long after the western world had gone to pre-made clothes. In part this was because the country had not modernized. Then the aid came. The aid came in many forms, but one of the forms was millions upon millions of T-shirts and jeans. The entire profession of being a tailor has been eliminated (of course except for the very rich people.) I'm not saying africans should be tailors, but pointing out that aid distorts the market, and distorts the economy and can undermine it if it's not well thought out. This is what Bono was saying and this is one of the lessons that GiveDirectly seems to have learned.

ARothfusz 11y ago

Given that most startups fail, one could consider the whole startup ecosystem a form of charity that, hopefully, produces enough wealthy people to keep the wheels turning. With luck, some of the beneficiaries of GiveDirectly prosper enough to start their own charity some day. The ultimate Y-combinator function?

zobzu 11y ago

I like the transparency that there seems to be around this as it makes me more likely to donate the money. It seems to mean that basically they get 9% of donations to cover various costs. Both non-negligible but also not too bad. Still would like to know what the "overhead costs" are.

reagency 11y ago
When you go to the grocery store, do you interrogate to find out what they spend overhead costs are, or do you ask if the product is worth the price?
- MCRed 11y ago
  In the case of buying a product you can evaluate the product directly. This is much harder with charity, so you can look at their financial efficiency to see if your money is helping people or helping the operators of the "charity" to get rich.
- tomjen3 11y ago
  Apples to Oranges. The grocery store can set the money on fire for all I care. The charity, not so much.

pfh 11y ago

This seems like the form of charity most respectful to the recipient.

nether 11y ago

An American architect tried building a school in post-earthquake Haiti. He struggled for a while with growing cost estimates, finding materials, and cutting through corruption and bureaucracy. At the end he thought that just giving them cash would have been better. > If you could turn back the clock would you just write a check to all the parents of the kids who go to that school? > “Definitely,” Meyers said. http://thebillfold.com/2013/05/giving-money-directly-to-poor-people/ http://thebillfold.com/2013/05/giving-money-directly-to-poor...

mckoss 11y ago

Alaska paid residents $1,800 in 2014 under its Permanent Fund program (a negative tax).

datashovel 11y ago

90 cents on the dollar is extremely efficient. And from the sound of it all the studies indicate it's extremely effective as well. Don't tell FOX News, as I'm sure they'll find a way to give this a negative spin.