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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. (Thos

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...
  - notahacker 11y ago
    The big problem with these studies and local economies is that results are likely to depend very much on localised factors such as proximity to larger markets, not to mention what proportion of the village actually receives the handout, and how much of the existing village economy revolves around people with more wealth than the handout recipients. I think it's pretty much impossible to give a definitive yes/no answer. It's also worth pointing out that the "minor effects" are minor because they're not statistically significant for the sample rather than because they're not necessarily there. Haushofer and Shapiro, for example, finds that whilst recipients spend $36/month more, comparably poor non-recipients in a village spend $7.5 per month less. The sample size and volatility means the latter part of result isn't statistically significant, but on the other hand it is more consistent with the effects on the poor that didn't receive handouts in these particular villages being negative, and indeed if only a fifth of the village received the subsidy it's even consistent with the benefits being entirely positional, even though the dispersal of the losses amongst a larger population makes it difficult to precisely gauge.
reagency 11y ago
Unfortunate to see uninformed pessimistic speculation voted to the top, when GD is one of the most analyzed and transparent charities in the world. GD gives to the poorest, like raising the minimum wage. They don't make anyone richer than a neighbor. The SSI article is a hit piece with dodgy math, written by a competitor. It claims that a $1 gift that findances $1 of consumption PLUS $.80 investment profit is somehow a negative return. Ignoring the fact that the baseline for poverty relief is $0 investment profit.
jlarocco 11y ago
It's been a popular idea in econ circles for a while that giving poor people cash helps them more than giving them other forms of aid. There's less overhead, and it allows them to buy what they need, instead of what other people think they need. Obviously there's potential for abuse, but that's the case with regular aid, too, and it doesn't end up making a big difference. Also maybe not entirely fair, but it's a net gain, which is better than no gain at all. Google can probably find better references, but here are a couple of links backing the idea: http://www.economist.com/blogs/freeexchange/2014/08/costs-foreign-aid http://www.economist.com/blogs/freeexchange/2014/08/costs-fo... http://www.econlife.com/foreign-aid-through-cash-grants/ http://www.econlife.com/foreign-aid-through-cash-grants/
ZeroGravitas 11y ago
I'm personally suspicious of most charity and aid, so I can see the same questions asked about most aid programmes. Their core claim seems to be that its less distorting than traditional charity aid programmes and I can readily believe that.
- tempestn 11y ago
  Absolutely. I'm just thinking that with many traditional programs the focus is on infrastructure, which directly helps to address both of these issues. (It is shared by everyone, at least in a local region, so doesn't tend to have negative consequences on those who don't receive aid. And because it doesn't directly involve injecting cash into the economy, Dutch disease is less of a concern.) That said, many of those programs certainly do have drawbacks, as discussed in the OP. So even with potential shortcomings, this approach might be better. I'm hoping to learn more to make a more informed decision as to whether that's likely the case.
TeMPOraL 11y ago
That's a very good question. I'd add one other thing that interests me - aside unintended economic consequences, are there unintended social consequences? I can for example imagine people who are also poor but not enough to be eligible for a grant simply becoming jealous of their neighbors who lifted themselves up thanks to GD's help, especially if the relative change of social status within the village or town was significant. After all, people are just people, and there were already hints of reactions typical in context of lottery winnings, namely family and friends suddenly showing up and asking for loans. If there are any studies about how direct donations affect social dynamics within a community, I'd be very interested to read them.

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...
- notahacker 11y ago
  The big problem with these studies and local economies is that results are likely to depend very much on localised factors such as proximity to larger markets, not to mention what proportion of the village actually receives the handout, and how much of the existing village economy revolves around people with more wealth than the handout recipients. I think it's pretty much impossible to give a definitive yes/no answer. It's also worth pointing out that the "minor effects" are minor because they're not statistically significant for the sample rather than because they're not necessarily there. Haushofer and Shapiro, for example, finds that whilst recipients spend $36/month more, comparably poor non-recipients in a village spend $7.5 per month less. The sample size and volatility means the latter part of result isn't statistically significant, but on the other hand it is more consistent with the effects on the poor that didn't receive handouts in these particular villages being negative, and indeed if only a fifth of the village received the subsidy it's even consistent with the benefits being entirely positional, even though the dispersal of the losses amongst a larger population makes it difficult to precisely gauge.

reagency 11y ago

Unfortunate to see uninformed pessimistic speculation voted to the top, when GD is one of the most analyzed and transparent charities in the world. GD gives to the poorest, like raising the minimum wage. They don't make anyone richer than a neighbor. The SSI article is a hit piece with dodgy math, written by a competitor. It claims that a $1 gift that findances $1 of consumption PLUS $.80 investment profit is somehow a negative return. Ignoring the fact that the baseline for poverty relief is $0 investment profit.

jlarocco 11y ago

It's been a popular idea in econ circles for a while that giving poor people cash helps them more than giving them other forms of aid. There's less overhead, and it allows them to buy what they need, instead of what other people think they need. Obviously there's potential for abuse, but that's the case with regular aid, too, and it doesn't end up making a big difference. Also maybe not entirely fair, but it's a net gain, which is better than no gain at all. Google can probably find better references, but here are a couple of links backing the idea: http://www.economist.com/blogs/freeexchange/2014/08/costs-foreign-aid http://www.economist.com/blogs/freeexchange/2014/08/costs-fo... http://www.econlife.com/foreign-aid-through-cash-grants/ http://www.econlife.com/foreign-aid-through-cash-grants/

ZeroGravitas 11y ago

I'm personally suspicious of most charity and aid, so I can see the same questions asked about most aid programmes. Their core claim seems to be that its less distorting than traditional charity aid programmes and I can readily believe that.

tempestn 11y ago
Absolutely. I'm just thinking that with many traditional programs the focus is on infrastructure, which directly helps to address both of these issues. (It is shared by everyone, at least in a local region, so doesn't tend to have negative consequences on those who don't receive aid. And because it doesn't directly involve injecting cash into the economy, Dutch disease is less of a concern.) That said, many of those programs certainly do have drawbacks, as discussed in the OP. So even with potential shortcomings, this approach might be better. I'm hoping to learn more to make a more informed decision as to whether that's likely the case.

TeMPOraL 11y ago

That's a very good question. I'd add one other thing that interests me - aside unintended economic consequences, are there unintended social consequences? I can for example imagine people who are also poor but not enough to be eligible for a grant simply becoming jealous of their neighbors who lifted themselves up thanks to GD's help, especially if the relative change of social status within the village or town was significant. After all, people are just people, and there were already hints of reactions typical in context of lottery winnings, namely family and friends suddenly showing up and asking for loans. If there are any studies about how direct donations affect social dynamics within a community, I'd be very interested to read them.