Why cash transfers to the poor are not the next big thing

Good sales pitches do not include nuance. The politically savvy know to go for the simple, sexy, even vulgar message. This is a long honorable tradition. Generations of idealistic readers have gotten giddy at The Communist Manifesto and fallen asleep through Das Kapital.

I’ve recently had a series of papers and posts with pithy titles, such as “Dear governments: Want to help the poor and transform your economy? Give people cash.” It’s gotten more attention than I expected, even a mention in the New York Times.

I believe my message. But here’s why you shouldn’t take it too far.

First, the message can be misunderstood. It is not, “Cash transfers to the poor are a panacea.” More like, “They probably suck less than most of the other things we are doing.” This is not a high bar.

Second, cash transfers work in some cases not others. If a poor person is enterprising, and their main problem is insufficient capital, terrific. If that’s not their problem, throwing cash will not do much to help. I recommend the paper for details. Apologies: It is even more boring that Das Kapital.

Third, a cash transfer to help the poor build business is like aspirin to a flesh wound. It helps, but not for long. The real problem is the absence of firms small and large to employ people productively. The root of the problem is political instability, economic uncertainty, and a country’s high cost structure, among other things. A government’s attention is properly on these bigger issues.

If I were an enterprising young researcher looking for an idea and experiments that will prove powerful in five years, I would try to find the stake I can drive into the heart of the cash transfer movement.

My rule of thumb in this profession: “If the New York Times covers a research paper, the next year we will learn that it’s wrong”.

This is not a criticism of the New York Times. Single research papers are usually wrong. The Times catches the swell of the most interesting and sexy, and increases their attention and profile. A flurry of new studies ensue. The faults are laid bare. Yet another panacea crushes the hopes of the hopeful.

That is not depressing. That is science. We should welcome it.

In that spirit: I look forward to the stake-wielders. I’ll unbutton my shirt for you.