Is it nuts to give money to the poor?

I’m breaking my blog holiday. It’s a special occasion:

Planet Money reporters David Kestenbaum and Jacob Goldstein went to Kenya to see the work of a charity called GiveDirectly in action. Instead of funding schools or wells or livestock, GiveDirectly has decided to just give money directly to the poor people who need it, and let them decide how to spend it. David and Jacob explain whether this method of charity works, and why some people think it’s a terrible idea.

That’s the blurb from my favorite radio show, This American Life. Jacob also wrote a piece in yesterday’s NY Times Magazine. Both are excellent.

What’s special? Well, in a single day it’s the fulfillment of two of my nerdiest dreams: quotes in both the Times and TAL.

Cash transfers have been my day job for quite some days now. If you’ve been following this blog, you might have seen me describe my study of a wildly successful government program in Uganda, one that sent $8000 to groups of 20 young people to help them start skilled trades. Or an even more successful charitable program in Uganda that gave some of the poorest women on the planet cash to become traders. “Dear governments,” I wrote, “Want to help the poor and transform your economy? Give people cash.”

What’s interesting is that journalists keep turning to me to rain on my own parade. That’s fair, because that’s one of the things I do best. A few days after my plea to governments, I wrote another post, “Why cash transfers are not the next big thing.”

Perhaps that’s why I appear in Goldstein’s article as the skeptical academic. GiveDirectly is very optimistic about giving $1000 to poor people in Kenya. So am I, I say, but the research doesn’t really support it. Yet. Only I didn’t get in the “yet” in that clip. It happens.

Actually, there are couple of good reasons I’m well placed to be the skeptic.

One is that the wildly successful projects I studied gave other stuff, such as training or conditions or social pressure to invest. That probably mattered a lot, and we simply don’t know if pure cash will work as well.

That brings me to the second reason: I have two other projects in the field right now that give plain cash, and the signs are not so good. One is a tough case: street youth and petty criminals in Monrovia. The early signs are that the cash ran through them (but don’t quote me yet, since I haven’t seen half the data). The other is a tough case too: a horserace between getting a factory job and getting a grant to start your own business, both compared to neither intervention. The early signs on cash transfers are not promising, but again, less than half the data are in. So maybe I, and GiveDirectly, will prove ourselves wrong.

So why am I still an optimist? I think sometimes it will work and sometimes it won’t, but that we can develop and test theory to predict that. I think these studies will give guidance about why and for whom cash works best. That’s important.

You would think.

It’s interesting: neither the government nor the charity I worked with in Uganda were willing to try just cash, if only to compare. They wouldn’t even discuss it. This might sound sensible of them, since they could be right about their “other stuff” being important. Except the “other stuff” often costs more than the cash.

This is the big “cost” no one talks about: suppose a charity could give $2000 of stuff to one person, and help them become 200% richer or healthier than they were before. Is it possible I could spend $1000 each on two people, and help get them each get 150% ahead? Wouldn’t that be better?

A lot of charities don’t like to think that way. The TAL episode talked to a woman from Heifer International, who give cows and training instead of cash. That could be the right thing to do. But she couldn’t bear the thought of finding out. She hated the idea of experimenting on poor people. They are human beings.

Let me be blunt: This is the way the Heifers of the world fool themselves. When you give stuff to some people and not to others, you are still experimenting in the world. You are still flipping a coin to decide who you help and who you don’t, it’s just an imaginary one.

You’re experimenting with your eyes closed.

Yes, flipping the coin to see who gets nothing, and measuring these poor souls over time, is different than never talking to them in the first place. But let’s not pretend that never talking to them in the first place is something we can ignore. But that’s exactly what we do. They don’t even enter our minds. Personally, I’d rather flip the coin and measure them.

Where it gets downright immoral to not measure them, I say, is if your program is so expensive it crowds out two other people who could benefit. We don’t know if that’s true or not, since Heifer (shame on them) wouldn’t share their studies or data with the journalists. But I’ve seen many, many, many projects that spend $1500 training and all the “other stuff” in order to give people $300 or a cow. Is it fair to ask, what if we’d just given them $1800? Or what if we’d given six people cows? Seriously, your one guy does six times better than that?

Why do sensible, caring people act this way? Subconsciously, I think humans feel like we owe something to the people we interact with, and pretty much nothing to those we do not. Without thinking about it, we are comfortable with that six-times moral tradeoff.

I would like to make people very uncomfortable about that.

This is actually the reason that GiveDirectly is a big deal. It’s the same reason randomized control trials in aid are a big deal. Economists can argue about whether any result from any study even applies to the village down the road, let alone the country next door. They can complain that the best young minds are answering small easy questions. Many of my colleagues bemoan exactly that. And they are largely right.

But GiveDirectly and randomized trials are helping drive a big, big change: those who help other people for a living are, for the first time, being forced to think about their top and their bottom lines. How much does what we do work? And is it worth the cost?

Believe it or not, these questions don’t really get asked. In fact, it’s so rare, that in my sphere of the aid world (conflict and humanitarianism) a ridiculous number of people have never even thought that way before.

I mean it. I’ve played this part dozens of times: I argue my point; they  sputter and get mad or wave me aside; then they stop for a moment, their eyes focus on the distance, and they say I might have a point. They don’t know if I’m right, they say, but no one ever suggested it to them before.

That is happening a hundred and a thousand times, as big aid donors and little taxpayers  are starting to ask this question to the people that give their dollars away for a living.

If you lead a charity at the moment, you will remember the day many years ago when you rolled your eyes and realized that every second donor was going to want to know what percentage of their money you spend on “administration”. You and I know that is a dumb fictional number, easily manipulated, that misses the end goal.

The good news for you: I predict the day is not so far off when that dumb number no longer matters.

The bad news: the day is not so far off when they ask you for a much harder set of numbers: “What impact are you having, and is it worth what you spent?” or “Couldn’t you have helped six times as many people doing it differently?”

Maybe they’ll even add, “Why didn’t you just give them the money?”

I think this will remake the charity map in my lifetime. If I play but a tiny role in this change, it will be more impactful on poverty and misery than anything else I do in my petty little academic life. So expect me to keep writing long, blathering posts on cash transfers and field experiments as long as you are a reader.

Now back to my blog holiday.