Am I a cash transfer evangelist or hypocrite?

I’m going to get off the cash transfer wagon on this blog because it’s getting boring for me and for you.

But first… am I an evangelist or hypocrite? I think the answer is both.

There is a homeless man who stands outside the grocery store in my building every day. He looks about 50. Every day he asks me for change, and every day I say, “sorry, no.” I feel badly, but I comfort myself with the thought that Jeannie and I give $100 every month to City Harvest, a network of NYC food programs.

Why do I think it’s a good idea to give cash to the poorest in Uganda, but not to the homeless of NYC?

The obvious worry is that the money will be “wasted” in that it’s spent on getting drunk or high. Possibly my money could do more harm than good.

But then this is the very myth I and others have looked into and dispelled–at least in poor countries. (David Evans has a very nice blog post and paper looking at 44 studies. 42 say that the poor don’t spend cash on booze or cigarettes.)

You might suspect (and I do) that the poorest in NYC are different. The average person in Uganda or Liberia is very poor, and the average person does just fine with cash. But a homeless person in NYC is not average (at least not the ones who stand outside my grocery store for years). The poorest of the poor in developed and developing countries might be different.

That would be easier to believe if I didn’t have a cash transfer experiment (stay tuned) where we gave cash to the poorest men in the urban slums of Liberia. We sought out men who, as often as not, made their living through theft or drug dealing, were often homeless, and were rampant users of alcohol, marijuana, and sometimes harder stuff. (We even specifically recruited the guys hanging out in front of grocery stores begging.)

As best we can tell, they saved and invested most of their money, and spent little on “bads”.

I am curious: can anyone suggest reports or studies on the homeless in urban America? Are there agencies that give cash to the poorest and most hardcore homeless in the US? Particularly good program evaluations?

 

63 Responses

  1. Interesting topic! I have ideas for such an experiment in the Netherlands (My PhD project): using crowdfunding to get enough money, randomly give unconditional money to the poor and evaluate the intervention with an RCT. Where do they spend the money? What are the effects on mental health issues, employment, housing etc? The difficulty is getting enough money for this project… Do you have some tips?

  2. It’s a very interesting topic, and please continue writing about it! I’d be interested to know how the gradations of “poor” affect the cash transfer effect. For example in the US, even people who are panhandling for money to buy food are not generally starving to death before our eyes, and even families who are homeless are not generally scavenging garbage dumps for scrap materials to build dwellings out of. I’d be interested to know if that’s the key factor, or if substance issues/mental health play a role too, or if it’s cultural, or something else. Thanks for the great blog, I always enjoy reading it and recommend it to other translators who work with these issues too.

  4. Isn’t the biggest difference the incentives in question? When we give money to homeless on the street, we effectively pay them to stay on the street and not do anything productive. As far as I know, your studies were unconditional, so people could take the money and do whatever they wanted with their day.
    Also, from a cost-benefit point of view, 100 dollars can go much farther in Uganda than in Manhattan…

  7. There are a ton of studies on the “check effect”:
    http://www.nejm.org/doi/full/10.1056/NEJM199509213331207
    http://www.sciencedirect.com/science/article/pii/S0047272707000631

    I don’t know if your experiment in Liberia effectively counters the question “are the poor in the U.S. different?” After all, in places like Uganda and Liberia there is generalized poverty so as you say the conditional probability that a poor person is an alcoholic, drug-abusing person with an iatrogenic diagnosis of schizophrenia is much lower than in the U.S.

  8. The best evaluations on homelessness tend towards policy relevant programs that have lessons for other providers. So the recent one that’s pretty good is from Columbia- http://www.casacolumbia.org/addiction-science/case-studies#casahope

    One reason that I think there aren’t cash transfer studies is that there are existing cash benefit programs that many homeless, especially chronically homeless (1+ year of continuous homelessness or 4 episodes in the last 3 years). From just the data I work with about a third or a bit more qualify for SSI or SSDI, and in NY or MA they can generally get a little bit of monthly welfare cash benefits as well. I’d be really interested to take a look at the characteristics and situation of the poorest of the poor in Liberia and how that compares with the homeless population (and chronically homeless subpopulation) here. I don’t think I would be able to just think through which group is more physically vulnerable, more disabled, more traumatized or more marginalized.

  9. You should search the Google and Google scholar for “basic income”. This is how they call cash transfers in rich countries.
    There is growing support from academia and the people.

  10. See what happened when homeless in Toronto were given free pre-paid credit cards? See:

    http://www.thestar.com/news/gta/2010/08/28/how_panhandlers_use_free_credit_cards.html

    Where did the money go?

    Card 1: $50, handed to Jason. Spends $8.69 at McDonald’s. Returns card.

    Card 2: $50, to Mark. Spends $21.64 at The Corner Place restaurant. Doesn’t return. Later spends $15.50 at the LCBO.

    Card 3: $75, to Joanne. Card is stolen. Over two days, $24.95 spent at McDonald’s, $38.35 at the LCBO.

    Card 4: $50, to Al. Card unreturned. Balance remains at $50

    Card 5: $75. Laurie buys $74.61 worth of food, phone minutes and cigarettes at a gas station convenience store. Returns card.

  11. I’d be curious to hear your thoughts on U.S. cash transfers not to the homeless people on the street corners, but to the people in the poorest, most dysfunctional communities of the U.S., e.g. south side Chicago. Has this ever been tried / considered?

  13. Moctar and Chris are interested in whether the cash transfer is a change in permanent income or not.

    Tyler Cowen has suggested that remittances are sent in small amounts because the donors fear that large sums will not be saved. Tyler says there’s evidence that small gifts spread out result in more saving.

    On another point, there’s going to be a question of whether the poorest of the poor in the US are more likely to the difficult cases of mental illness and/or with an innate proclivity to alcoholism. In the richer U.S. this group subsists. In Liberia they are missing because they die an early death. This is merely my conjecture.

  14. Not bored; continue with the subject.
    Your concluding paragraph does hit the point about distinction. Look at the house; identify the problem. If the man is already the problem then giving him cash will likely be wasted. After all some houses, not poor, have substantial problems, even with two wage earners, where one is blowing the money on drink and gambling. The same will happen in similar poor houses.
    Maybe the point is also that there is less abuse of cash in some societies because they don’t have any cash. So when they are given it they spend it with more responsibility. In other words they are poor because they have no cash. Whereas in developed countries some are poor because they are already addicted to major cash consuming substances. So giving cash just adds to that sort of expenditure. They are lower on the rung – to use the phrase below average- than many who in developing countries who are poor because they have no cash.

  15. Perhaps not all money has the same effects. Perhaps there is a difference between a number of people simply handing a random person money on the street, in a small amount and as a one-off affair, and essentially enrolling a person in a programme in which they are given much larger sums of money, told that someone is interested in seeing what they will do with it, and checked up on periodically.
    So while the homeless man story was maybe just an intro to this post, there is perhaps some distinction to be looked for when it comes to distributing money to the homeless? Passing thought.