Cash Transfers to the Poor

Chris Blattman, author of one of the key papers on cash transfers to the poor, takes a page from Albert Hirschman’s book and practices a bit of self-subversion.

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….

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.

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

In that spirit: I look forward to the stake-wielders.


It is hard to agree when countries like Mexico have "political stability" so to speak, economic "certainty" and "low" wages but poor access to credit. :/ not sure that this grasps all the core issues.

"not sure that this grasps all the core issues."

I agree. "The real problem is the absence of firms small and large to employ people productively." In America we have political stability and as little economic uncertainty as exists anywhere in the world, but we still do not have enough productive jobs.

"If I were an enterprising young researcher..." I would try to solve the jobs problem. Then you would really be making a difference. Killing cash transfers is a side show.

Unless killing cash transfers WAS the solution to the jobs problem ...

I think this guy has the best diagnosis and cures for what ails the economy:

He says things like: "Apart from the damage that asset price obsessed monetary policy does to the economy’s ability to innovate, doctrines like the Greenspan Put also act as a transfer of wealth from the society as a whole to some of its richest members. Contrary to the popular perception of monetary policy as a neutral macroeconomic policy with a minimal impact on income distribution, real-world monetary policy that focuses on propping up asset prices overwhelmingly favours the rich for one obvious reason that even central banks have now begun to admit9. Most assets are owned by the rich."

He argues Greenspan's monetary policy helped stifle innovation (contributing to the great stagnation!) and transferred wealth to the wealthy. (I think we are seeing the same thing happen with the current QE programs.) He argues we need to lower barriers to entry such as licenses, patents, copyrights and regulatory schemes that protect incumbents and we need to eliminate safe assets and firms: everything should be allowed to fail. Finally he says we need a "...a safety net for the people and not a hammock for the firms that employ them." !

I'd like to see his, Ashwin Parameswaran's, ideas reach a wider audience. I'd like to see him do a Scott Sumner.

Appreciated that link. I agree with much of what he wrote. Particularly when he writes on monetary policy that helicopter drops are better than buying government backed paper from large financial institutions and locking up the proceeds as excess reserves. I will try to follow him going forward.

How to make cash transfers to the poor politically acceptable? You'd probably need to expel all illegal immigrants.

...or, um, just not give the transfers to illegal immigrants..?

That would leave endless political pressure to give 'em the money, amnesty them, or whatever. Only expulsion would lance those boils. Or you could sell them citizenship: that might make a decent compromise.

As I have proposed. You are on the right track as Republicans are insane to demand border security in return for amnesty. They should demand entitlement reform. The Democrats, for their part, should recuse themselves, as they only care about future voter constituencies.

The primary Republican concern also seems to be voter constituencies. Should both parties recuse themselves and just let the libertarians figure it out? Or would the libertarian's relatively pro-immigration stance not be considered neutral?

I'll take it.

However, it is less clear that the Republicans are primarily concerned with importing voters.

If it were, then they would be racing to pander to the Mexicans like everyone is whining to them that they have to do. So, nice try. Got another?

First, Republicans are concerned with resisting the importation of democratic voters. That's especially clear in the house.

In the Senate, where redistricting is not a concern and where you have to play to a bigger tent, Republicans are, in fact, racing to pander. Are you just not paying attention at all? That's how the Senate passed a bill. The entire debate in congress is over future voters. Occasionally, they even admit it. It's silly to act like only one side cares about the politics.

Your data (a majority of Republicans) are not racing to pander. A small fraction of Senate Republicans simply acknowledge the voting trends of having a porous border with a poorer country. You also state the obvious, that the immigrants are primarily Democrat voters. You make my point. Thanks.


Your evidence for "The Democrats, for their part, should recuse themselves, as they only care about future voter constituencies?"

Your argument of equivalence of opposite sign might make some sense if the Democrats weren't advocating breaking laws or "reforming" immigration laws to cover for wholesale immigration lawbreaking.

This is why I say Republicans should not tie amnesty to border control. The democrats will never really follow through on border control. Or they will, because they already got their new block.

Your evidence for “The Democrats, for their part, should recuse themselves, as they only care about future voter constituencies?”

Your evidence otherwise?

1. They didn't change border/immigration policy until they were content that the immigrants were solidly Democrat voters. They started no national debate on our horrible immigration system until the problem was that there were too many immigrants to fix it, conveniently Democrat voting.

It's funny. Democrats don't accuse Republicans of Realpolitik. They always accuse them of racism. Now it shifts...funny.

As for burdens of proof, you guys want me to make something plain for you that you haven't noticed as obvious. How 'bout you try convincing me?

Just want to be clear, Andrew. You're saying Republicans would be opposed to immigration reform even if it were expected most of these voters would be Republican?

Also, I didn't say a majority of Republicans. Just enough to matter. Maybe I "made your point?"

I already acknowledged Democrats are pro-immigration in part because they expect new, poor immigrants to be Democrats. We see the exact opposite dynamic with Cuban immigrants, who are supported by Republicans for basically the same reason (they're expected to support Republicans).

I guess I'm saying it's silly to act like both sides aren't "acknowledging the voting trends of having a porous border with a poorer country" and acting accordingly. Pretending that one party is more virtuous is what I called silly.

A negative income tax was proposed and rejected in the early 70´s long before illegals were a problem. Now neither the right nor the left would support such a program but for different reasons. Even food stamps are attacked now, the right worries that the poor eats too well and the left that they eat junk food.

Even food stamps are attacked now, the right worries that the poor eats too well and the left that they eat junk food.

I find that wrong on both accounts. The Right worries about the cost. And since the government has better control of what the poor eat using SNAP than any other group in America, I doubt the Left is worried about what they eat.

To clarify: I doubt the Left is extremely worried about the quality of the food that is bought using SNAP funds.

"the right worries that the poor eats too well "

Classic Turing fail? Being obese isn't exactly eating "too well." That is also why there are all these rules about what you can buy with food stamps.

Libertarians would probably say "if you subsidize something you get more of it (and less of what you tax)" and if the new epidemic is obesity then I wouldn't say "even" food stamps are being attacked. I might say you subsidized food, now we are fat. It worked!!! Victory!!

I'm against any involuntary handouts.

What is the problem, aren't kind social liberals generous enough to donate (or, I forgot that Reseach shows they're more stingy with dinations than the other side) and aren't the greedy capitalists eager to earn ROI (oh, I forgot thanks to the kleptocracy we're having it's too risky to invest in "unregulated" businesses independent of the State)?

If someone can make it with $1,000, I don't believe he cannot make it with $950 (that is, with a commercial loan minus the interest). End of story.

Since 1980 when Reagan advocated for helping the poor with private charity instead of government welfare, the private aid to the poor has exploded.

One statistic is the number of food banks in 1980, then in 1990, 2000, and 2010 - explosive growth in private food aid.

However, poverty has increased since 1980, along with government aid in food stamps.

Clearly Reagan's advocacy of private charity was advocacy of increased poverty and the conservative promotion of a dependency state.

A private welfare system creates well paid and thus well educated social and political activists who have every reason to lobby government for welfare expansion, and for government funding directed at the private welfare system. A million dollar bonus depends on winning the government funding, or a the tax breaks that make private for-profit donations mutually profitable for all the private organizations.

For example, the old government aid programs in the US used commodity surplus to provide aid - the farm agencies would buy butter and cream and milk and beans and meat to drive up prices, and then donate those commodities. Excess beef would be canned in large tins, the beans in 50lb bags, the cheese in 20lb blocks, corn, peas, etc in large tins. Distributed from warehouses schools and welfare organizations would pickup truckloads and fix meals with local ingredients or break it down for distribution to others.

Today, a cash based system of government aid means the food bank system gets donations of highly processed foods or buys highly processed food. Instead of a 50lb bag of steel cut or rolled oats of commodity excess for nothing, boxes of oat based cold cereal is bought from a GF in retail packaging a $1 commodity for $50 retail. The food bank CEO and the GF CEO both want government cash or tax breaks instead of having commodities handed out with the processing done with local cheap or free labor.

Food aid creates jobs for factory workers and CEOs under the Reagan model of aiding the poor. But the taxpayers are paying a lot more.

All in all, the private sector needs to promote increased poverty to create jobs in the private sector with increased government cash handouts to the private sector to provide welfare under the Reagan model.

Haven't there been a bunch of studies about cash transfers already, including RCTs.
We already know they work OK, but are not a panacea. So trying to come up with a paper that drives "a stake through the heart of cash transfers" is a fool's errand. Blatman needs to read more of the existing literature.

I think popular discussion about cash transfers is biased towards the positive aspects.

Economists know, in theory, that cash transfers are efficient from a purely utilitarian sense. Awareness of or belief in poor choices made with that cash seems to be enough of a reason to oppose them.

As for the recipients and their advocates, why wouldn't they want cash transfers? The sale or trade of food stamps clearly represents a preference for liquidity over in-kind transfers. The efforts of government to stop such transactions through debit cards demonstrates the bureaucratic desire to maintain control and paternalistic sentiments.

The earned income tax credit is a variation on the negative income tax. I don't see much impetus to rid ourselves of that.

Seriously? From Blattman, Fiala and Martinez (2013):

"Finally, a large number of experiments study conditional cash transfer (CCT) programs, which tie transfers to child health and schooling obligations. Unfortunately, these seldom examine effects on investment or enterprise (Fizbein et al., 2009). The few that do reach opposing conclusions. However, in at least one CCT program—Progresa in Mexico—there is evidence of an increase in self-employment as the transfers relieved financial constraints on credit and risk (Bianchi and Bobba, 2013; Gertler et al., 2012)."

"We study an experimental program in Uganda’s relatively underdeveloped north. In 2008 the government distributed cash transfers worth $382, roughly a year’s income, to thousands of poor and underemployed youth aged 16 to 35... The grants were unconditional, with two qualifications... From many thousand applicants, the government screened and selected 535 groups (about 12,000 youth, a third female). The average youth reported 19 hours a week and earned less than a dollar a day. The government randomly assigned 265 groups to the intervention. We survey a panel of 2,675 treatment and control youth three times: at baseline and two and four years post-intervention."

As the first line of this post says, he is an author of one of the key papers on cash transfers to the poor. That is why Tyler calls his blog post "self-subversion".

Instead of, "If I were an enterprising young researcher …, I would try to find the stake I can drive into the heart of the cash transfer movement."

How about, "lets look at all available evidence, see what reasonable conclusions we can draw, and test that."

Can't we at least pretend that economics aspires to be scientific in its approach.

so you think there is any science in which disproving some parts of conventional wisdom/established theory is not one of the most effective ways to build a career? (also, trying to disprove theories is supposed to be normal science in most positivist accounts of it).

"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."

That's why you will always play second fiddle to Tyler. You have an agenda and will seek any evidence to prove it true where he is more apt to draw conclusions after seeing the evidence.

How's tenure treating you, by the way, teat-sucker? Talk about a transfer.

Alex is quoting the original article. An article by someone who supports cash transfers to the poor but understands the warrants in his argument and has an open mind to alternative hypotheses ("That is science.") Jeebus.

dead serious,

you can't read and you are rude.

Mea culpa.

Bad reading on my part and terrible overreaction. Deep apologies.

dead serious' role here is to play the ass-hat. Well done again, sir.

As I've said before:

Alex Tabarrok - Accomplished writer, successful textbook author, prestigious professor, education innovator, and chooser of good collaborators - smarter than you.

And that's if you disagree with him, don't like him and don't understand that Tyler Cowen is a unique case. I do like him!

By the way, what agenda did your genius mind(s) puzzle out that Alex is pursuing this time?

He misunderstood the snippet of text taken out of context. I was wondering the same thing without the emotional response. The comment to which he responded sounded very ascientific. I interpreted it as, "i have a fervent belief that this result is true and consequently the policy is harmful, and we need some smart and brave individual to challenge established dogma." That's a rather heroic statement.

It might be that Blattman wishes it weren't true despite his research. Maybe he wishes cash transfers didn't suck less than strategic government tinkering. I sometimes feel sympathy for interventionists who realize they are largely impotent. Then they call me a racist or something and I get over it.

Maybe social engineering fails when measured against cash transfers because it is the first time it has ever been thought to be measured.

uhm - that sentence is by Chris Blattman, talking about an agenda he himself created. And it is meant as strategic career advice, not as a normative agenda.
FWIW, Blattman got a job at Yale right out of gradschool, then moved to Columbia, very likely to get tenure, so as an academic economist he's by most standards more successful than Tyler or Alex.

As I wrote in the comments section of Chris' post, the most important two sentences were “The root of the problem is political instability, economic uncertainty, and a country’s high cost structure, among other things" and "A government’s attention is properly on these bigger issues.”

...and that the operative word in those two sentences was "government's."

And so I asked, "what about well-meaning private individuals? I am not a government. A lot of people (like me) like to have a small giving portfolios, but it’s hard to see how I would tackle “political instability” or “a country’s high cost structure” as a private, middle-class citizen. It’s much easier to confidently donate to a global health org, for example.

"So wouldn’t something like GiveDirectly fit nicely in that portfolio?"

ummm, thats not science, thats ideology


Yes, that might be the ideology of science. I am a big supporter of ideology.

How does acceptance of the three perfectly valid points imply the desirability of "driving a stake through the heart of" cash transfers, especially if they “probably suck less than most of the other things we are doing.” Why not the stake for those "other things?"

"If a poor person is enterprising..."


Aspirin for a flesh wound - an apt analogy except that the aspirin has absolutely no measurable effect, are overpriced, are given out to many people including some who do not have flesh wounds, and others are forced to pay for them.

A worthwhile study would examine people who escaped from poverty and identified sufficient and necessary characteristics. Then align all incentives toward those. And by that I mainly mean removing counterproductive incentives.

"A worthwhile study would examine people who escaped from poverty and identified sufficient and necessary characteristics."

Would that be primarily hard work and intelligence? If so and you rewarded on those grounds, can you imagine the brouhaha if you started giving transfers based on IQ tests and working 50+ hours per week?

I'd love to see it as a long term experiment with a proper control group. Test for high IQ with a standardized test, require a high amount of verified hours worked at a paying job, but currently low income and low net wealth. Then give a substantial amount of cash ($1,000+ per month) and measure the standing of the two groups after 3 years or so.

Of course, I would suspect that even the control group with high IQ and a high work ethic to make large advancements, I'd just be curious to see how much further ahead the experimental group was at the end of the day.

I think that hard work has a larger marginal impact in determining success. Hard working people with low IQ's can become quite successful. Their biggest challenge is keeping what they earn.

In highly specialized fields, high IQ differentiates the top 5% and 1% from the rest of the top 10%. With high IQ and hard work, I would guess the probability of a successful life is almost certain. The biggest downfalls of people with those two characteristics are chemical dependence, poor social skills, poor social choices, and hubris. But I'd take those odds.

There was a time when those with the lowest IQs had to work hard to survive. They are now caught in our safety net. Menial work is honorable work. There is no honor or dignity in being dependent on the welfare state.

Those are my opinions of course.

What about the fact that the average resident of these chronically poor countries maxes out at the level of intelligence that we associate with 14-year-olds?

I think you mean their level of education maxes out at middle school level (if that). Individual intelligence peaks just before puberty -- but you are quite correct to point out that these chronically destitute countries have average IQs around 70 which can be associated with mental retardation.

It's just bizarre to listen to people like Esther Duflo going around saying that poverty in these places can be solved by providing access to credit. In contrast, Paul Romer has said that the first rule of charter cities needs to be potty training.

Which do you think is more realistic?

I disagree that intelligence peaks near puberty. If you mean mental capacity for learning, I might agree; however, as people become more experienced, they are better able to put their learning to work. The combination of some maturity with new knowledge can be more powerful than a sharp mind.

I understand and accept the necessity to often view things one variable or one dimension at a time, but learning has to do with a lot more than just IQ.

One of the most interesting facts that I've learned reading this blog was the massive difference in average IQ among countries. Previous to reading about it here, I had only heard it mentioned tangentially and followed up with so many cries of racism that, I thought it probably wasn't true.

I'm sure I could have checked, but no one has time to follow up on every comment they see. From the Economist:

Based on his actions more than his words as a better indication of what FDR believed, FDR rejected cash aid and even commodity aid as a way to help the poor and needy.

FDR instead provided jobs.

If the private sector would not supply jobs, and Hoover and local governments had been spending hugely on roads and bridges for a dozen years because government had decided that good roads and bridges for cars and trucks were needed. Congress had pressured the Post Office to expand service, and in 1913, a century ago, the Post Office began RFD and Parcel Post which created a profit for the first time in Post Office history. But that required good roads, so Congress had begun funding roads in the West where government owned a lot of land. By 1930, the pressure was on for expanded road building funding nationally so the effectively 5% Federal tax on gasoline. A number of States had already put taxes on gasoline to fund road construction.

And Hoover also began the Hoover dam and there were other economic development projects Federally funded. Federal grants for schools and other public buildings and infrastructure.

When FDR took office, the existing Hoover programs were ramped up, corruption and waste be damned - for about 6 months and then the scandals resulted in cutbacks to cut waste fraud abuse.

But the private sector would not hire unskilled workers.

So, FDR instituted first the CCC which hired young adults from families on relief with their wage mostly going to their family - a teen would work 30 hour a week and get $5 a month with $25 sent to his parents, and the teen would get housing, food, health care, clothing, job training, education if he wanted, transport to the job site, supervision and discipline by mostly military boot camp DIs. A home craft program existed for the girls, sewing, knitting, other piecework.

A more general program run by local government under WPA employed people building parks and post offices and other public works which can be found in many cities and towns older than 1900. Low pay for 30 hour work was the standard. This was not an alternative to the local and Federal funding of private construction of major projects which were revenue based - roads had revenue from taxes and tolls, schools were funded by debt paid by a revenue bond tax assessment.

FDR believed that it was a job that provided dignity, and if the private sector would not provide that dignity because the person lacked the skills or discipline or experience, the government must provide the job.

And then there was more than enough to do - tens of millions of trees were planted, along with much other conservation work to restore the land from slash and plunder farming and logging and mining that left wasteland that caused problems like flooding and pollution.

I can't imagine anyone arguing that there is no conservation work to do, that the loss of wetlands protecting Gulf Coast communities is just fine the way it is. because cities and towns washed away by hurricanes are great for the economy. That wildfire in the West a great for the economy because fire is natural and rebuilding hundreds of homes creates jobs so no one should be sent in to clear the underbrush and selectively cut the trash trees. So a CCC today on a much larger scale (local organizations still operate in the CCC model) would certainly be able to convert welfare cash payments into jobs that will provide real job experience.

Actually, I can very much argue for wildfire being a natural thing for habitat. In that case, of course, people should have no business building homes in wildfire areas, and these should be proclaimed protected areas of nature.

The Great Depression didn't end until FDR died.

At a small park near Spokane, WA there is a sign that commemorates one of the New Deal work camps that existed there in during the Depression. It was rural; it was a camp; it was, apparently, for men only, men who were willing and able to work really hard and sleep on the ground. Anyone who thinks this is transferrable to today's world is smoking something. Such a camp would immediately become the focus of national news media and social justice advocates. There would be demands for equality of gender and race, with bean counters making sure that "minorities" were proportionally represented. If there were too many "minority" residents, the cry would be cruel and inhuman punishment, slave labor, etc. Activists and politicians alike would demand absolute safety and full provision of health care for the workers. There would be lawsuits and union organizers. Corporations would sue for unfair competition. It would end up costing far more than just contracting the work out to commercial enterprises.

Don't see too much connection in that table. China has high IQ and relatively high disease burden, while Singapore and South Korea both have among the highest IQs but worse disease burdens than most western countries.

Stats from adoption point to race as a factor in IQ but culture is probably more important. After all smart people contributed to Mao's China and smart people are building modern China. Same IQ different culture.

I'm fairly sure that disease burden is the result of population density and cultural norms. It still shocks me to see Asians not cover their faces when they sneeze or cough; Europe figured this out after several plagues ravaged the population.

I have my doubts about Chinese IQ in general. We tend to observe Chinese with higher IQs in STEM fields, but we see similar cream of the crop from Latin America, Africa, Eastern Europe, and the rest of Asia - selection bias. Roam the streets of Chinatown in search of the illegal immigrants, and it doesn't take long to realize they are from the bottom tail of the distribution. I would even go so far as to suggest China expelled them. I've seen it happen in Europe before the Iron Curtain came down.

I observe Chinese in Asia, where they rise to the top whether its the Philippines, Indonesia, Thailand or Singapore.

And as others have noted, affirmative action if repealed would have little effect on whites but allow many northeast Asians to attend the college of their choice.

Because on average they're smarter.

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