Chris Blattman is becoming more skeptical of cash transfers

His new paper is with Nathan Fiala and Sebastian Martinez:

In 2008, Uganda granted hundreds of small groups $400/person to help members start individual skilled trades. Four years on, an experimental evaluation found grants raised earnings by 38% (Blattman, Fiala, Martinez 2014). We return after 9 years to find these start-up grants acted more as a kick-start than a lift out of poverty. Grantees’ investment leveled off; controls eventually increased their incomes through business and casual labor; and so both groups converged in employment, earnings, and consumption. Grants had lasting impacts on assets, skilled work, and possibly child health, but had little effect on mortality, fertility, health or education.

And here is my earlier Conversation with Chris Blattman, in which a similar result is discussed.

Comments

Shorter version of finding: "the poor will always be with us". Nothing you can do about it, it's just the way God intended it (natural law). Speaking as somebody in the 1%.

Looking at the world the thing is if people today cannot live on $7.25/hour without being late on their rent and other bills in you raise the minimum wage to $15/hour indexed for inflation in a few years, putting aside the issue of the effect on unemployment, 95% those type of people will once again being late on their rent and other bills and crying I cannot live on this.

What are the Best Things We Could Do for the Poor Through Government

End the War on Drugs, give amnesty for non-violent drug prisoners, and criminal justice reform with the aim of reducing incarceration rates. What has done more economic harm to the poor than having their working-age men locked away

Hire more and better police. See here. Poor people are too often victims of crime and fraud. It is better to live on a corner of the roof than share a house/neighborhood with crime, violence or biting insects.

Allow any subdividing and residential building that increased overall density and some that does not.

Wipe out the mosquito. seems like it could not be done but heard about it on NPR see here. https://www.npr.org/sections/health-shots/2016/12/14/504732533/to-fight-malaria-scientists-try-genetic-engineering-to-wipe-out-mosquitoes

What can we do for the poor? Redesign all welfare, tax and government services so they dont encourage single motherhood. Do that and your incarceration rates will take care of themselves.

Respond

Add Comment

If there are people who just need a little temporary boost up and won't immediately end up back in their debt to their ears, they are more likely to be found in the third world.

The #1 thing to help the poor in the US is for governments to first stop squeezing them with punitive fines. Once the police stop becoming a revenue generation force we can look at other options.

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

I wonder what the impact was though on the community that these people were in? I would guess that a more cash/asset rich community would do better than a poorer one.

The bigger question is if we can get AI working before African countries hit Malthusian limits again. They have escaped Malthusian limits in recent times thanks to better food supply from overseas but there is no sign of any demographic transition yet in many of the countries hence the UN forecast of a population explosion in Africa. Without a demographic transition or some sort of AI force majeure the Malthusian equation will apply (population increasing exponentially, food supply arithmetically) with dire consequences.

A.I.? More advanced technology will help but there is a lot that can improve lives dramatically before the Ugandans get A.I. in 2050 or 2150. For example, it would be great if the level of the corruption there, now among the most severe in the world, could improve to Chinese and Indian levels that both rank at 79th out of 180 countries.

Biotech too.

Respond

Add Comment

Respond

Add Comment

WTF do you expect AI to do in this circumstance?

AI or Super-Intelligence will change everything. Maybe for the worst, maybe for the better. I can't imagine how it will change Africa, only that it will.

So will magic, with about the same likelihood of ever actually existing.

Spoken like a true Muggle.

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

I hold Blattman in high regard; he's one of a new generation of academics that's been educated in the belief that changing your mind is not a sign of weakness.
On topic, what's the alternative to cash? Turns out it's a mix of interventions focused around health (I don't only mean healthcare, I think of stuff like pollution control and safer traffic), nutrition, education, and of course wealth building. The best known wealth building mechanism in turn isn't cash transfers. It's emigration, hands down. Blattman knows this.

As Africa's population goes from 1.2B to 4B over the next 80 years, perhaps 2B of them could emigrate to other countries to increase their wealth. Of course that still leaves 800M more living in Africa than now, so maybe we could make it 2B Africans emigrating every 50 years or so, or 80 Million each year, probably in 150 years we could get all 6 Billion Africans out of Africa to somewhere else where they could finally accumulate wealth.

China will soon(10-15yrs) own Africa. Africa is worth a lot more w/o Africans than w/Africans. I think we can count on China to "solve" the 4,000,000,000 problem.

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment

It’s a one off payment of $400, quite a lot of money for Uganda but not so much over a 9 year period. I already find it fantastic that it raises earnings by 38% after 4 years. Did we expect that a one off cash transfer can have life long impacts? What interventions at $400 per capita still has such large impacts at year+4? Maybe early learning.

Exactly. One time payment. Why would anyone actually expect that it would make a difference?

This would only make sense if it was a monthly payment. THEN I would be surprised that there is convergence with the control group.

Many investments continue to generate returns indefinitely.

Respond

Add Comment

Respond

Add Comment

Agreed. Given the failures of microfinance initiatives in the past and the Millenium Villages Project, 38% is an impressive number.

Respond

Add Comment

Respond

Add Comment

After so many mixed results to bootstrap development from a pure economic and/or policy perspective, maybe it is time to consider that there is a philosophical dimension to economic development.

Respond

Add Comment

No surprises there. Good institutions is the best long term medicine, cash transfers, handouts and alike are short term fixes not sustainable solutions.

This. Why accumulate any capitol if some strongman is just going to come along and take it?

It seems that a big part of the poor helping industry involves figuring out how to help the poor while studiously ignoring the failure in governance that is at the root of all these issues.

Respond

Add Comment

Respond

Add Comment

What researchers found is that cash transfers (in developing countries) work in the short-run but not in the long-run. Is that intuitive or counter-intuitive? I ask because tax policy here is based on the belief that temporary tax cuts intended to spur investment don't work very well, not nearly as well as permanent tax cuts. Indeed, that's the premise of the Republican tax cut proposal recently introduced in the House that would extend last year's tax cuts (adding a couple more trillion to government debt). In developing countries, the amount required to start a small business is quite small, such as the travel business of Cowen's friend in Ethiopia. Short term cash transfers might allow someone to start such a business, while long-term transfers might provide a disincentive to make the business work or to continue a business that isn't working.

"What researchers found is that cash transfers (in developing countries) work in the short-run but not in the long-run."

Similar to the results of early education (pre-school).

Respond

Add Comment

Respond

Add Comment

It was always odd to expect that a modest household level grant would be fundamentally and sustainably life changing. If it were, the implication would be that governance, institutions, education, etc don't matter.

How so?

Respond

Add Comment

Respond

Add Comment

But in the long run, we're all dead anyway. Doing things that help for four years is still four year's worth of better life for a family.

Respond

Add Comment

"Grants had lasting impacts on assets, skilled work, and possibly child health" So what if they didn't have lasting differential impacts on income. Aren't these impacts alone enough to justify what was a modest one-time investment?

Sounds like a non-rhetorical question

Respond

Add Comment

Aren't these impacts alone enough

It depends on their size. Wealth is still finite, so we want to use it wisely.

That said, given how many interventions end up harming the recipient, just having a measured positive effect should put this on a short list.

Respond

Add Comment

Respond

Add Comment

Respond

Add Comment