In the Stanford Social Innovation Review, Kevin Starr & Laura Hattendorf express their doubts.
But is GiveDirectly’s model, as Slate put it: “the best and simplest way to fight poverty”?
No. It’s an experiment—an important one, but an experiment nonetheless. We hope we’re wrong, but our hunch is that it is more of a 1-year reprieve from deprivation than a cost-effective, lasting “solution to poverty.”
Poor people are poor because they don’t have money, and so we think unconditional cash transfers should be judged primarily by how much money recipients are making a few years out from the windfall. GiveDirectly’s work in Kenya is too new to know that, but cash-transfer enthusiasts like GiveWell point to other studies of other cash-transfer programs and predict a slam-dunk.
We looked at those studies, and we’re puzzled as to why GiveWell’s analysts, who rightly prize impact and cost-effectiveness, chose GiveDirectly as one of their “Top Charity” trinity. In the most relevant, longer-term study that GiveWell cited—a program working with unemployed youth in Uganda—recipients of an initial $382 grant had a 41 percent greater monthly income 4 years out. This sounds like a big return on the donor’s dollar.
It’s not. Working out the cost-effectiveness of income-generating funding can be confusing, and we at Mulago find it useful to benchmark grants by calculating the amount of additional income over 3 years, divided by the amount of grant money it took to generate it: the income bang for the donor buck. Of the baseline income of those youth, 41 percent turns out to be $11 per month. By that calculation ($11 per month x 36 months ÷ $382), the unconditional cash grant produced $1.03 of additional income over 3 years per donor dollar, essentially a wash.
Chris Blattman responds with several points, two of my favorites being the following.
1. Victory! If it’s becoming standard to judge interventions by their cost effectiveness, then I can’t be more thrilled. Same goes for GiveDirectly. You can think of cash transfers like the index fund of development (making GiveDirectly the Vanguard). If the NGOs (money managers) of the world can outperform the index funds, then the world becomes a better place.
3. Scalable? Whether these other interventions prove as scalable or replicable as cash is another question. Too many NGOs search for solutions to help 1,000 people a year not 1,000,000. But I’m confident some alternatives to cash will prove promising. Some already are, from vaccines to election monitoring, if only because they solve the problems cash cannot. I’m more skeptical we’ll see better alternatives for pure poverty-alleviation, but we’ll see.
I'd never thought of cash transfers as the index fund of charity, but it's a useful analogy. If you can't do better than giving someone cash, then give someone cash.
In Asian cultures, the most common wedding gift is cash. When I was younger that seemed like a gift for the creatively deficient, but at its heart is also a genuine pragmatism that signals the unselfish nature of the giver.