What cash can and can’t do

My take on the ongoing U.B.I. wars

Bartosz Hadyniak

Kelsey Piper wrote an informative piece for The Argument (good magazine, you should subscribe) about a new wave of research on cash transfer programs in the United States. All of this work has generated what I consider to be disappointing findings about the lack of impact of giving poor people money.

I found a lot of the reactions to the article kind of annoying.

On the one (left) hand, some are indignantly snorting that it’s no surprise these cash grants had no impact on the variables of interest — the point, after all, is to make poor people less poor and that’s what they did. Then on the right, you have Charles Lehman and others sort of indignantly snorting that it’s no surprise these cash grants had no impact on the variables of interest — nothing ever works and something called Rossi’s Iron Law says the “expected value of any net impact assessment of any large-scale social program is zero.”

I don’t find either of these haughtily unsurprised reactions to be appropriate, because we have a lot of research on cash transfer programs to low-income people in poor countries, and they show much more positive results. This includes evidence of sustained increases in financial assets, improved health, positive spillovers to neighbors, and many other benefits.

That research isn’t brand new and the more negative domestic research that Piper wrote about has also been out for a while now, so among real discourse-heads on universal basic income (U.B.I.), these two contrary facts have already been assimilated.

And the explanation is obvious: Poor people in Kenya are average people who happen to live in an extremely poor country. Basic habits of hard work, diligence, and thrift don’t necessarily pay off in an environment where everybody is so poor that hardly anyone can hire you or pay for anything you make. Dumping cash on people in these circumstances really lets them level-up. By contrast, the domestic poor are — unless they are recently arrived immigrants — often people who, for one reason or another, are struggling to get their lives together in a very wealthy country. If they were thrifty and diligent, they wouldn’t be poor in the first place. Putting money in their pockets doesn’t make them thrifty and diligent, so it doesn’t really alter their lives that much.

That’s all fine. But I do want to emphasize that if the empirical evidence came out the other way, there would be an equally obvious explanation: Kenyans are living in a third world country with weak governance and terrible institutions, so obviously dropping some cash into a village doesn’t change anything — only fundamental reforms will help. The American poor, by contrast, are living in a functional society and just need a little money to get ahead.

It’s obvious!

Which is just to say that everything is obvious once you know the answer.