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Mexico tried giving poor people cash instead of food. It worked.

Posted on June 29th, 2014 at 15:06 by John Sinteur in category: News -- Write a comment


In the United States, most government aid takes the form of in-kind transfers: that is, the government gives you stuff, or a voucher to buy specific stuff, rather than just cash to buy whatever you like. That has led to a panoply of programs — food stamps, housing assistance, Medicaid, insurance subsidies — that are each focused on a particular purpose. But there’s only value in giving people, say, food rather than money if they wouldn’t have used the money to buy food anyway. And a new study suggests that when people in Mexico got cash rather than food aid, they spent it on… food.

  1. [Quote]:

    We’re looking at this the wrong way around. The issue is not about eliminating poverty. It’s about how to motivate rich people to part with their money. After all, aid to the poor comes from taxes, and the rich pay more taxes. So any kind of welfare has to give the donors of the money something in exchange for their donation. But the poor have nothing to trade for what they receive. Right? Wrong.

    The poor have their dignity. That’s what they trade for donations. Every scheme for wealth distribution is informed by that fact. Rich people give money, and poor people abase themselves in exchange. That’s why every welfare scheme always involves humiliation.

    That’s why government housing for the poor looks different from ordinary houses: so the poor will stand out, so they can be shamed.

    That’s why poor people have to endure long lineups at the welfare office: so they can be reminded that they are less worthy of decent consideration.

    That’s why poor people have to endure invasion of their most private aspects of their lives, through visits by social workers: so they can be reminded that they don’t deserve privacy.

    And that’s why the rich don’t like giving out cash: because cash is anonymous, and enables dignity, equality, and privacy.

    As long as this implicit bargain (money in exchange for dignity) is ignored, the cruelty of the social welfare system will seem mysterious.

  2. “After all, aid to the poor comes from taxes, and the rich pay more taxes.”

    What BS! The rich pay less taxes than the lower and middle classes! If they did pay their fair share, then maybe we could really help people in serious poverty!

  3. The first Federal tax booklet I used had a tax table in the back that stated: “Over $114,000 – 70%”. The one I just looked at from 1986 had “Over $88,700 – 50%”. Taxes on the wealthy are less than that today. I don’t have the exact percentage because I use TurboTax and haven’t had a booklet in years. Taxes have gone down since that first booklet but even with a 70% tax rate on the wealthy, we still had poverty and we still had deficits. I don’t think the solution, if there even is a solution, will ever come by taking money from the rich or expecting the rich to give money to the poor. If there is a solution to poverty, it lies elsewhere.

  4. The rich and the poor have an equal right to hire lawyers and accountants to stash their wealth in tax-dodging schemes and tax havens.

    Fairness and honour are for the little people, right?

  5. [Quote]:

    Imagine being excluded from the financial services industry because of your passport.

    That happened to Carrie Walczak, an American living in Germany, in May. She received a letter from Deutsche Bank informing her that her bank account was going to be closed because she is an American.

  6. On your last point, John. A lot of banks got bullied and spanked for letting honest Americans hide their money from the IRS, so it is an obvious thing for them to do.

  7. exactly, sue, but I wasn’t talking about the banks there – in line with porpentine: if you don’t have the money for lawyers and accountants, you’re little people, and fair target no matter where you are on the planet.

  8. I see people starting to use an alternative economy.

  9. John, I’m assuming you quoted that post in #1 because you agree with it.

    That post assumes intent (to humiliate) where none is needed to explain the outcome. Housing is different because it is cheaper, and cheaper housing can house more people at the same cost. Also, it can be explained by the fact that those who start to do better will seek status by moving out of poorer neighborhoods. Waiting in lines for welfare is disappearing as welfare and food stamps are increasingly distributed electronically onto ATM cards, which also reduce the stigma of using food stamps in the supermarket. (Strange, the 0.01% are more powerful than ever, yet the stigma of being poor goes down?)

    The simple reason that aid has been in-kind or in restricted forms of cash is that it intuitively/naively makes sense to try to pay only for basic needs, and not enable people to be alcoholics, or gamble, or buy drugs. It wasn’t obvious that giving cash would produce better outcomes overall.

    [Edit to clarify phrasing of last sentence.]

  10. It wasn’t obvious that giving cash would produce better outcomes overall.

    Cash, Food or Vouchers: What Type of Assistance is Most Effective in Reducing Hunger?

    The three-year collaboration between IFPRI and WFP compared the relative costs and benefits of assistance programs that provided the same value of cash, food baskets, or supermarket vouchers in four countries: Ecuador, Niger, Uganda, and Yemen. (…) Cash assistance was always significantly more cost-effective to deliver. In fact, researchers determined that if they repeated the study, but only distributed cash, they could feed an additional 32,800 people with the same project budget.

  11. HEY. NICE SELECTIVE QUOTING. How about these parts?

    The results, which Hoddinott reiterated should not be generalized given the small scale and short duration of the six-month evaluation, may surprise some.

    Findings revealed that there is no one “right” transfer modality.

    Come on, John.

    More seriously, that link you gave is from November, 2013. This idea that giving cash is more effective than tailored aid is a recent one. I’ve only been aware of studies showing it for a few years. To support all the stuff in your first comment, about the rich repressing the poor, you have to show that food stamps and rent assistance programs enacted decades ago were shaped at the time with the knowledge that cash would work out better and would not be squandered. I believe that that data did not exist.

    It’s easy to look at outcomes and say “the rich have the power so they must’ve intentionally made it so”, but you know that that’s a fallacy.

  12. I believe that that data did not exist.

    Neither do I.

    I’ve only been aware of studies showing it for a few years

    Exactly. And I wonder why. Is this one of the old “that would make my department smaller so we will not try it” policies? Or perhaps simply “we cannot give these people cash! They’d just buy a drink!” – similar to what you said earlier.

    My uptake from all this is that we should at least stop stop with the “they would buy alcohol” mindset, recognize that a significant number of people would not, and tailor whatever we come up with to that. One-size-fits-all doesn’t work.

  13. Exactly. And I wonder why.

    Sorry John, I’m pushing you on this, because I think the stuff you posted in #1 is willful hogwash and I think you just agreed that you have no evidence to support it but you’re willing to throw some evidence-free conspiracy theory at it. Seems like you’re veering towards the people saying that Gates is just giving out vaccines because he knows vaccines cause health problems or because he wants the poor people to be alive and starving.

    I do think the studies on cash grants are super interesting and I hope they affect policy making. (Just saw this here.)

    But for the time being, for my own personal choices I’m going to continue to not give money to guys in the street and instead give it to shelters and food banks and education-for-the-disadvantaged organizations.

  14. But for the time being, for my own personal choices

    Ah, but that’s a whole different question. You won’t find me giving anything to a tjoller either. And I do pick and choose who I donate to in a similar way – small, local organizations (even if they are two continents away from me) with clear simple goals attainable in the short term.

  15. OK, so that choice is OK for you and me to make personally, but when government policy is set along the same lines, it becomes the rich taking away the dignity of the poor? How is that?

  16. but when government policy is set along the same lines

    It is? From the original article:

    During the program’s rollout in 2003, the government did an experiment in 200 villages where households eligible for the program randomly received “either the in-kind food transfer, an unrestricted cash transfer, or no transfer.”

    So no policy there, just testing, with some interesting results. I quoted one other article that you pointed out did support not just one position, you also quoted one that was interesting on cash grants but certainly not about policy.

    And I think I mentioned doubts about the reasons for current policy. I don’t think I ever advocated that government policy follows my personal choices in the matter. Although I would indeed ridicule any government that would follow my personal choices, if only for the simple reason that it doesn’t scale. The dignity bit was an example of the many, many other things that play a role in setting all these policies. If I can get people to critically think about this stuff, I’ve reached my goal. And if, at the end of it all, it turns out I was wrong on every single point, it wouldn’t bother me a bit. It wouldn’t be the first time I learned a thing or two from opening my mouth.

  17. So wait, what are you saying now about the stuff in #1? Do you believe it? Why did you post it exactly?

  18. Because there’s more to poverty than lack of money. Just like there’s more to hunger than lack of food. Never forget to look at other possible reasons.

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