On the original Star Trek series, when Mr. Spock was confronted with a new and unexpected bit of information, he would raise one Vulcan eyebrow and intone “fascinating.”
I don’t have a Vulcan eyebrow, but “fascinating” was my reaction to a 2013 academic paper written by Johannas Haushofer and Jeremy Shapiro, with the not-very-sexy title “Household Response to Income Changes: Evidence from an Unconditional Cash Transfer Program in Kenya.”
Stop yawning, because this is important. And fascinating.
In the U.S., lawmakers (and not just right-wing ones) have long taken a punitive approach to the poor. Even self-labeled “compassionate conservatives” like former President George W. Bush have proposed programs that would “help welfare recipients develop middle-class values.” (Because clearly, if you are poor, you must be morally defective.) American attitudes toward the needy have their roots in 15th Century English Poor Laws that prohibited “giving alms to the sturdy beggar.”
American social welfare programs built on that model have numerous, demeaning—and costly—restrictions on eligibility. After all, if “we” don’t watch “them,” they’ll cheat us hardworking taxpayers.
Most recently, a number of state legislators have piled on; convinced that any assistance allowing recipient discretion would “obviously’ lead to imprudent choices, they have even passed rules about what welfare recipients can buy at the grocery store with their food stamps.
Imagine what would happen if we simply sent poor people some cash! (Um…perhaps like Social Security…?)
Well, it turns out we don’t have to imagine it; an NGO called “GiveDirectly” has been doing just that in Kenya. GiveDirectly chooses beneficiaries at random; the only criteria is income below poverty level. The organization is rigorously evidence-based, and the paper I came across is one of several independent research projects examining the results.
So what happened?
Recipients spent more on health and education. Alcohol and tobacco expenditures did not increase. The researchers found
no evidence for an increase in tension within households, no significant spillover effects on non-recipient households, and no general equilibrium effects at the village level, with the single exception that we observe an increase in female empowerment at the village level. Together, these findings suggest that simple cash transfers may not have the perverse effects that some policymakers feel they would have, which has led for a clear policy preference for conditional cash transfers or in-kind transfers.
I came across this article because I have recently become aware of psychological studies connecting poverty with a host of deleterious psychological consequences, and I was exploring the literature reporting on those consequences for a book I’m writing. (I had previously understood the link between insecurities of various kinds and social unrest, but I was unaware of this particular line of research.)
As an article in New America Weekly reported, the human brain has specific reactions to any form of scarcity; it seems that cognitive capacity can only be stretched so far. This has been dubbed the “bandwidth tax,” shorthand for the proposition that scarcity inhibits the brain’s ability to focus on multiple tasks. This isn’t a big surprise to anyone who has agonized over whether to use her limited funds to buy baby formula or see the pediatrician.
Interestingly, the levels of stress associated with poverty can be assessed physically; people produce a “stress hormone” called cortisol, levels of which can be measured.
Haushofer and Shapiro measured them.
Transfer recipients experience large increases in psychological well-being, and several types of transfers lead to reductions in levels of the stress hormone cortisol.
Apparently, cash transfers to desperately poor people are followed by increased access to education and medical care, and lowered levels of a stress hormone that interferes with good decision-making.