Science in Economics – experiment in fighting global poverty
Science isn’t just for space rockets. I ran across an experiment in awarding money to poor people that uses a control group. Ah, science! Of course, humans are difficult to study in the wild, but this seems like good data.
It’s an unprecedented – and massive – experiment: Since 2017 the U.S.-based charity GiveDirectly… Their findings cover the first two years of the effort and compare the outcomes for about 5,000 people who got monthly payments to nearly 12,000 others in a control group who got no money. But, just as significantly, the researchers also compared the recipients to people in two other categories: nearly 9,000 who received the monthly income for just two years, without the promise of another decade of payments afterward; and another roughly 9,000 people who got that same two years’ worth of income but in a lump-sum payment. NPR
The experiment is continuing, and here are some of the results so far:
1] People who got the money in a lump sum vastly outperformed people who were promised the same amount for just two years but received it in monthly installments.
2] Lump sums are so useful that even those receiving monthly installments created their own version. Here’s that human factor at work. Recipients of monthly stipends created their own savings clubs. Each month, the members put $10 into the communal pot and a different person takes it home. Bingo. A lump sum.
3] Poor people generally use the money productively rather than wasting it on alcohol, cigarettes or other vices. It makes me wonder if this worry is merely an excuse.
Long-term results are not in yet, but you can read more by clicking on this NPR article.
I have no connection to Give Directly, and I’m no expert on non-profits. I did look at Charity Navigator, and Give Directly gets high marks there. But if you’re interested in moving the experiment along via a donation, do your own evaluation. There’s contact information at Charity Navigator.
Sometimes, your gut reaction is all you have to evaluate an undertaking, but when there’s data, so much the better. Give Directly seems to be trying to to do well with their doing good. The idea of a charity that doesn’t come with paternalistic strings attached seems like a welcome find during this season. Happy Holidays.
