I’ve been thinking a bunch about this study (direct link) of CBT-style techniques used to try and get criminals onto a better life path in Liberia that showed what looks like spectacular results, curious if anyone wants to share thoughts.
One thing I've noticed is when a person in poverty gets a windfall, there is an insane amount of pressure put upon them. People in poverty are socially connected to other people in poverty, and chances are someone in your social circle can exert enough social pressure to get your money. Think "the friend who I've known for decades needs that $500 to help pay for his mother's medical treatment, and he promises he'll pay me back." Given that there is no way you are keeping the money for any length of time due to this social pressure, a rational response is to spend it as quickly as possible so you get at least some benefit from it.
- An awareness-of-needs issue might be sticker shock. If you've been out of the housing market for a while you might have an outdated idea of what first-month's-rent-plus-deposit amounts to. When you get your $2000 and think "now's my chance!" and then go hunting for an apartment, only to learn that everything is still out of your reach, disappointment sets in: "Even with $2000 falling from the sky, I still can't get a place."
- One difference I suspect you'd find between poverty in a place like the U.S. with widespread wealth, and poverty in a place with endemic poverty, is that extremely poor people in the U.S. are more likely to be those with cognitive disabilities and severe mental illnesses. This makes it harder for them to do long-term planning or cost/benefit analysis, to avoid scams & leeches, etc. This could make it harder for programs like this to succeed here.
1. I dont think it'strue that almost everyone had received money from this organization before; it says 43% had, and 99% (of the 43%) had received $500 (all over 4 months prior).
2. "It does this to such a large extent, in this theory, that such people end up overspending the endowment, which we know because their debt levels increased." In the Kevin Hart episode of Seinfeld's "Comedians in Cars Getting Coffee", Hart tells a funny anecdote abot just this effect.
3. I would like to see one of these experiments paired with significant financial counseling. Ask the participants what their specific goals are beforehand, and then give them assistance/advice to help them meet those specific goals, whatever they are (even if those goals are objectively bad); be curious to know if the objective and subjective outcomes change.
My anecdotal experience with a group of 250 families over a few years is that if there is an urgent need such as being kicked out of housing and sent to a shelter without money for rent or the repair of a car without which there is no income, then money makes a huge difference.
Also, consistency is so important vs. "one-time" unless there is urgent and specific need as per above.
It does not surprise me that temporary and undifferentiated stimulus is ineffective.
Thanks Zvi for going through this in your usual careful way.
1. EA is starting to seem like a way for techie millennials to embrace 1980s Republican ideals without seeming like Republicans (I see this as a net-positive)
2. Hypothesis - the reason poor people are poor is because they are bad at managing money and giving them more money doesn't change that
The "what they spent money on" data is purely self-reported and probably not of much value. (None of the money went to drugs or alcohol at all? Who'd have thunk it?)
The other big difference between the US and Kenya is that most people in Kenya are poor, whereas poor people in the US are already self-selected for being especially bad at making financial decisions, so the average poor Kenyan is probably much better at making financial decisions than the average poor American. Poor Kenyans are people who have never had an opportunity, whereas poor Americans are people who have already pissed away hundreds of opportunities that the average Kenyan would kill for.
It would be interesting to try giving money to people in various different wealth brackets to see what they do with it.
It's even less useful because successful Kenyans support their entire extended family. Their individual standard of living does not improve as much as an American's would.
Giving money to different wealth brackets wouldn't be as useful as giving it to people who have a record of success.
Most income variation in the USA is within families. Not making that up.
You can spend an unlimited amount on poor people and get no return on investment. It's possible!
See Afghanistan vs. Marshall Plan.
After WW2, my family got out of rural poverty by using the GI Bill. The reason that worked is that they were willing to work, willing to get and stay married, but had no opportunity. When the opportunity appeared, all 6 men in that generation served and went to college, except for my great uncle who died on Guadalcanal.
You want a plan to stop poverty? Tell people the truth: there are simple things anyone can do that will prevent long term poverty.
1. Graduate High School. Without this, you can't even get entry level jobs. You'll be day labor if you are lucky.
2. Stay employed. Keep working. Welfare is a waste of time. You should be learning skills and gaining experience for your next job. I graduated a year late after dropping out and realizing I would never get anywhere.
3. Don't have children out of wedlock. Sorry, but it's true. This is under your control. Sorry, but it is.
4. Don't have children too young even if married. This is subjective and conditional, but under 20 is too young.
5. If you get married, try to stay married. Families are "white privilige." A couple working together will ALWAYS have an advantage over a single person. An extended family which cooperates will ALWAYS have an advantage over isolated individuals. Sorry, again, but not all family organizations are equal when it comes to economic outcomes.
6. Don't do drugs. Again, sorry, but I've never met poor people born in America who didn't do drugs. Not kidding, the role of drugs in perpetuation poverty is totally obvious and totally denied. Legalizing drugs is not doing poor people a favor. Jail time sucks, but so does poverty. I've noticed that almost everything really bad that happens to people has something to do with parties and drugs. Don't.
7. Stay out of jail. Despite what you might hear, it's not that hard. Most people manage it, even when poor.
How do I know these things? Besides enlisting in the military at age 18, I have worked a lot of low wage jobs over the last 30 years, often minimum wage, and noticed that I had a much higher standard of living than any of my coworkers. I was married, didn't do drugs, had no child support and wasn't a single parent. That was it. It's not income that's the problem. We always paid our rent, owned a used car, and built our savings. My wife's 401 (k) from working at the grocery store (an evil national corporation) reached $100k in about 10 years. We pay a mortgage and own two cars.
Poverty is behavioral. It's not exploitation, it's not random. People who go to work, cooperate with family, and follow rules and norms will always have an advantage over people who don't. It is fantastically stupid and harmful to deny the truth.
I think avoiding poverty is about self-control. I don't think self-control is primarily genetic. It is learned, and parenting matters a lot. People can also learn it through experience.
I notice that poor people have nicer clothes and flashier cars than I do. Perhaps this means something?
Kinda sobering, given the "inevitable due to technological unemployment (which is right around the corner)" vibes continually accruing to UBI. It just seems hard to duplicate all the goodness of cash transfers using a hodgepodge of in-kind transfers, even if they hit all the biggest spending categories...money *ought* to be fungible, choices *ought* to be meta-good, bureaucratic overhead *ought* to be pain not profit. Clearly, More Research Is Needed.
(I do wonder if the covid stimulant checks and EITC served as "de facto in-kind transfers", due to a sort of framing effect...tying a bundle of cash to the ideaspace of "covid" might prime recipients to spend it more productively on acute pandemic-related losses vs. general Pennies From Heaven charity. Similar with EITC and children - it's supposed to be for child-related surplus expenses. Though the means-testing probably also helps; not sure if there's actual data out there, but anecdotally, poor singletons make more unwise financial decisions than poor parents. Kids keep one at least slightly fundamentally economically honest.)
>a windfall teaches people that life is arbitrary and doesn’t reward work or punish lack of work, so they work less.
>There isn’t proper appreciation for how much that money will be worth to you when things get tough again, but then again that is only valuable to you to the extent you can resist the pressures to spend.
This seems pretty accurate. Among my social group, many (possibly most?) make even less than the $35k Chicago poors in this study, and have even higher cost of living to boot. Age is certainly a confounder - lots of college kids - yet collecting stories of what my peers did with their various stimulant checks over the course of the pandemic, many did treat it as Arbitrary Largesse to be spent right away. Typically on frivolous consumption, more unpaid vacation time, living beyond means temporarily, and so on. The same happened when my company joined many others in offering "hazard pay for essential workers" for some time...those funds largely got diverted to self-care type stuff, not socked away. People thought I was really weird for tripling my 401(k) contributions, for example...
I think there's a certain general trend among particular classes of individuals to catastrophize and treat modernity as no good, horrible, awful, absolutely bad...covid definitely seemed to vindicate those beliefs. Quite a lot of "well, the world's clearly ending anyway, why not start a new hobby of e.g. collecting expensive whiskey?" type mentality. Then of course the world didn't end after all, and we muddled through covid. Now these people look at their bank balances - under inflation! - and it's like, "welp, shit." Things do indeed get tough again. (Your reporting really helped me get out of this particular trap, Zvi, for which I'll always be grateful.)
And the checks have just kept coming. California doing "inflation tax rebates" after already doing a "definitely not a gas tax holiday" is...not surprising, and not unwelcome from a self-interest perspective. But definitely contributes to making Life feel Arbitrary. Federally, there's still the specter of Suspended Student Loans as well. Truly curious if they'll kick the can down the road once again come end of July. (I predict the increase in interest rates will have a non-negligible impact on this decision.)
I found this video of a talk by Megan McCardle, a 'libertarianish' person I've long liked and followed, to be pretty insightful (whenever I first watched it): https://www.youtube.com/watch?v=AchISJUKfH4
I would NOT at all be surprised if even the 'long term' cash transfers showed similarly weak or negative effects. I would expect a LOT of recipients to (and somewhat 'rationally') just work less. The major 'poverty traps' seem social or cultural, e.g.:
> ... people, especially during the pandemic but increasingly so in general, have lost the core belief that the future exists and is real and matters and you can change it, which makes windfalls greatly reducing of effort in ways that are bad in the long term, and also that a windfall teaches people that life is arbitrary and doesn’t reward work or punish lack of work, so they work less.
And I think that, for a LOT of the people stuck in poverty in the U.S. or similar countries/states/nations, this is largely true. It IS in fact extremely difficult to find/search/target satisfactory futures. One aspect that reading this post made me think of is just not knowing how much/many of the rules/regulations/laws it's, effectively or in-practice, okay to ignore/defer indefinitely. It's EXTREMELY helpful to have some concrete hands-on experience with, e.g. starting a business, and from a 'privileged' position within the company/business, i.e. with access/knowledge of finances, 'compliance', etc..
I hired a moving company somewhat recently and the two workers sent to help me were two young men from Harlem that lived/live in public housing. They told me about them being paid under the table, and less than (NYC) minimum wage, and mentioned that they had thought about starting their own moving company. I told them that that was a great idea and tried to encourage them to do so, and even (sincerely) offered to help them with that, but I quickly realized that they had convinced themselves that it just wasn't possible/feasible for them to do that. No amount of variations on 'just do it!' on my part seemed to reach them at all. Sadly, I'm not sure they're _entirely_ wrong about their prospects either, tho I think they're missing the crucial insight that trying and failing is both reasonably, in theory, and definitely/actually in practice, 'just' another step on the road towards a better future for themselves.
We ended up discussing Bitcoin and cryptocurrency (somehow) and one of them showed me an investment app they had in which they owned some fraction of Bitcoin or similar. I told them about cryptocurrency 'mining' and how it had mostly migrated to places in the world that had 'cheap' electricity. They mentioned that they didn't pay for electricity in public housing and I responded that they could possibly use that to (profitably) mine cryptocurrency themselves. I think that, in the face of what they (think they) would have had to do to do that, they just admitted defeat immediately instead of sketching/outlining a plan.
As a vaguely 'libertarian' person myself, I think it's a generally and extremely under-appreciated fact about living in 'first world' countries/states/nations that only the most determined people have a 'real' chance – psychologically, emotionally, and maybe cognitively – to claw their way up the wall of bullshit obstacles that have been erected for the usual 'good' reasons. The only even somewhat plausible means of escaping poverty are the standard 'lotteries', e.g. sports, music, or gray/black market 'hustles'. This seems incredibly Sad to me.
1. Could you, personally, make choices that would result in you becoming poor? They said yes.
2. Would you agree, therefore, that it is possible that other people make choices that result in becoming poor? They said yes.
3. Does that mean that some number of poor people are poor because of choices they have made? They said yes.
4. Therefore isn't it important to know which choices result in becoming poor so everyone can avoid them? They said yes.
5. When we look at the social scientific data there are correlations between certain choices and being poor. Should we then avoid those choices? They said yes.
6. As a corollary, should we not also look at the choices made by people who are not poor? They said yes.
Finally, I said: do not listen to what people say is true but look at the actions people take. Many successful, educated liberals who say they care about poor people refuse to endorse, or even mention, choices that prevent poverty. They do know what those choices are because their own behavior shows that they know what the results will be. They do not teach their own children to make the choices that result in poverty.
We lie to poor people about how to escape poverty. How is that moral?
The _psychology_ of why people refuse to face or admit the truth, about anything, is pretty dark, and very sad.
I don't know how to point out all the Good being squandered by not believing what's true. It's hard enough just having _any_ idea about what's true sometimes.
I'm very grateful for Zvi specifically, and quite a few other similar truth seekers, at helping me better understand what I little (I think) I do.
Where does it say that the cash transfer study happened in Chicago? A quick skim of the paper/Twitter thread doesn't yield anything more specific than "US individuals," but I might have missed it.
Also, they report median income as $12,336 ($1,028 monthly, pg. 16), much lower than the Chicago median of $34,000.
This sounds somewhat similar (but not quite) to something called Contingency Management interventions. It's a type of intervention where money is delivered dependent on a (objectively verified) behavior occurring, and money is withheld if it does not occur. There are a couple different variations to this, but that's the general idea.
When done effectively, this stuff is almost miraculous, across a variety of areas such as: reducing substance abuse rates across types of drugs (cocaine, cigarettes, benzos, etc.), increasing medication adherence (e.g. Aids treatments), increasing physical activity, decreasing homelessness, increasing employment, recycling, etc.
My PhD was in this area with one of the leading researchers of the field, so happy to chat more if you're interested for EA related stuff.
Not for EA purposes, but if there's ways to use this to improve potential government policy (e.g. for drug treatment or homelessness) then that is relevant to my current interests. I'll try and check it out.
This outcome really butts up against my strong presumption that first-order effects dominate over clever 'but-maybe-doing-positive-thing-will-backfire!' second-order effects. The vast majority of the time when people make such objections they end up being wrong.
I'm kind of cautious about updating much on this study though. Given that our outcomes here are kind of low-resolution (we don't actually know how their budget changed, and we can't firmly distinguish between 'bought $4000 of extra cigarettes for my extended family' and 'bought a $4000 car to replace my clunker I have to repair every month.'), it's really hard to be sure we're seeing any given narrative. Maybe everyone invested in durable goods like better cars, and feel bad because those cost more than $2000 dollars and they now have another payment. I suspect there are dozens of possible stories you could tell that fit this data. Who knows?
At this point, I still suspect that this study is wrong and won't replicate. It just doesn't seem like a strong enough data-point to push my prior of 'giving people money helps them' below 50%.
I grew up poor, with mostly irresponsible adults in my life, and for me this is an unsurprising result.
In my family had my stepdad received the $2,000 windfall he would've quit his job, lived off the windfall, and then found a new job when the money ran out. He probably would feel worse off for it. He wouldn't have used the time off on any kind of self improvement, but rather indulging on drugs and alcohol. He'd also probably feel regret for not having spent the windfall on something lasting.
A $500 windfall would probably not be enough to quit working over, it would mostly just go to drugs and alcohol.
Relying on self-report for where the money spent is fraught. People will say they spent it virtuously because they fear it'll be taken back if they say it was spent on vices.
I see that the paper considered the frittered-away-on-vices scenario, but their top reason for dismissing it was the self report on intended spending:
--------------------------
We next consider the possibility that UCT recipients spent money in ways that ultimately
harmed them, for instance on recreational drugs and alcohol (Banerjee and Duflo, 2007; Brune
et al., 2017). To test this, we examine Figure 4, which graphs participants’ intended uses of
their UCT and survey payments. We see that both “lotteries and gambling” and “recreational
drugs, tobacco, and alcohol” were mentioned very rarely. In fact, the former category was
mentioned by only a single participant, and the latter was mentioned by none.
--------------------------
They considered that participants may be lying and so searched the transactions for '“alcohol,” “liquor,”
“lotto,” “Mega Millions,” “casino,” “gambling,” or variants thereof.' They average daily spend on these was $0.02 for the $500 group, $0.04 for the $2000 group.
That's a suspiciously small number. Less than a single beer or a pack of smokes spread out over a month.
The researchers don't seem to understand how such purchases show up in bank transactions. AFAIK the bank record just has a short version of the business name, not any details on what you've purchased. Few of the places you'd buy alcohol from would have these words in the business name. They're going to be in grocery store transactions, gas stations, etc. Even bars don't usually have "bar" in their name. And if you're buying illegal drugs, you're just going to use cash, so it wouldn't show up in bank transactions.
One thing I've noticed is when a person in poverty gets a windfall, there is an insane amount of pressure put upon them. People in poverty are socially connected to other people in poverty, and chances are someone in your social circle can exert enough social pressure to get your money. Think "the friend who I've known for decades needs that $500 to help pay for his mother's medical treatment, and he promises he'll pay me back." Given that there is no way you are keeping the money for any length of time due to this social pressure, a rational response is to spend it as quickly as possible so you get at least some benefit from it.
And pressure from their kids. If my SIL gets any money, all five of her ne'er-do-well children immediately demand "their share" of it.
A couple of off-the-cuff thoughts:
- An awareness-of-needs issue might be sticker shock. If you've been out of the housing market for a while you might have an outdated idea of what first-month's-rent-plus-deposit amounts to. When you get your $2000 and think "now's my chance!" and then go hunting for an apartment, only to learn that everything is still out of your reach, disappointment sets in: "Even with $2000 falling from the sky, I still can't get a place."
- One difference I suspect you'd find between poverty in a place like the U.S. with widespread wealth, and poverty in a place with endemic poverty, is that extremely poor people in the U.S. are more likely to be those with cognitive disabilities and severe mental illnesses. This makes it harder for them to do long-term planning or cost/benefit analysis, to avoid scams & leeches, etc. This could make it harder for programs like this to succeed here.
1. I dont think it'strue that almost everyone had received money from this organization before; it says 43% had, and 99% (of the 43%) had received $500 (all over 4 months prior).
2. "It does this to such a large extent, in this theory, that such people end up overspending the endowment, which we know because their debt levels increased." In the Kevin Hart episode of Seinfeld's "Comedians in Cars Getting Coffee", Hart tells a funny anecdote abot just this effect.
3. I would like to see one of these experiments paired with significant financial counseling. Ask the participants what their specific goals are beforehand, and then give them assistance/advice to help them meet those specific goals, whatever they are (even if those goals are objectively bad); be curious to know if the objective and subjective outcomes change.
My anecdotal experience with a group of 250 families over a few years is that if there is an urgent need such as being kicked out of housing and sent to a shelter without money for rent or the repair of a car without which there is no income, then money makes a huge difference.
Also, consistency is so important vs. "one-time" unless there is urgent and specific need as per above.
It does not surprise me that temporary and undifferentiated stimulus is ineffective.
Thanks Zvi for going through this in your usual careful way.
Two thoughts:
1. EA is starting to seem like a way for techie millennials to embrace 1980s Republican ideals without seeming like Republicans (I see this as a net-positive)
2. Hypothesis - the reason poor people are poor is because they are bad at managing money and giving them more money doesn't change that
The "what they spent money on" data is purely self-reported and probably not of much value. (None of the money went to drugs or alcohol at all? Who'd have thunk it?)
The other big difference between the US and Kenya is that most people in Kenya are poor, whereas poor people in the US are already self-selected for being especially bad at making financial decisions, so the average poor Kenyan is probably much better at making financial decisions than the average poor American. Poor Kenyans are people who have never had an opportunity, whereas poor Americans are people who have already pissed away hundreds of opportunities that the average Kenyan would kill for.
It would be interesting to try giving money to people in various different wealth brackets to see what they do with it.
It's even less useful because successful Kenyans support their entire extended family. Their individual standard of living does not improve as much as an American's would.
Giving money to different wealth brackets wouldn't be as useful as giving it to people who have a record of success.
Most income variation in the USA is within families. Not making that up.
Duh!
You can spend an unlimited amount on poor people and get no return on investment. It's possible!
See Afghanistan vs. Marshall Plan.
After WW2, my family got out of rural poverty by using the GI Bill. The reason that worked is that they were willing to work, willing to get and stay married, but had no opportunity. When the opportunity appeared, all 6 men in that generation served and went to college, except for my great uncle who died on Guadalcanal.
You want a plan to stop poverty? Tell people the truth: there are simple things anyone can do that will prevent long term poverty.
1. Graduate High School. Without this, you can't even get entry level jobs. You'll be day labor if you are lucky.
2. Stay employed. Keep working. Welfare is a waste of time. You should be learning skills and gaining experience for your next job. I graduated a year late after dropping out and realizing I would never get anywhere.
3. Don't have children out of wedlock. Sorry, but it's true. This is under your control. Sorry, but it is.
4. Don't have children too young even if married. This is subjective and conditional, but under 20 is too young.
5. If you get married, try to stay married. Families are "white privilige." A couple working together will ALWAYS have an advantage over a single person. An extended family which cooperates will ALWAYS have an advantage over isolated individuals. Sorry, again, but not all family organizations are equal when it comes to economic outcomes.
6. Don't do drugs. Again, sorry, but I've never met poor people born in America who didn't do drugs. Not kidding, the role of drugs in perpetuation poverty is totally obvious and totally denied. Legalizing drugs is not doing poor people a favor. Jail time sucks, but so does poverty. I've noticed that almost everything really bad that happens to people has something to do with parties and drugs. Don't.
7. Stay out of jail. Despite what you might hear, it's not that hard. Most people manage it, even when poor.
How do I know these things? Besides enlisting in the military at age 18, I have worked a lot of low wage jobs over the last 30 years, often minimum wage, and noticed that I had a much higher standard of living than any of my coworkers. I was married, didn't do drugs, had no child support and wasn't a single parent. That was it. It's not income that's the problem. We always paid our rent, owned a used car, and built our savings. My wife's 401 (k) from working at the grocery store (an evil national corporation) reached $100k in about 10 years. We pay a mortgage and own two cars.
Poverty is behavioral. It's not exploitation, it's not random. People who go to work, cooperate with family, and follow rules and norms will always have an advantage over people who don't. It is fantastically stupid and harmful to deny the truth.
I think avoiding poverty is about self-control. I don't think self-control is primarily genetic. It is learned, and parenting matters a lot. People can also learn it through experience.
I notice that poor people have nicer clothes and flashier cars than I do. Perhaps this means something?
Kinda sobering, given the "inevitable due to technological unemployment (which is right around the corner)" vibes continually accruing to UBI. It just seems hard to duplicate all the goodness of cash transfers using a hodgepodge of in-kind transfers, even if they hit all the biggest spending categories...money *ought* to be fungible, choices *ought* to be meta-good, bureaucratic overhead *ought* to be pain not profit. Clearly, More Research Is Needed.
(I do wonder if the covid stimulant checks and EITC served as "de facto in-kind transfers", due to a sort of framing effect...tying a bundle of cash to the ideaspace of "covid" might prime recipients to spend it more productively on acute pandemic-related losses vs. general Pennies From Heaven charity. Similar with EITC and children - it's supposed to be for child-related surplus expenses. Though the means-testing probably also helps; not sure if there's actual data out there, but anecdotally, poor singletons make more unwise financial decisions than poor parents. Kids keep one at least slightly fundamentally economically honest.)
>a windfall teaches people that life is arbitrary and doesn’t reward work or punish lack of work, so they work less.
>There isn’t proper appreciation for how much that money will be worth to you when things get tough again, but then again that is only valuable to you to the extent you can resist the pressures to spend.
This seems pretty accurate. Among my social group, many (possibly most?) make even less than the $35k Chicago poors in this study, and have even higher cost of living to boot. Age is certainly a confounder - lots of college kids - yet collecting stories of what my peers did with their various stimulant checks over the course of the pandemic, many did treat it as Arbitrary Largesse to be spent right away. Typically on frivolous consumption, more unpaid vacation time, living beyond means temporarily, and so on. The same happened when my company joined many others in offering "hazard pay for essential workers" for some time...those funds largely got diverted to self-care type stuff, not socked away. People thought I was really weird for tripling my 401(k) contributions, for example...
I think there's a certain general trend among particular classes of individuals to catastrophize and treat modernity as no good, horrible, awful, absolutely bad...covid definitely seemed to vindicate those beliefs. Quite a lot of "well, the world's clearly ending anyway, why not start a new hobby of e.g. collecting expensive whiskey?" type mentality. Then of course the world didn't end after all, and we muddled through covid. Now these people look at their bank balances - under inflation! - and it's like, "welp, shit." Things do indeed get tough again. (Your reporting really helped me get out of this particular trap, Zvi, for which I'll always be grateful.)
And the checks have just kept coming. California doing "inflation tax rebates" after already doing a "definitely not a gas tax holiday" is...not surprising, and not unwelcome from a self-interest perspective. But definitely contributes to making Life feel Arbitrary. Federally, there's still the specter of Suspended Student Loans as well. Truly curious if they'll kick the can down the road once again come end of July. (I predict the increase in interest rates will have a non-negligible impact on this decision.)
I found this video of a talk by Megan McCardle, a 'libertarianish' person I've long liked and followed, to be pretty insightful (whenever I first watched it): https://www.youtube.com/watch?v=AchISJUKfH4
I would NOT at all be surprised if even the 'long term' cash transfers showed similarly weak or negative effects. I would expect a LOT of recipients to (and somewhat 'rationally') just work less. The major 'poverty traps' seem social or cultural, e.g.:
> ... people, especially during the pandemic but increasingly so in general, have lost the core belief that the future exists and is real and matters and you can change it, which makes windfalls greatly reducing of effort in ways that are bad in the long term, and also that a windfall teaches people that life is arbitrary and doesn’t reward work or punish lack of work, so they work less.
And I think that, for a LOT of the people stuck in poverty in the U.S. or similar countries/states/nations, this is largely true. It IS in fact extremely difficult to find/search/target satisfactory futures. One aspect that reading this post made me think of is just not knowing how much/many of the rules/regulations/laws it's, effectively or in-practice, okay to ignore/defer indefinitely. It's EXTREMELY helpful to have some concrete hands-on experience with, e.g. starting a business, and from a 'privileged' position within the company/business, i.e. with access/knowledge of finances, 'compliance', etc..
I hired a moving company somewhat recently and the two workers sent to help me were two young men from Harlem that lived/live in public housing. They told me about them being paid under the table, and less than (NYC) minimum wage, and mentioned that they had thought about starting their own moving company. I told them that that was a great idea and tried to encourage them to do so, and even (sincerely) offered to help them with that, but I quickly realized that they had convinced themselves that it just wasn't possible/feasible for them to do that. No amount of variations on 'just do it!' on my part seemed to reach them at all. Sadly, I'm not sure they're _entirely_ wrong about their prospects either, tho I think they're missing the crucial insight that trying and failing is both reasonably, in theory, and definitely/actually in practice, 'just' another step on the road towards a better future for themselves.
We ended up discussing Bitcoin and cryptocurrency (somehow) and one of them showed me an investment app they had in which they owned some fraction of Bitcoin or similar. I told them about cryptocurrency 'mining' and how it had mostly migrated to places in the world that had 'cheap' electricity. They mentioned that they didn't pay for electricity in public housing and I responded that they could possibly use that to (profitably) mine cryptocurrency themselves. I think that, in the face of what they (think they) would have had to do to do that, they just admitted defeat immediately instead of sketching/outlining a plan.
As a vaguely 'libertarian' person myself, I think it's a generally and extremely under-appreciated fact about living in 'first world' countries/states/nations that only the most determined people have a 'real' chance – psychologically, emotionally, and maybe cognitively – to claw their way up the wall of bullshit obstacles that have been erected for the usual 'good' reasons. The only even somewhat plausible means of escaping poverty are the standard 'lotteries', e.g. sports, music, or gray/black market 'hustles'. This seems incredibly Sad to me.
I asked my kids the following:
1. Could you, personally, make choices that would result in you becoming poor? They said yes.
2. Would you agree, therefore, that it is possible that other people make choices that result in becoming poor? They said yes.
3. Does that mean that some number of poor people are poor because of choices they have made? They said yes.
4. Therefore isn't it important to know which choices result in becoming poor so everyone can avoid them? They said yes.
5. When we look at the social scientific data there are correlations between certain choices and being poor. Should we then avoid those choices? They said yes.
6. As a corollary, should we not also look at the choices made by people who are not poor? They said yes.
Finally, I said: do not listen to what people say is true but look at the actions people take. Many successful, educated liberals who say they care about poor people refuse to endorse, or even mention, choices that prevent poverty. They do know what those choices are because their own behavior shows that they know what the results will be. They do not teach their own children to make the choices that result in poverty.
We lie to poor people about how to escape poverty. How is that moral?
Thanks for sharing :)
The _psychology_ of why people refuse to face or admit the truth, about anything, is pretty dark, and very sad.
I don't know how to point out all the Good being squandered by not believing what's true. It's hard enough just having _any_ idea about what's true sometimes.
I'm very grateful for Zvi specifically, and quite a few other similar truth seekers, at helping me better understand what I little (I think) I do.
If anyone is making choices to be poor, it's people in first-world countries. I can more easily buy someone living in SSA is poor not by choice.
Freddie de Boer wrote a post about this exact thing. Subscriber only, unfortunately. "Hard Work for My Kid, not for Your Kid," 7/15/22
Where does it say that the cash transfer study happened in Chicago? A quick skim of the paper/Twitter thread doesn't yield anything more specific than "US individuals," but I might have missed it.
Also, they report median income as $12,336 ($1,028 monthly, pg. 16), much lower than the Chicago median of $34,000.
This sounds somewhat similar (but not quite) to something called Contingency Management interventions. It's a type of intervention where money is delivered dependent on a (objectively verified) behavior occurring, and money is withheld if it does not occur. There are a couple different variations to this, but that's the general idea.
Summary link: https://www.sciencedirect.com/science/article/pii/S037687169900071X?casa_token=ZpxGbFB0HeUAAAAA:7XlJZIUr9vMYj5HSSyXiwdpbtsWg9PsDLoujnkmcLpB4kwEgdBkEQMMgPDI9yLL3hFeADF0kH1c
When done effectively, this stuff is almost miraculous, across a variety of areas such as: reducing substance abuse rates across types of drugs (cocaine, cigarettes, benzos, etc.), increasing medication adherence (e.g. Aids treatments), increasing physical activity, decreasing homelessness, increasing employment, recycling, etc.
My PhD was in this area with one of the leading researchers of the field, so happy to chat more if you're interested for EA related stuff.
Not for EA purposes, but if there's ways to use this to improve potential government policy (e.g. for drug treatment or homelessness) then that is relevant to my current interests. I'll try and check it out.
Oh looks like it's gated.
I can e-mail it, unless you know another way to facilitate sharing?
Also, related, a few months ago I heard California wanted to implement a CM program for substance users, not sure at the current state of the program:
https://www.npr.org/2021/08/26/1031220835/california-bill-treatment-addiction
Yep, email is good.
This outcome really butts up against my strong presumption that first-order effects dominate over clever 'but-maybe-doing-positive-thing-will-backfire!' second-order effects. The vast majority of the time when people make such objections they end up being wrong.
I'm kind of cautious about updating much on this study though. Given that our outcomes here are kind of low-resolution (we don't actually know how their budget changed, and we can't firmly distinguish between 'bought $4000 of extra cigarettes for my extended family' and 'bought a $4000 car to replace my clunker I have to repair every month.'), it's really hard to be sure we're seeing any given narrative. Maybe everyone invested in durable goods like better cars, and feel bad because those cost more than $2000 dollars and they now have another payment. I suspect there are dozens of possible stories you could tell that fit this data. Who knows?
At this point, I still suspect that this study is wrong and won't replicate. It just doesn't seem like a strong enough data-point to push my prior of 'giving people money helps them' below 50%.
I grew up poor, with mostly irresponsible adults in my life, and for me this is an unsurprising result.
In my family had my stepdad received the $2,000 windfall he would've quit his job, lived off the windfall, and then found a new job when the money ran out. He probably would feel worse off for it. He wouldn't have used the time off on any kind of self improvement, but rather indulging on drugs and alcohol. He'd also probably feel regret for not having spent the windfall on something lasting.
A $500 windfall would probably not be enough to quit working over, it would mostly just go to drugs and alcohol.
Relying on self-report for where the money spent is fraught. People will say they spent it virtuously because they fear it'll be taken back if they say it was spent on vices.
I see that the paper considered the frittered-away-on-vices scenario, but their top reason for dismissing it was the self report on intended spending:
--------------------------
We next consider the possibility that UCT recipients spent money in ways that ultimately
harmed them, for instance on recreational drugs and alcohol (Banerjee and Duflo, 2007; Brune
et al., 2017). To test this, we examine Figure 4, which graphs participants’ intended uses of
their UCT and survey payments. We see that both “lotteries and gambling” and “recreational
drugs, tobacco, and alcohol” were mentioned very rarely. In fact, the former category was
mentioned by only a single participant, and the latter was mentioned by none.
--------------------------
They considered that participants may be lying and so searched the transactions for '“alcohol,” “liquor,”
“beer,” “wine,” “bar,” “tobacco,” “cigarettes,” “cigars,” “smoking,” “cannabis,” “lottery,”
“lotto,” “Mega Millions,” “casino,” “gambling,” or variants thereof.' They average daily spend on these was $0.02 for the $500 group, $0.04 for the $2000 group.
That's a suspiciously small number. Less than a single beer or a pack of smokes spread out over a month.
The researchers don't seem to understand how such purchases show up in bank transactions. AFAIK the bank record just has a short version of the business name, not any details on what you've purchased. Few of the places you'd buy alcohol from would have these words in the business name. They're going to be in grocery store transactions, gas stations, etc. Even bars don't usually have "bar" in their name. And if you're buying illegal drugs, you're just going to use cash, so it wouldn't show up in bank transactions.