A charity called GiveDirectly.com had a radical idea. It gave Kenyans money — no strings attached — in a randomized trial. What happened? People that received cash had more assets, less hunger, and more happiness than those that didn't get cash.
But wouldn't it be better to give goods — like food — than cash handouts? What if that money just goes to alcohol and cigarettes?
The answer is no, according to a new paper by the World Bank that looked at 19 studies to analyze the effects of "cash transfers" and the amount that goes toward "temptation goods," according to Vox.com. They concluded that 82 percent of those receiving cash actually reduced purchases of alcohol and tobacco.
"We have investigated evidence from around the developing world, including Latin America, Africa, and Asia," said David Evans and Anna Popova, who wrote the World Bank report. "There is clear evidence that transfers are not consistently used for alcohol or tobacco in any of these environments."
But to some veterans of the charity world, giving cash is worrisome. When NPR first reported on giving cash it spoke with Carol Bellamy, who used to run UNICEF and who said people might spend the money on things like alcohol or gambling.
But the results of the GiveDirectly trial show otherwise. People used the money to buy cows, feed their kids, and kick-off small businesses.
"We don't see people spending money on alcohol and tobacco," Johannes Haushofer of MIT's Poverty Action Lab who was one of the GiveDirectly study's co-authors, told NPR. "Instead we see them investing in their kids' education, we see them investing in health care. They buy more and better food."
There are some catches — people spent more on health care and education, but it's unclear if that will translate in the long run — if people will have less illness and have better school attendance, for example. But cash programs for women in Brazil show long-term success, and Paul Niehaus of GiveDirectly points to a study in Uganda where cash improved people's incomes years later because they had invested it in skills and small businesses. Niehaus told NPR that some of the biggest benefits are mental relief from the grind of poverty.
"There is this growing realization that being poor is really stressful, and that can make it hard to organize your life and plan and make good decisions," Niehaus says. "If one of the things that giving people wealth is doing is enabling them to feel more sane and more in control of their life, that could ultimately be one of the more important things."