« Freakonomics Radio

146. Fighting Poverty With Actual Evidence

2013-11-27 | 🔗
It's time to do away with feel-good stories, gut hunches, and magical thinking.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This podcast dynamically inserts audio advertisements of varying lengths for each download. As a result, the transcription time indexes may be inaccurate.
On a reason. Podcast. We asked this question: would a big bucket of cash really change your life? The episode was about a nineteenth century land lottery in Georgia. For the winners of this lottery it represented, substantial windfall. We wanted to know how that windfall affected the winners and, more specifically, how it affected the winners, children and grandchildren, in other words, did the winners just spend the windfall or did they invest it somehow helping their future generations live better. Here's white blankly, one of the economists who studied the gene. Gillian lottery. We see a really huge change in the wealth of the individuals, but we don't see any difference in human cap. We don't see that the children going to school more, if your father
on the lottery lost the lottery. The school attendance rates are pretty much the same. The literacy rates are pretty much the same as we follow their sons into adulthood. Their wealth looks the same. Statistical sets whether their father, one the lottery, lost, the lottery. Their occupation looks the same: the grandchildren, aren't going to school more. The grandchildren are more literate So what we learned was that future generations of the winners didn't really benefit now. This is just one case study from Anti Bellum. Georgia can, definitively answered the larger question which what's the best way to help poor people stop being poor This is, of course, a timeless question, but lately, thanks to a lot of new philanthropy and philanthropy research, it's been discussed with a great intensity and its given.
Rise to even more questions like he's giving money directly to poor people. Perhaps the best thing you can do what about giving them? Others free schooling or if you are a farmer in Africa a free animals or equipment, or should you not focus on, bring them anything at all, but rather try to build a better market economy to help them get better jobs. Now, as coincidence, would have it, I recently had the opportune need to moderate a discussion on the very topic of how to best alleviate poverty. This was presented by on profit, called innovations for poverty action. It took place in front of a life audience here in New York City, one, this episode of economic radio. We invite you to listen. I'm fine,
from W. And my see this is free economics. Radio, the pot casket explores the hidden side of everything. Here's your host Stephen Governor, So my name is even debonair- I am the moderator for this event, which is called using evidence to fight poverty and is presented by innovations for poverty, action or two guests. Guess Sardine Carlin, an economist at Yale whose president and founder of innovations for poverty action sailor whose professor behavioral science and economics at the University of Chicago. So I'd like to give a very brief background of the two of them. Failure will start your Dick Richard sailor is one of the pioneers, perhaps the chief pioneer of the discipline that has come to be known as behavioral economics.
Which is a blend of economics and psychology, and something that most academics are not known to employ, which is common sense, and it really did revolutionise the way that a couple generation of scholars and writers and others have looked at human behavior writ small and writ large in Vienna, honestly very grateful for what you ve done out mean to get on machine you're off the map. But it's true dick is the the co author of an excellent book called nudge, improving decisions about health, wealth and happiness, which shows how behavioral economics can be used in the real world. Isn't it visor to the british government's so called nudging so called meaning they named the unit after this book and this nudge unit practices really well. Sailor preaches on many dimensions. His non academic interests include per his website Gulf and fight wine, although not I should know fine Gulf or just any wine, so the golf can be of any.
Above all it needs fine. The wine must be good Dean Carlin was headed toward a hedge fund career when you spent three years in Salvador working for a micro loan organizations. Anybody need to know what a Microloans organization is. Don't be shy avenues, so you surprise to find that this organisation was not very good at collecting data to see. If in or How well this system worked, which meant that a lot of decisions, therefore being based on hunch, maybe ideology rather than evidence. Dean went on to graduate school at the University of Chicago where he became a tea. For none other than Dick sailor, and in two thousand and two he found it. Innovations for poverty action, which has grown to more than nine hundred people in fifty one country's its mission, is to quote discover what works to help the worlds.
Or primarily, by using randomize controlled trials or trials real trials in the real world, and then to get those solutions put into play two years ago, Dean CO authored a book called more than good intentions. How a new economics is helping to solve global poverty. So I invite you to welcome the two of these findings Thank you if we could begin the very beginning with the title of this talk, which is using evidence to fight poverty. When I saw the title, I have to admit my first thought was this. I remember the time I first heard the phrase evidence based medicine and I looked at night. What the hell other kind of medicine is there, and then you realise that there is a lot. So a great deal of medicine it turns out is based on a kind of hunch, and you know feelings and in past experiences it may or may not be as real,
We wish so as it turns out. Economics has a lot to say about this by now and em. Presumably you may have something to say: let's start with you, Dick about the power of and need for evidence generally, if one wishes to solve problems and where you see us being in the in the long arc. One thing this question: otherwise we have, as you can ask similar question about behavioral economics. In fact, Herb Simon once did and ask. Why do we need the phrase behavioral economics? What other kind of economics could there be, and we know there is another kind of economics that actually doesn't rely much on evidence because they know stuff. So economists know a lot of stuff The problem is a lot of it is wrong. So what evidence based economics or evidence based policy is about, is partly modesty of
thinking you know, all the answers to all the questions and curiosity and a willingness to collect data. When I'm over in the UK early on in these meetings, I would always say we can't do evidence based policy without evidence, and that became one of our monstrous seems obvious it does any add until you think about the way. Most policy is done. Let's talk about poverty, fur little army be the rest of our time. It strikes me as a bit odd that here we have two economists, please don't know what your position is going to be on this, but I know you're is deemed to one in one point: ex economists, who feel that the way or a very good way to fight poverty is too in one way, give stuff where money to poor people, ok,
So we are used to hearing the argument from economists that, if you want to help poor people, you build a better, freer, more open market and maybe ensure that the governments are you know. Corrupt is this. A revolution is an anomaly. Is it's just you out there who believes this will give us a context of economics or X, thought and poverty alleviation Senor you hit unkind of two opposite ends of the spectrum in terms of ways of tackling you. No one is crow macro level interventions which you know in terms of institutions and fighting corruption, and things like this and the second is A more and more micro level, which is where a lot of government programmes are a lot of non profits are working on the ground, and so that's really, where our focuses in its not to say that these echo level. Issues are wrong or right. You know, I've earned opinion about that, frankly would have. We can do to improve property rights and the use of dangerous goods,
but meanwhile lose a lot of money, a lot of resources, a lot of efforts being spent on the ground for direct delivery of social services and and that's where we're focus. Is to say? Ok, how do we have to improve that? Had we improve the way those problems are designed as Carl and sees it. The first step in improving how those programmes are designed is together evidence as to what works and what does, for instance, I would work to just give a bunch of cash directly to people in some poor villages in Kenya. A nonprofit called give directly recently did just that. They went into about five hundred households and gave them money in electronic form stored on a cell phone, and they could spend that money as they please no strings attached
now this is what is called an unconditional cash transfer, that is, you dont, have to agree to get job training or send your kids to school in order to get the money which is have some programs work. In this case, some families got about three: four dollars and others got about eleven hundred a huge amount of money, you're two's worth of income? Some people got the money all at once. Others got it in installments, the idea was to have a few variation so that you could measure the effects of the giving lump sum verses, instalment, big, some verses, smaller and this included having a control group near by poor households who didn't get any free money. This experiment was evaluated by innovations for poverty, action, dean, carbons group. So what happened as you would expect the money goes into many different directions, which is one of the reasons why it is not the question asked, but why one of the things that were
instant. Seeing is this type of programme compared to a programme that is more targeted in equal value of transfers, but so, for instance, providing people for goats and food where it's very focused on saying no work, rather than just give you money for anything. And having some that maybe go to housing structure whatever it is you choose instead, what we can do is work. Focus on providing you a set of assets that generate income, and then let whatever you want with extra income, okay, so its move, back one step that level of flexibility to maximize into that's one of the tests that we're setting up in other settings is this asset transfer, rather than ass transfer between economics, one or one. We learned a lot of basic things about why cash would not be as beneficial as something more if people. Low information about how to improve the health around them. Cash is not going to satisfy that. So this unjust
It makes one around that says. The cash ranchers might be great for direct alleviation of poverty in a very direct level and its efficient, but there might be other things which are have added benefits beyond the mere value of that transfer? And so that's what we need? start seeing more up is wondered. When is that right or one? Is that just combo jumbo that fit our economy no one's rank, but doesn't actually translated somewhere. You can think about. Part of this is just understanding why people are poor, which seems like a very obvious question. Therefore, because they don't have enough money, but why is it that they don't have enough money? So do they lack education today? Lack willpower to they lack resources I mean, is it does sound like a like a dumb question? Of course we know what poverty is, but actually middle and it's gonna vary. So somebody on the south side of Chicago being poor may be very
different. Then a peasant in some african village and the same interventions won't necessarily work. Do you the results of this paper. Or can you be a blind for us now I dont know if it's ok so Dick before we get to the results, and that say that stick let's say I come failure and economic sage, and I want to join at your feet. And I say, professor thaler- we have a project here or Dean has a project here where we're gonna give a bunch of families a few hundred families, a bunch of money cash to do with what they will. Here's are living circumstances. They live in this kind of villagers what they then cannot by with a de la you know, and what they can and cannot by. Let's say ranges from farm animal on the productive. Until let's say you know, gambling in and
call on tobacco and prostitution if you're against that, on the other and against all of those. On the other hand, how would you think that people in that circumstance which spend a windfall. Some of each country, the West Gimme a Gimme, a media and are giving me. Let me rephrase the question, but hey, I'm a donor and either thousand dollars and I want to spend and Dean says I can
Take your towels in dollars and distribute it to poor families in Kenya worth one thousand dollars goes a long way and I'm just going to give it to them and they're going to do what they want you to do. My intuition is that, in some cases that will work great when people have a good sense of how to make use of that money in other situations, if you give them a for goats and fertilizer, and they wouldn't know that spending the money on for goats and fertilizer is what will triple their income then that wouldn't work as well. So that's why I'm not willing to go out on a limb. I understand. Okay, so very brave of you, I'm sending asked me who's gonna, be president in two thousand. Twenty I'll tell you, but you know these hard questions, so
Dick who will be president- and I was gonna- give you he doesn't. Sixteen I wasn't gonna make too is Steve. Lovett, Steve Levitt, dean. Ok, if you could then talk a little bit about the results of the study than what what did? What did you find? so they they actually didn't find money going into alcohol was a pleasant surprise. What is released, All that money- I don't know I'm fine line ironically, for in one other study, I know of because it's one of and Bolivia that we recently they found the giving in really rural areas, hunters in Florida, or a kind of communities in world politics, people. Access to a savings account did actually increase alcohol consumption because that was basically them in sub oratory thing. People could do is take a canoe writer, now we are to get a more expensive bottle of liquor, and this was something people saved up for
even in those vehicle actually debated at so very much. The spirit of what they are saying, There is going to depend having that in this context, what they did this and with give directly, they did find things a lot of housing improve it's a lot of investment into into income generating type of activities with the main thrust. When they saw the money going into ceremonies. Emily was also in part, Ok, let me breakin here and give a bit of english translation since you're, doing a lot of economics jargon about investment into income, generating active and so on. What was the result of this experiment in Kenya? Were poor people were given big sums of cash to spend as they wish good news. Fewer kids went hungry farmers bottom, Our cows and started earning more money and scipios of these cash grants apparently didn't blow. The money is not too much of it. On things like alcohol and gamble,
can you talk a minute about the characteristics of the household or the person who gets the money that uses it most productively with? We ve all heard that if you give aid to women, women tend to take care of the family or a bit more than, if you give it to men, they'll do it sailor would do with it. Can you tell us anything about that so striking thing that is, I've seen a lot of studies which try to look at that and find either that it doesn't matter word, like you just said: I've never seen a study that can give you two men is better than no me to him. A deafening seen ones that go against the conventional wisdom. Unfounded learnt that it didn't matter in some that finds that the women are going art new, put more money into the things that the health and education, for instance, of children. But more often than not we're actually surprised in finding that it's not doesn't matters much, I think, there's a lot live within the household is a little bit of a black box for how things are quite a simple as we locate suspicion of the black Box. Let's talk about, let's bring it back up to talk about evidence a bit generally, you know the inputs.
Here you know the families where you find them. You know. The money that's being given to them and what form and there's some variation in that? What about the out? But what about the spending? How do you know what you know about how these people spend? honey when they, I would say in the Spirit of programmes, is that we have seen strong, But it's a says you can. I just ask people what they did with the money. So we did recently- I don't remember they don't know, but I don't even know the answers. We have a study in the Philippines that were about to release about how people spend their money from micro, credit loans. Where here we ask people, what did you do with the money and we asked them in a way that allows them to hide the answer and we asked them in a very direct way. And we asked them to hide the answer in its revealed another kind of secret way that it can tell us very much. Afternoon say well, yeah did use it to pay down other that em used to pay for household expenses where these are losers was to go into the business.
But when we actually asked a survey in our Serbia about all the outflows just tells but everything you ve spent in your life for more than twenty dollars, and we have a control group, so we can compare draw when she found all the money, went into the business which is striking. Given The perception of the money is that it went to pay down that this is not unique to undeveloped countries. So for years people have been asking. Economists, look when you get people to save more and therefore we can plan. How do you know they? Just don't worry the critical bills and the answer was we? Don't we Well, your whole smart plan is based on the survey No, I mean we know, but there's a happy ending here so hold on. We knew that
their account else's? We're going up, but we don't have access to their round sheets ran along, comes rushed Jedi in John Friedmann and a couple of danish economists and in Denmark it turns out. They don't have much concern about privacy, which is great for many sectors and they have a wealth tax, and so they were able to run the study. I've wanted to run for twenty five years and very good news. Networks. Networks, basically, is all new saving the it. We should say you kind of left our view automatically unroll people into some saving plan and escalate their contributions. Ninety percent, the people just follow along with whatever you're doing and their saving is just goes up by that amount.
Fault is not an, whereas the old model was you had to opt in to these foreign lands are what no one other thing. Those really ensure that to those. If you drew their attention to it, then it did crowd out. So if they were keenly aware of what is happening with the increases in the not so it really makes a huge argument for subtle nudges that just shift the way the behaviour will happen. If you don't do anything else that passive increase the level of the big I'm concerned. When I read the study about that, they give directly intervention where these these people are given money end the IP results show that they spend. Let's call it productively that productive spam. Thing is based on self reported spending. So if you come into my house and you're these nice, american or british or nigerian scholars- and you say- hey- you- ve been chosen to receive a thousand dollars in cash
spend it. However, you want and then come back six months than twelve months and in eighteen months or years how'd you spend it, I'm they say. Oh my bought account. I sent my daughter to school and I took her to the document you sick and I bought better food. That is how how do I mean we ve all been trained to be, I think, rightly suspicious of self reported date on and on many levels, so persuade me that is three three One is that this is that the way over control group so is so if you do have Under reporting systematically of expenditures you haven't on both treatment controls, you have two then tell a story: that's it would maybe right which says no. Concern about biased cell
putting more so in the treatment versus control. So the second thing that often happens is exactly the reason, often for independence. Every study I know, does not actually do this where there's no stated connection but a lot of stuff. You do. I know that most of my work, the survey work, is done independently of the intervention, so the surveyors are coming representing themselves as workers that ok or from a university and not no stated link to the intervention so that there's no association that says. Oh, I need to over report to you. I understand that, but I don't want to be the head of the household who, when the people who gave me the man, you're, someone who knows the people gave me money come and say what you do with the money. I don't want to be the one who says. Oh, I had a fantastic month of gambling and drinking and smoking, and I bought some prostitutes. Also lets struck, raise your hand if you have cheap,
on your spouse or significant other in the last six months. That's so so here is a prime example of how we have. I don't know. I don't think they did this and they are not light was raised. As you know, we have I've dine in Uganda question about cheating on your spouse and it can take happily how elicited and we actually found a treatment effect, that was from a study where we found Intervention lead to more cheating So how was it you ask it this way, you say sorry, loot, arrogantly heads, I hadn't ass, you, you, don't ask it of any one: individual, ok, you know- I get the measure whether you cheated, but I cannot. I can answer the question for the for the on average, so we ask, we ask, is called the technical. This realization, where you say, Sorry list, Mr Adam, is it where you say give me I'm gonna name three things and I want you and you do this for half the people, you say tell me yes or no in total. Just how many? Yes don't tell me each one just coming in total, I own a bicycle:
I have at least three children. I was born in the city that I can now live in and half the people are just told how many those statements are true, the other half or given the same three statements and then the fourth is I cheated on my wife. Again, don't tell me- which ones are yes or no, just tell me the total weight and used some unseen everywhere about getting a four and then you just attractive an average of two point? Seven into point to that means that fifty percent of people are telling you they cheat on their life. So we did this and we actually deposit. So there are ways of getting these things, but I would say there is a third answered. Your question, which is A lot of sittings, we are looking at an active administrative data as much as we can to find out due to observe outcomes. We're looking at so, for instance, there's a savings product that we did in Uganda with schoolchildren where we actually taskforce there's no self reporting on here, where we actually testily kids, numeracy and literacy, and we found a criminal act, and there's others where you can test like doing clean water and you actually test the water.
You can use objective measures like that, and I will not. Every study can do. That depends on what we're doing coming up on for economic radio Richard sailor is a big fan of small nudges to move people in the right direction, If you say most people and watches Gunnar, paying their taxes on time, and it's going so that new parts that were building you can get the take up rate up buys what five percent. Can we take questions from the earnings? What's the evidence on what helps people get out of extreme
poverty, from W and Y see. This is for economics, radio, here's, your host, Stephen Governor Today's episode is drawn from a conversation, I recently moderated with Dean Carlin a Yale economist who runs a nonprofit called innovations for poverty, action and Richard sailor from the University of Chicago he's, considered the dean of behind Ro economics failure is also the co author of the book called knowledge which is about using cheap syn an easy ways to encourage pro social behaviour weather
saving more money for retirement or increasing organ donations or using less energy. Some of sailors ideas have now been adopted by the british which now runs a nudge unit and more recently, by the? U S, government. I asked Taylor to tell us a success story, Well, probably the best example of that one of the very first initiatives in Britain was a meeting with some guy who's in charge of collecting money from people who owe money other taxes, most people in the UK. Their taxes automatically to very Tehran withholding were wild, but a few of private business
you drive a cab warrior of whatever doctors, what we would call schedule seeing come here, then you have to file a tax return and come up with a lot of money. And some people are later, they were writing letters if they would send one. That's another letter and then turned over to collection agency, which is very expensive, and the team just started experimenting, running different letters. So there's a simple trick from Bob Gilles DE the great social psychologist, author of the book, influence that if you tell people truthfully, most people pay their taxes on time that helps the little bit. If you say,
most people in Westchester County where you live painter, I'm making this up pay pay their taxes on time that helps more, if you say most people and which is to counter paying their taxes on time, and it's going for that new park that were building that. So you can get the take up rate up by as much as five percent and what part of the psychology he is doing that each part MEG in all the positive is heard mental holidays Norman. I mean it social norming and then making it local em in there. You know it's like saved more tomorrow strategy devised help, people say more, I, through everything I knew it that so
doesn't make very good psychology, because you can't sort out which ingredient in all you taste, some dish, a restaurant tastes great. You don't know whether it was the little bit of time that they put in their that really right. It's of the ingredients, so I mean that we we have. Very the letters, and you know that then they keep fiddling with things like a little hand note on the outside of the letter, helps and gave us a sense of vast scale of improvement. What running one of these experiments paid all the expenses of the team for the first three years and a whole nudge too, not just the tax nudged yeah. So me, these experiments make money so because sending out
All written letter costs exactly the same amount as sending out a rude letter that doesn't explain how to go about paying off your assuming that good writers, cheap. Higher resuming the bid raises two right. Good writers are easy to that. Sick yes, please, hi, I'm Susan Davis, with Brac team. We worked together on the graduation programme- and I was wondering, can you say what is the evidence Try now looking at Social protection systems, whether its unconditional cash transfer, conditional cash transfer or something like graduation. What's what's the evidence on what helps people get out of extreme poverty best fastest? So let me just make What citizens referring to a series of seven evaluations, that EPA has been doing in one of the few
The idea is that we need to get the eye just having one study in one place and instead have collections of studies that speak to each other and help us understand the robustness of a particular approach in this graduation approach. Apathetic quota will, as you can't be here, quotes in the in the bud is a model that says we're going to work with the altar poor and help them could graduate out of poverty by providing them, goats, vitamin training and how to manage goats and go to just an example. There's beekeepers and in Ethiopia, a cow in west angle different in different depending on the context, but it's some sort of it's it's bundles of food along the way, so that people do not turn round and sell the acid in order to eat. It's often some healthcare.
It's a lot of monitoring and help along the way in order to see that the income is generated in and sustains and said, this package has proven to be fairly successful across most of the sites, but not all that's one of the things we are now working on enshrined what, but it has not been compared and in a very simple horse race to cash. In all of the studies so far the Harrison has been to control, but we do not know the answer to the question that Europe basically asking as well in Susan's posing, which is well. How did you compared to cash, and that is something we are very keen to do in terms of the phase two of these studies that are helping to try to tinker on how best to do this? Now? Yes, in the green
hi I'm alongside us from? I am actually a graduate student from sea, the University of notes. I definitely value good quality improvement agents. My question ease regarding I mean I know that these intervention, that one of the biggest challenges of these interventions is killing them up. So I would like to know the the insights from both of you. What is the percentage of how easy it is to, after you have a good internet going through the government, or, do I don't know any seditions a? How do we get it up very question overthrew we were so This is. This is exactly why I think the second mantra that you use for the nod unit is really applicable here, so you use this month will make it easy, and an you mean this in the context usually of how we make it easy for people to do things. Same exact principle applies to scale up. How do we make it easy for governments to take make the right choices? Had we make it easy for Ngos to choose the right thing, and this has
locations unto levels, one is it: it doesn't. Media implication that type of evidence we collect is one of the reasons for running randomize trials. It's? U can the fact that you can put up a simple barter makes it easy for people to get it like. Ok treatment is here. Control is there. I see the impact the minute. You have really fancy econometrics with locked his greek letters. You are not making it easy for policy makers to understand and decipher the what the lessons or from a research based great point. I would like to thank you for Your attendance and you're very kind attention, and please join me in thanking Richard sailor and Dean Carl. So, as you heard, the jury is
yet in on whether giving cash works better than giving stuff or if either of them is a good, systematic way to address poverty? What dean Ireland and Richard sailor do know, is that if you wish to even stand a chance of solving a hard problem like poverty, you first need evidence of what the problem is, and how some solutions might work or not, work you dont need hunches or ideology or old wives. Tales need evidence now at this moment a good bit of this evidence is being gathered, and what does that tell us about, say the wisdom of giving money directly to poor people? Well, it depends on a very sad.
Flying answer. Is it, but at least it has the virtue of probably being true on the next economics radio. Every year more than one million people around the world die from using our most dangerous machine car. But what of it? told you that we're safer now than ever and getting even safer data, certainly support that view. If you look at the path, fatalities on the roads, promote driven. It's an amazing success story, We ve got and safer on the road, despite all the distractions, that's next time and for economics, radio,
free economic radio was produced by W N Y, see and Dublin productions. Our staff includes David Herman, Gregg, resolves ski, at a cone. Borri Lamb, Susie Lichtenberg Increase Span in special thanks to Jethro, sank, ass innovations for poverty, action and city foundation. Our host for the event, which was recorded, live by Jim. If you are more frequent, onyx radio, you can subscribe to our podcast on Itunes or go to free economic stock com, we'll find law. The radio, a blog, the books and more.
Transcript generated on 2021-03-14.