In 2013 Daniel Handel, an economist with USAID—the U.S. government’s main agency for foreign assistance—had just moved to Rwanda when he heard about a charity that was testing a bold idea:
Instead of giving people in poor countries, say, livestock or job training to help improve their standard of living, why not just give them cash and let them decide how best to spend it?
Handel had been mulling this exact question. Aid programs were spending enormous sums per person to boost poor people’s income less than the cost of the program. At this rate, Handel thought, why not just hand over the money to people directly? This program called GiveDirectly was doing just that.
So Handel went to his bosses at USAID’s Rwanda office and proposed an experiment:
Take one of USAID’s typical programs and test it against cash aid. For the comparison, he selected a program to improve child and maternal health in Rwanda by teaching families about nutrition and hygiene.
A pool of families from nearly 250 villages was selected based on typical criteria and randomly assigned to one of four groups.
- Those in the first were the “control” and received no help.
- Those in the second group were visited by the nutrition and hygiene education teams.
- Families in the third group were given small cash grants by GiveDirectly equivalent to the per-person cost of the nutrition and hygiene program, an average of $114.
- In the final group, families got a much larger cash grant of around $500 – a figure chosen because this was the amount that GiveDirectly estimated was more likely to make an impact.
Following the experiment, the government released the results of the first study in the series.
The experiment found that the program met none of its main objectives. Teaching Rwandans about nutrition did not improve their nutrition or health. Neither did giving Rwandans the cash equivalent of the cost of the education program — about $114.
“Our hearts sank.”
The program’s focus on trying to change behaviors is one of the world’s major strategies for ending malnutrition. And, at least in this example, it had failed to achieve any of its primary goals.
A year on, the children who had been targeted by the nutrition and hygiene program were no more likely to eat a better or more diverse diet, and no less likely to be malnourished or anemic than children who had gotten no help at all. But providing a much larger cash grant of about $500 did make some difference.
Supporters of such “cash-benchmarking” exercises are heralding this particular one as a milestone. For years, anti-poverty advocates and researchers have complained that the U.S. government doesn’t do enough to make sure its aid programs actually work. “But when you talk about giving money to people straight up, with no conditions, people at USAID look at you kind of like you’re a crazy person. There’s ‘an inherent sense’ that they can’t be trusted to spend it wisely.” said Daniel Handel’s associate James Carbonell.
- In this case, people who were given the cost-equivalent grants used much of the money to pay down their debts.
- It remains unclear what, if any, material changes USAID is planning to its nutrition efforts based on the study’s findings.
- At the time of this writing (FEB 2019), USAID remains reluctant to discuss the experiment and did not grant the authors of the NPR story permission to speak directly to Daniel Handel about the results.
- Did the authors of the study Fail?
- Would proving that cash-equivalent grants were as beneficial as the education program have qualified as Success?
- Or did the authors succeed by proving that simply handing recipients money without any stipulation was the wrong way to achieve a particular goal?
- Could the authors conclude that poor people really DON’T know “what to do with the money”?
Heavily edited from an original story by NPR.
Copyright 2018 NPR. To see more, visit http://www.npr.org/.
The Planet Money story: https://www.npr.org/templates/transcript/transcript.php?storyId=214210692
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