Solve Poverty by Giving Cash

EconTalk had Michael Faye and Paul Niehaus of GiveDirectly.  They have been giving cash - no strings attached - to people in poverty.  Their argument is that the recipient, not the donor, is better suited to determine where best to spend the money.  One example was that many recipients in Africa would buy a tin roof.  Though this seemed like an extravagance, it was a cost-saving and quality of life decision.  Tin rooves are more costly but last much longer than a thatch roof, don't get infested with mosquitos, and are less likely to leak.  The other benefit of cash is that it doesn't undercut local industry.  For example, sending excess food to be distributed has the effect of bankrupting native farmers whereas cash will allow recipients to purchase more from local farmers and create local prosperity.

Russ offered the argument that if you give a man a fish, you feed him for a day, but if you teach a man to fish, you feed him for a lifetime.   He modified it a bit for our modern age.  Of course, cash gifts will raise the recipients' standard of living while the money is flowing, but once it stops, they will revert to poverty.  The goal must be to improve productivity.  The counter was that programs that sought to 'teach a man to fish' or whatever other skill have not proven effective.  Faye observed that a cash transfer in the United States showed that the children of recipients lived longer, had higher incomes, and attained greater education than the children of those who had not received cash transfers.  This was tracked over a 50-year span.  The pair argued that extreme poverty could be resolved through such grants at a cost of 1% of US and European GDP.

Though obviously some people will spend wisely and improve themselves while receiving grants, it is questionable if most will.  Big lottery winners almost always descend back to their pre-lottery lifestyle when the money is all spent.  Interesting and worth a listen.