What Happens when the Poor Receive Cash

From the NYT.

Even she hadn’t expected the cash to make much difference. “The expectation is that social interventions have relatively small effects,” she told me. “This one had quite large effects.”

That’s because most social interventions don’t transfer as much value to poor people. Weekly counseling services may cost $100 per visit for the government to provide, but how much of that $100 in value is actually transferred to the poor recipient? $10 maybe? They get a lot more by just receiving the full $100 to do with as they see fit.

She and her colleagues kept following the children. Minor crimes committed by Cherokee youth declined. On-time high school graduation rates improved. And by 2006, when the supplements had grown to about $9,000 yearly per member, Professor Costello could make another observation: The earlier the supplements arrived in a child’s life, the better that child’s mental health in early adulthood.

Professor Costello and Professor Akee don’t entirely agree [that increased community services had a big impact]. They think cold hard cash made the real difference. For one thing, Professor Akee says, outcomes started improving as soon as the supplements began, before many of the communitywide services went into effect.

Your well being is correlated with how much value you control. Couple of lessons:
1) Conservatives have a tough row to hoe in convincing people that government benefits don’t help recipients.
2) If the government sincerely wants to offer a benefit, they should transfer all of the value to the beneficiaries.