Continuing Conversation... Chris Blattman on Cash, Poverty, and Development

EconTalk Extra
by Amy Willis
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Chris Blattman on Cash, Povert... Sam Altman on Start-ups, Ventu...

Roberts returns to the topic of development this week in his conversation with Columbia's Chris Blattman, advocate of a radical approach to fighting poverty.

Share YOUR thoughts on this week's episode...Join the conversation in the comments, or start your own offline. We love to hear from you!

Check Your Knowledge:

1. Blattman emphasizes the importance of regular cash transfers, as opposed to one-time grants. What particular obstacle does he believe this will overcome, and to what extent do you agree with him?

2. Blattman asserts that despite their promise, cash transfers are still only a "band-aid" solution. What does he mean by this, and what else does he argue is needed before development can really take off?


Going Deeper:

3. Roberts admits that he gives money to poor people even if they are going to spend it on drugs and alcohol. Use the economic way of thinking to either defend or argue Russ' penchant for doing so.

4. Roberts and Blattman briefly discuss Mexico's Opportunidades program, which features conditional cash transfers. How does this program compare to Blattman's recommendations? Which has the potential for more long-run efficacy, and why?

Extra Credit:

5. In 2011, Roberts discussed microfinance with Mike Munger. Contrast Munger's more positive spin to Blattman's. What are the most compelling arguments offered by each? To what extent can microfinance improve this lives of the world' poor today and into the future?

Comments and Sharing


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COMMENTS (2 to date)
Mike F writes:

1. Blattman seems to think that regular cash transfers act as a form of insurance that would increase a poor person's risk tolerance, thereby increasing their willingness to invest a higher proportion of their capital in favor of consuming it. For instance, a one-time transfer of capital in an area where property rights are not respected might induce you to consume your capital as quickly as possible to avoid the risk of it being stolen. But knowing that future transfers were coming, you might be more willing to risk your current capital in tools or training that might not generate returns. Maybe a better way to express it based on points he made later in the podcast is that it tempers a person's risk tolerance. Having future contingent transfers would likewise reduce a very risk embracing person like a young Liberian man's appetite for risk by providing a trade-off for behavior that might multiply his current capital at great risk to himself. In other words, having regular transfers might reduce the variance in risk appetite between the lions and the lambs in a given society by giving some increased security to each.

2. Blattman says cash is just a Band-Aid until things like firms, banks, and efficient markets develop. If that is the standard, then all aid is just a Band-Aid. Nothing but time will allow all that to develop. Ultimately, cash is only as useful as the stuff available to acquire in the country. So some threshold amount of cash has to be placed before certain products and services would have any chance for profitable use in a particularly impoverished country.

3. I thought the exchange around this point seemed a little out of character for Roberts. He seemed almost self-congratulatory for his state of enlightenment in treating a needy person as an adult with full responsibility for his own decisions. Maybe I read a little more into it than he intended, and he was just trying to be explicit about his reasoning for what would undoubtedly be considered a controversial stance. I wonder, though, if he was liquor rich and cash poor whether he feel as good about a decision to give liquor to a man down on his luck in lieu of cash to make his own decision. I think that would be a little more difficult to justify. In general, I agree with his point that giving a person the power to make their own choice is a more respectful gift than giving him the opportunity to appease one specific need on your terms.

4. I don't recall a lot about the Mexican program specifically, but my wife and I have a one-family aid program that sprung up from a series of problems associated with an adoption from a central American country. These are much wealthier countries than the African countries discussed on the podcast, so the aid required to make a difference is much more substantial. On early visits, like a lot of people, we tried to control the ability for any aid to be diverted to vice spending. In kind aid like diapers, formula, clothes rather than cash. On later trips it was used laptops, toys, small appliances and medical devices. Toward the end of the visits it became mostly cash even though we knew some of it would be spent on fireworks, cigarettes and fashion items. Now we just send cash. It's not really conditional, but we aren't really sure how much progress it generates. Certainly, they don't ever seem to need any less. I believe that the aid we provide has probably displaced other aid that the family had been receiving from other avenues. Extended families and friends seem to self-insure down there, help each other out when misfortunes hit. While I feel confident that the money has found a much higher marginal value down there, I feel less confident that it is providing any path to a better life. We may just have shifted some dependencies around.

Peter Cheer writes:

I found this program very interesting, partly because I have worked in Ethiopia and Kenya.

At heart I am a liberal minded lefty and listen to Econtalk as a way of challenging my natural inclinations. It struck me that the findings of Chris Blattman about how individuals formed into groups to get the money and how it was spent would have been strongly welcomed by nineteenth century anarchists like Peter Kropotkin (en.wikipedia.org/wiki/Peter_Kropotkin). Of course there are arguments against the views of Kropotkin and the results Chris Blattman found did come from a limited number of small projects but... it makes you think.

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