People are Fundamentally Good. Evidence – Cash Transfers

In development is it all to often that you find individuals who throw up their hands and think that all of their efforts and everyone else’s efforts are helpless. In my own experience this is almost always the result of a lack of understanding amongst individuals. Cultural differences are often the root issue but aid workers always will tell you understand the culture. Yet they come to the conclusion that the poor aren’t making the right choices and are irrational. I guarantee you that these people do no understand the culture that they claim to. As evidence, unconditional cash transfers.

Unconditional cash transfers are the flavor of the decade in development. These typically give cash grants to individuals along with some technical training. The purpose is to inject cash into poor households to allow them to invest in themselves are increase productivity and in turn income and consumption.

If you have a negative outlook on people we would find discouraging results like increase in alcohol consumption, frivolous spending, and no long term impact. We see the exact opposite. Cash is used to procure productive assets and there is long term impact. Many studies also have found that there is no increase in alcohol consumption which is often blurted out by doubters (though they have nothing but speculation).

Interestingly, a similar experiment happened by accident in North Carolina where Native Americans received cash payments from a newly built casino. The mental well being of the children increased as well as education. And alcohol consumption went down. These results should not be surprising at all if we believe that people want to be productive, add to society, provide for their families, etc.

The over arching lesson for those in development is that people are self-interested by the same things we all are. We are created equal after all right? If the poor are making decisions that you don’t understand then you haven’t done enough psycho analysis or challenged your assumptions enough to make sense of the situation.


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