A great way to help poor people: give them money

If readers give $10,000 to GiveDirectly, my wife and I will give another $5,000.

It’s Giving Tuesday, and Matt Yglesias—my former colleague at Vox and now author of the excellent newsletter Slow Boring—has organized a consortium of Substack writers to raise money for GiveDirectly. This non-profit organization does exactly what it sounds like: give cash directly to poor people all over the world.

The group is aiming to raise a total of $350,000, and I’m hoping that Understanding AI readers will contribute at least $10,000 to that total—please use this special link if you’d like to be counted as an Understanding AI reader.

If donations from readers total at least $10,000, my wife and I will donate an additional $5,000.

There are two things I like about GiveDirectly’s approach: it is extremely simple and it trusts recipients to know what would benefit them the most.

Here’s how Matt explained the program in a post last year:

GiveDirectly runs a few different programs, all of which are built around direct transfers. But today I want to talk about what I think of as their most basic work, what they characterize as their “poverty relief” program. Through this program, GiveDirectly identifies low-income rural villages in low-income countries that have the financial infrastructure to support cash transfers, and they give each family in those villages $1,100.

There’s a lot of foreign aid money and poverty-focused philanthropy out there, and very little of it takes the form of cash transfers. That’s not because we have incredibly convincing evidence that non-cash programs are better than cash, but at least in part because, historically, we had no good way to deliver cash transfers to low-income rural areas. Spending money on things like infrastructure projects or hiring doctors to treat people was more logistically tractable than putting money into people’s hands. But the rise of cell phones has enabled mobile payments systems in many countries around the world, including some countries that are incredibly poor and otherwise lack well-developed banking systems.

This technology is not available everywhere. But quite a few places do meet these basic criteria, and GiveDirectly is now running poverty alleviation programs in Kenya, Liberia, Malawi, Rwanda, and Uganda, plus other cash transfer programs in DR Congo, Nigeria, Morocco, Mozambique, and Togo.

GiveDirectly gives money to the entire village to prevent the transfers from becoming a source of ill will and contention, so they try to find a village where most or all residents are living on less than $2.15 per day — there are, sadly, enough such communities that the organization is not in imminent danger of running out of opportunities. In the villages, GiveDirectly staff use a combination of community meetings and door-to-door visits to explain the program and enroll participants, all of whom then receive $1,100 in mobile money. Why $1,100? It’s a little bit arbitrary, but that’s approximately the average annual expenditure for a household living in extreme poverty. It’s also a nice round number that’s easy to explain to donors. And it’s an amount that’s been studied before, so they can speak confidently about their programs, and I can speak confidently about them to you.

It’s easy to study cash transfers in poor countries because an organization can randomize which villages get money first. For example, a meta-analysis by Francesca Bastagli, Jessica Hagen-Zanker, and Georgina Sturge found significant evidence of positive impacts and little evidence of negative impacts (like recipients quitting their jobs).

Some recipients make long-term investments, like starting businesses or improving their homes. Others use the money for more immediate needs, like food or clothing for their children. Either way, a marginal dollar goes much farther in these countries than it would in a rich country like the United States.

Understanding AI has 42,000 readers, and more than 97 percent of you are on the “free” list. If you’ve found my newsletter useful, a donation to GiveDirectly would be a great way to say “thanks.”