
Researchers Find a Remarkable Ripple Effect When You Give Cash to Poor Families - pseudolus
https://www.npr.org/sections/goatsandsoda/2019/12/02/781152563/researchers-find-a-remarkable-ripple-effect-when-you-give-cash-to-poor-families
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chillacy
This just adds to a growing body of research showing how effective cash
transfer programs are, especially compared to traditional aid.

It pains me to see people going to stores to buy canned foods or physical
things for charities. Because afterwards, people have to spend time to sort
the goods, ship it out, and distribute the goods, which are resource intensive
activities. And then the final recipient has no say in what they receive
either... in many cases the donated items go unused. And even if they are
useful, a constant infusion of effectively free goods can distort the local
economies.

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RugnirViking
"And then the final recipient has no say in what they receive either... in
many cases the donated items go unused."

I used to work in a food bank warehouse, and yes, sorting the goods was a
great deal of effort. We sorted them by 'urgency' and use-by date. Canned food
was very helpful, because it lasts between the big giving times - people
donate primarily in autumn and christmas, and there is a big defecit during
the summer, so having long-lasting things was always a blessing.

The main thing that would help would be standardising the placement and format
of use-by dates on products. Some few products have absurd locations for the
use-by date, such as inside of the container!

Very, very little food was wasted.

Yes, the recipient didn't have a great deal of choice. However, practically,
this simply won't be possible without waste, as you'd have to have enough food
to offer a choice, and some wouldn't be picked. However, the packages that we
provided people were balanced nutritionally, and we took feedback from them
regularly about what worked for them and what didn't. We made sure they got a
lot of basic, versatile ingredients, such as onions, pasta, rice etc.

In adittion to this, have a little perspective. People who are relying on
these kinds of programmes very rarely complain that they don't have choice, as
they are glad to have anything at all. We also try to make sure each person
recieves some "interesting" items along with basic ingredients, to allow them
to experement, and provide diversity.

Things we always needed more of: Long-life milk, or powdered milk. Fruit
juice, especially long-life juice or concentrated juice. Fresh vegetables and
onions can be helpful, although if you really do want to help its best to
confer with the local volunteers on what they need most at the moment.

Things we had too much of: Tea and coffee. Sometimes we'd get a large donation
of fruit from supermarkets, but that was usually solved by effort (banannas
that can't be given away made into bananna bread or baby formula, or in the
worst-case compost for a community garden)

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bzbz
That last sentence struck me: “banannas that can't be given away made into
bananna or baby formula.” This wasn’t in the US, was it?

~~~
RugnirViking
It was in the UK. Banannas are just an example of a highly time-sensitive item
(about a week before they go bad usually)

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username90
> "The cash transfers were something like 17% of total local income — local
> GDP,"

So basically they gave entire communities 17% of a years salary and looked at
what happened to the community afterwards. My naive reaction is that this
would funnel significant amounts of goods from nearby communities to these
enriched communities because it was such a huge amount.

These extra goods would let people spend more time enriching it, creating more
economic activity here but less in neighboring communities who sold their
goods. For example, the mill, it didn't have enough grain to mill before but
now they had money to buy grain. Doesn't this mean that some other miller
somewhere else in Kenya now has less grain to mill? Or is Kenya importing
grain? So to me it seems like this study ignored the externalities by just
looking at the effects on the local community and not the entirety.

I don't really buy the argument that more money increased economic activity,
then the problem would easily be solved by just printing money. Many countries
have tried that and failed.

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ncmncm
Keynes identified criteria under which printing money does not create runaway
inflation.

An excellent example was 2008, when printing $800B did not cause inflation.
Printing $1.2T would also not have caused inflation, and would have ended the
recession, but the Senate preferred to extend the recession, to blame on
Obama, instead.

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Fjolsvith
>Eighteen months on, the researchers found that, as expected, the families who
got the money used it to buy lots more food and other essentials.

>But that was just the beginning.

>"That money goes to local businesses," says Miguel. "They sell more. They
generate more revenue. And then eventually that gets passed on into labor
earnings for their workers."

>The net effect: Every dollar in cash aid increased total economic activity in
the area by $2.60.

Amazing. This is almost like what happens when (poor) families receive a tax
cut.

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Red_Leaves_Flyy
It has long been known that up to a certain point any extra familial income
gets spent. Problems occur when the spent money is vacuumed up by mega
companies that do not invest into the communities they operate in thereby
depriving communities of the cash flow they need to survive.

Companies are sitting on hundreds of billions of dollars in liquid currency.
That stagnant money has a massive negative effect on the world. It's not a big
deal when a family hoards 10k in cash. But when something like 8% the US GDP
languishes in cash that's a whole lot of lost economic movement.

What needs to be learned here is that extractive economic models have created
so many of the problems that our cities face. There are real consequences
measured in human lives and suffering when people extract labor to become
billionaires.

~~~
s1k3b8
> Problems occur when the spent money is vacuumed up by mega companies that do
> not invest into the communities they operate in thereby depriving
> communities of the cash flow they need to survive.

Feels like this is where government should come in and increases taxes on
these corporations/wealthy and funnel money to the lower income. Which will
incentivize corporations/wealthy to provide services to get the money from the
low income.

> Companies are sitting on hundreds of billions of dollars in liquid currency.
> That stagnant money has a massive negative effect on the world

Shouldn't we start thinking about taxing wealth? Why tax sales, property
(house) and income only?

~~~
chillacy
Some countries do have a wealth tax. But in practice it hasn't worked nearly
as well as it should in theory, and a lot of European countries ended up
canning their wealth taxes.

~~~
s1k3b8
The difference between US and "a lot of European countries" is that we have
global financial power and they don't. If the US truly wanted to have a wealth
tax, we can make it globally binding for US companies/citizens. Meaning you
can't offshore it or hide it "legally" in foreign nations because we'd
sanction both the individual and the nation. No tax haven or nation can afford
to risk being banned from US markets and the international financial system
which the US created and controls. But the US is a captive nation controlled
by the wealthy, so I won't be holding my breath for a wealth tax.

~~~
chillacy
Even ignoring people offshoring wealth, it's still fairly expensive for the
IRS to audit assets for the wealthy, especially things like art (how many
expensive paintings do you have and what are they worth now?), private equity
(how will series-A startup founders pay their tax?), or intellectual property
(how much are Rihanna's songs worth?).

Ultimately I'm skeptical, because there isn't a good model of it working well
anywhere else, or even at smaller scales. If the argument is that it only
works at the largest scales with 100% buy-in... that's an awfully risky
policy.

And among economists it's basically Saez and Zucman vs everyone else, not
particularly promising. This is at least the most reasonable position I found,
which is that it might work but we shouldn't rely on it to raise as much as we
expect: [https://www.project-syndicate.org/commentary/elizabeth-
warre...](https://www.project-syndicate.org/commentary/elizabeth-warren-
wealth-tax-debate-by-jean-pisani-ferry-2019-10)

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zaroth
It’s a fairly basic premise of macroeconomics that a dollar injected into the
economy produces greater than one dollar of net GDP increase. The money
multiplier is usually discussed in terms of government spending, or the
central bank printing money, but it is true at the consumer level as well, for
example, when measuring the economic impact of a tax cut.

And interesting side point is that the multiplier (obviously) is much lower as
the savings rate increases, and also if the cash infusion is used mostly to
pay down debt, because neither will translate into further spending cycles.

So when confidence is high and interest rates are low, the money multiplier
will be at its highest.

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8bitsrule
Shades of Dickens.

Now all we have to do is to remember this 'very carefully done' study, so that
it doesn't have to be repeated in a century.

"We learn from history that we don't learn from history." \- Hegel

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vadansky
Trickle-up economics?

~~~
nickthemagicman
Also known as: Supply side vs demand side economics. But essentially yes
trickle up.

~~~
ncmncm
Yes. The latter works, the former further enriches the rich. Guess which they
like better.

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fvjwiur
it's actually returning them the money they were robbed by being paid below
the value of their work

~~~
username90
I don't see how that is possible as most of these people are doing subsistence
farming. They eat their economic output themselves, there is nobody to
underpay them. On the contrary their main problem is that there isn't some
large corporation there to enhance their productivity with heavy machinery and
fertilizers in exchange for a fraction of the yields.

~~~
Red_Leaves_Flyy
The comment is not regards to subsistence farmers using rudimentary methods.

In regards to latter half of your comment. The value is robbed from them by
not valuing their efforts fairly in comparison to the value added by the
equipment used to scale the operation. Sure you can hyperfocus on the study's
cohort but then what's the point of any discussion at all?

