An interview with Johannes Haushofer on the state of the evidence for cash transfers
We’re pleased to introduce a new interview series for the Phenomenal World. We will be speaking with an array of academics and policymakers on the most ambitious yet tractable new ideas in the social sciences.
Johannes Haushofer is assistant professor of Psychology and Public Affairs at Princeton University. His work includes development economics, behavioral economics, psychology, and neurobiology. We spoke to him primarily about a neopolicy idea on which he has unique expertise: unconditional cash transfers (UCTs). Along with Jeremy Shapiro, he has led research on GiveDirectly’s UCT program in Kenya, and his work on short-term and long-term effects there has both provided the field with new evidence and set a course for deeper questions. Now Johannes is starting to work on a UBI pilot in a major US city, across the developing-nation/developed-nation divide.
We spoke to Johannes broadly about (1) where he sees the state of the evidence, (2) what conclusions can be drawn from developing nations to developed, and (3) his larger vision for the march of evidence regarding policies like this.
We’re grateful that Johannes took the time to speak with us and to inaugurate this interview series. Interviewing him was Michael Stynes, who leads JFI, as well as Sidhya Balakrishnan and Lauren Burns-Coady of JFI. This interview has been condensed and edited.
MS: Johannes, first of all, thank you very much for speaking with us. Your work is incredibly important to the entire basic income/cash transfer research community and I’m happy that Lauren, Sidhya, and I will have the opportunity to talk through some of your work. We are particularly interested in the point in which a pilot intervention becomes viable policy. Here specifically I want to try to understand what the state of the evidence is in favor of unconditional cash transfers in the developing world, and how your research there might extend to the developed world. Can we start with an overview of the work you’ve done so far, particularly on cash transfers in Kenya?
JH: The main completed study that I’ve done so far is a randomized controlled trial [RCT] on GiveDirectly’s UCT program in Kenya, that we finished maybe five years ago, and published two years ago. In that study, we delivered transfers that are on average $700, which is about two years of per capita consumption, to poor families in western Kenya. And we found pretty sizeable effects on outcomes like consumption, asset holdings, psychological well-being, and income. That piece of evidence is part of a larger body of evidence, which is that cash transfers do a bunch of good things. So they increase consumption, and other welfare outcomes we care about. There are lots of studies that make us think that. And there aren’t a lot of the negative effects that people were original worried about—temptation goods, conflicts, violence, and so on. We’re just now working on a paper that shows pretty large decreases in domestic violence, as a result of cash transfers.
I would say that the state of the evidence is: cash transfers do pretty good things. The 1.0 question for cash transfers is, “Is it better to get cash than to get nothing?” I think the answer to that is yes, it’s better to get cash. This isn’t surprising to many people, but it is surprising to some people who thought the poor are bad at handling money, and were going to blow it and make their lives worse.