Why Chris Hughes And Google Are Giving Cash Directly To The Poorest

http://www.forbes.com/sites/kerryadolan/2013/05/28/why-google-and-facebook-cofounder-chris-hughes-are-giving-cash-directly-to-the-poorest/

by hansy • 13 years ago

46 71 13 years ago

forbes.com

kvb5• 13 years ago

It's great to see GiveDirectly getting more attention. From my limited interactions with Paul Niehaus, he seemed quite competent and rightly focused on ensuring that the system remains free from corruption.

robodale• 13 years ago

What the actual fuck?

sliverstorm2• 13 years ago

Well that was constructive

FD3SA• 13 years ago

Interesting that developed countries do not implement a similar system for their own poor. Friedman and Hayek both believed such a system was superior to merit-tested social assistance programs which require massive bureaucracy and are prone to abuse.

Hopefully, with the success of such charities in developing countries we will see increasing support for such systems here at home, allowing people to escape the vicious unemployment trap of western economies.

(Edit) Additionally, the implementation of basic income at this point would be extremely effective, as it would leverage the massive revolution in freely available online education (e.g. Khan Academy, EdX, Udacity, Coursera) and cooperative workspaces (e.g. hackerspaces). This would effectively transform the entire country into a startup incubator, giving those with the desire and talent to build new companies the resources to do so immediately, without going through the excruciatingly slow, inefficient and oftentimes counterproductive process of formal education.

Mikeb853• 13 years ago

This is what welfare and employment insurance are for. Most developed countries do have systems for distributing wealth to the poor, to varying degrees.

tome• 13 years ago

FD3SA is suggesting that he/she considers this kind of wealth redistribution quite different from social welfare.

vec• 13 years ago

I'd even go a step further. Do away with welfare, food stamps, unemployment insurance, minimum wage, etc. Instead, move to a basic income[1] system.

Everyone (well, every citizen between, say, 18 and 67, when Social Security kicks in) gets a guaranteed flat income from the government. Then raise income taxes accordingly such that the average middle class family more or less breaks even.

[1] http://en.wikipedia.org/wiki/Basic_income

vecinu• 13 years ago

Can you explain why I as a citizen have to work 40 hours a week with overtime sometimes just so someone can receive a paycheck for free?

What is my benefit for such a compromise?

pdeuchler• 13 years ago

Honest question: What do you do about those who make poor spending decisions and use credit card debt as a piggy bank? Wouldn't this simply provide them with more income that they then leverage into more debt?

Or is the argument that the social good created by BI would outweigh such cases?

a-priori2• 13 years ago

I've been thinking a lot about basic income schemes lately, which do exactly that for everyone (not just the poor, though they'd benefit the most). You calculate how much it costs a person to pay their basic living expenses: food, a decent place to live, maybe a transit pass. Then you pay everyone in the population that amount of money each month, unconditionally (no means testing).

I once calculated that such a system, if applied in Canada, would require something like a 36% flat income tax if it were entirely funded that way, and it would have a break-even point at about $65k annual income (below that, you receive more than you put in). I expect the situation in the US to be similar.

Part of that cost could be offset by reducing or eliminating existing welfare and social security programs, including food stamps, employment insurance, and subsidized housing. It would also let you eliminate minimum wage, since you no longer have to be concerned about wages covering basic living expenses.

There are a lot of questions about how this would affect an economy. Would it cause massive inflation? Unemployment? Substance abuse? Or would it be the most effective social program ever? I have no idea. But I think it's worth a try. My hunch is that you will see all of those negative effects increase somewhat (inflation, unemployment, substance abuse) or in some people, but that the positive effects will greatly outweigh the negatives.

You needn't implement it all at once. You could apply it first to a random sample, say 1% of the population. Those people receive basic income and pay the tax required to fund it. They would also become ineligible for the social programs that would be removed if you rolled it out nationally (the details of that part may be tricky). Only roll it out to the whole population if the results are positive after a few years.

sliverstorm2• 13 years ago

If wages fall, particularly if we remove minimum wage, the required tax rate to support the system will go up, as will the break-even point.

pash• 13 years ago

Over the past two or three decades in the United States there has in fact been a big shift away from targeted anti-poverty programs in favor of just giving cash to the poor. At the federal level, this has meant big increases in the earned-income and child tax credits and relatively less funding for housing and food subsidies and other hand-outs in kind.

The idea that people can allocate resources for themselves better than somebody else can do for them has an interesting tie-in to today's debate about what policies we should pursue to stimulate economic growth. The basic Keynesian proscription for reviving a moribund economy is to put idle resources to work through more government investment, and for many years economists have tried to figure out which investments offer the best bang for the buck by measuring fiscal multipliers, etc. But this approach assumes that a dollar of output is a dollar of output, when in reality—if we're doing economics, and not mere accounting—people often value a dollar's worth of one good very differently from a dollar's worth of another. (And a disparity between accounting value and economic value is likelier to exist when investment decisions are made by politicians, at a remove from the mainstream of economic activity.)

This suggests we should try to allocate stimulus spending in a way that mirrors as closely as possible the distribution of resources we'd get if our economy were chugging along at a good clip, with all our people and capital doing the things the market would arrange if were working properly. Greg Mankiw, the chairman of the Harvard economics department, wrote a paper with his colleague Matthew Weinzierl [0] a couple of years ago that tries to get at what that would look like. Their simple model suggests, unsurprisingly, that traditional make-work government investment programs should be a last resort: getting the same amount of money into the hands of investors and consumers who can allocate it more effectively might be, well, more effective.

0. http://scholar.harvard.edu/mankiw/files/exploration_of_optim... [PDF]

maxharris7• 13 years ago

You know how Steve Jobs said, "Your time is limited, so don't waste it living someone else's life"?

Well, I agree, and I take that idea very seriously. People should keep their money (earned by trading time from their lives), and use it to make the most of their own lives.

Moral credit ought to go to those who create the most, not to those that give up everything. Contrary to what your mother will tell you, giving money to charity does not make you a better person. But creating things and otherwise making the most of your life (you only have one), does.

If you want to give money to charity, make sure you're doing it for the right reason (i.e., because you know that the specific cause you're supporting will make your own life better), and that you have enough money so that you're not sacrificing your primary values (your own goals, family, friends, for example) by doing so.

Don't give up the one life you have, or any part of it - it's yours, and it's all you've got.

Afforess2• 13 years ago

Not everyone subscribes to such a dark, cynical view of the world. I realize that there are thousands of invisible advantages I have over an identical me born in Africa. Giving to charity is a small way of shrinking the gap.

maxharris7• 13 years ago

There is nothing dark or cynical in what I have said. What is dark about "live the best life you can live" and "make the most of what you've got"?

Fact: to achieve your own goals, you need 100% of your time, money and effort.

comatose_kid• 13 years ago

I read SJ's quote as about being intentional in the things you choose to do and to not let other people's expectations guide your life choices. This is orthogonal to whether or not a person chooses to donate money/time to others.

I think yours is a pretty selfish viewpoint. I wonder how world war II soldiers would feel about what you say.

kvb5• 13 years ago

Why ought moral credit go to those who make the most, regardless of the opportunities that they're given? Americans and Western Europeans, on average, start from an advantageous position compared to those in poor regions.

As a side note, it seems quite plausible to me that redistribution from the "lucky" to the "unlucky" will result in a growing pie for all, though perhaps it won't grow to the extent that the very lucky are better off than if the redistribution didn't happen.

By all means be a miser if that makes you feel better, but don't cloak your actions in "morality".

maxharris7• 13 years ago

Why ought moral credit go to those who make the most, regardless of the opportunities that they're given?

Opportunities are not "given". I don't go to work thinking, "just look at all the opportunity I'm creating for other people by contributing to industrial civilization."

Rawls is wrong. The idea that "you didn't earn your brain, your family, your upbringing, etc." is completely in error because the concept "earn" only applies to situations where choice is involved. In reality, "earn" distinguishes the hardworking doctor or construction worker from a 30-year old man that won't get a job and still lives with his parents.

I say that if you make the most of what you've got, it doesn't matter if you started out with $5 or $5e7. What matters is that you make the most of the opportunities that are out there. What matters is how much you improve your lot.

I say that the purpose of morality is to have a happy life, here on earth. It sounds like you are against "enjoy yourself and live."

Edit: Here I give the answer to most of the people that are downvoting me. Clicking the down arrow to shut out other viewpoints won't help anyone get to the truth on the matter.

Mikeb853• 13 years ago

Many people derive great personal satisfaction from giving to others...

rgbrenner• 13 years ago

The quote you started off with directly contradicts the rest of your post. You say people should live the life they want to, then you tell people how they should live their lives.

If someone wants to donate money to charity, they should donate money to charity. That's the life they want to live.

tcgv• 13 years ago

Altruism or selflessness is the principle or practice of concern for the welfare of others. It is a traditional virtue in many cultures and a core aspect of various religious traditions, though the concept of "others" toward whom concern should be directed can vary among cultures and religions. Altruism or selflessness is the opposite of selfishness. [1]

[1] https://en.wikipedia.org/wiki/Altruism

arscan• 13 years ago

I just think you should spend money in a way that maximizes your own happiness.

Studies indicate that spending money on others is one of the best ways to increase your own happiness. I don't have references handy, but check out the book "Happy Money: The Science of Smarter Spending." That is loaded with references to studies that support that claim.

betterunix4• 13 years ago

"People should keep their money (earned by trading time from their lives)"

What about people born into wealth, who inherited the money their parents or grandparents earned by doing something useful for society? Where do they fit into your picture?

On the flip side, what about people who cannot find any job that pays enough for them to save money, who are literally living paycheck to paycheck. Do you want to live in a society where we have a class of people who have no social mobility at all, and who lack the power needed to change anything about that?

Ayn Rand's image of the heroic capitalist who amasses a fortune by solving society's problems is very unrealistic. Even people like Mike Bloomberg and Bill Gates, billionaires whose fortunes were amassed as a result of their own work, received help early on. Who do you think paid for Bill Gates or Mark Zuckerberg to go to Harvard, where they met the people that worked with them to build their businesses?

finnw2• 13 years ago

> What about people born into wealth, who inherited the money their parents or grandparents earned by doing something useful for society?

There isn't really any difference. The parents kept the money they earned, and (quite rationally) chose to spend it on giving the children an economic advantage (that the children, more often than not, could not have earned for themselves.) To tax the children is to tax the parents.

Sven7• 13 years ago

I suggest you spend an hour at your local cancer hospital or orphanage, cause I have personally seen, stronger views than this, melt away in minutes.

Helping others is deeply ingrained in our nature. But ofcourse, there are Kobe Bryant's out there being brought up by eskimos, who have no concept of basketball.

dcalacci• 13 years ago

a solipsist's life is far from an ethical one.

you mention creating, but nowhere do you mention who one should create for. the ethical reason for creating a product is to better others lives, not your own.

you also suggest that bettering others' lives does not better your own:

>i.e., because you know that the specific cause you're supporting will make your own life better

this ignores the joy that most people experience when they genuinely help others, the sense of community people feel when they come together as a group for a cause, and the feeling of hope that your community service or charity may impart on those who are less fortunate than you can likely imagine.

assisting a charity is not 'giving up' your life for most. It's enriching it.

As an aside, your comment detracts from the value of charity to begin with, when the article is about whether or not a specific _form_ of charity is more beneficial than others. I think your comment adds little to the discussion and ignores the content of the article entirely.

danielweber• 13 years ago

He has decided that this is how he will make the most of his own life.

glomph2• 13 years ago

What makes your life worth more than other peoples?

Mikeb853• 13 years ago

This is a great idea. Giving directly to the poor will hopefully bypass corrupt entities, and essentially injects cash directly into the economy you're hoping to assist. In the case of a farmer or someone looking to start a business, even a small cash injection can make a big difference, and will immediately produce an impact.

The main risks of course to this plan is that the money could get spent on imported goods, which would transfer the cash back out of the local economy, or that it would get hoarded (or stolen). But cash injections are still the most effective means to stimulate an economy, especially small, local economies.

notahacker2• 13 years ago

"cash injections are still the most effective means to stimulate an economy, especially small, local economies."

The economist in me thinks the effectiveness of cash stimulus is still mostly inflated away if the economic problem is structural, especially when injections are unrelated to any productive improvements in small, local economies. To the extent this scheme works because the cash injections are occasional and unpredictable and landlords, local Big Men and monopoly local goods suppliers haven't yet found a way of creaming off most of the cash injection. I wish them all the best and hope the positive results their followup studies have shown reflect something other than weaknesses in study methodology, but unfortunately I think this is patching the symptoms and can't scale without adding in some more precisely-targeted larger-scale aid.

gesman• 13 years ago

Disadvantage of charities is that only approximately 10% of donated money are making it directly to the cause.

Disadvantage of giving money directly to the poor is that half of them will end up buying pot, booze or getting robbed.

kvb5• 13 years ago

Please read up on this particular charity. Because of the way they target the aid, they seem to be largely free of the ill effects you imagine.

IanCal• 13 years ago

> Disadvantage of charities is that only approximately 10% of donated money are making it directly to the cause.

93% of a donation to GiveDirect will end up in the hands of the recipient.

> Disadvantage of giving money directly to the poor is that half of them will end up buying pot, booze or getting robbed.

Nope to the first two, I don't know about theft, but they have no reported incidents of violence (they perform follow up calls)

http://www.givedirectly.org/pdf/litreview_2.pdf

They've performed randomised trials to see if the money makes a difference, and find that it's making a huge difference to peoples lives.

nknighthb• 13 years ago

Even in the "robbed" case, as a general rule, the wealthy aren't wandering the streets mugging people. That money is going to get spent on goods and services somewhere along the way, at least providing economic stimulus.

thenipper• 13 years ago

I work at an NGO and have worked at a bunch of non-profits and can say that stat is simply not the case. Sure you have some organizations where a lot of the money is absorbed into various 'administrative' charges, but any good charity will have at least 75% of their money go to program costs. The best will often to around 90% of all their income going to programmatic costs.

jack-r-abbit• 13 years ago

This one homeless guy came up to me the other day, and he was asking me for money. I was about to give it to him, and then I thought, ‘He’s just gonna use it on drugs or alcohol.’ And then I thought, ‘That’s what I’m gonna use it on. Who am I to judge the guy, really?’ -Greg Giraldo

http://www.comedycentral.com/video-clips/xo5zry/stand-up-gre...

curiousDog• 13 years ago

Excellent. Having grown up in East Africa and seeing first hand how UNHCR, WHO, UNICEF etc actually worked; I've always thought this would be the best way.

Kudos to Google's top brass, you employees should be proud to work for a company like this!

joyeuse6701• 13 years ago

Pretty sure that almost all charities and welfare related groups see a spike in improvement of the lives of individuals on the onset of their service. The problem usually becomes dependence on the system. Could someone illustrate how this implementation solves the issue of dependence?

kvb5• 13 years ago

The payments are of a fixed amount ($1K, spread over 1-2 years), so recipients know that they won't continue to receive money indefinitely. It probably also helps that a significant fraction of the money appears to be spent on durable home improvements (e.g. tin roofs) rather than ongoing costs. See the FAQ (http://www.givedirectly.org/faqs.php) for more details.

ape4• 13 years ago

If they want to "give directly" why not just hand people cash?

pkulak• 13 years ago

A recent Planet Money talked about this exact issue:

http://www.npr.org/blogs/money/2013/05/21/185801589/episode-...

laserDinosaur• 13 years ago

"Typically people who live in mud huts with thatched roofs – and uses a system called M-Pesa, run by Vodafone , to transfer money to their cell phones."

People in mud huts have cell phones?

marssaxman• 13 years ago

The phrase "mud huts" evokes a primitive pastoral lifestyle, but there are a lot of places where mud brick is simply a sensible building material. I have stayed in a "mud hut" in Africa which had running water and electricity; this was common to all the houses in the neighborhood. They were nice big places, plenty of air and light, with ordinary doors and furniture and whatnot, that just happened to be built out of great big slabs of mud. They build this way not because they lack more sophisticated technology, but because mud bricks are an effective, economical technology well suited to their environment.

Why Chris Hughes And Google Are Giving Cash Directly To The Poorest

Related Stories