If You Give Money To Someone Who Needs It, They Spend It On What They Need

Shocking, I know.

Here’s some news that should not surprise you: if you give poor people money to use for their family’s well-being, they’ll spend it wisely, on things that they need, instead of on booze, and drugs and whatever else people think poor people spend their money on.

Definitive data on what poor people buy when they’re just given cash

Governments have finally figured out that one of the most effective ways to end poverty — or at least help people who live in poverty get out of it — is to give them cash. Yes. Just money. Give them money — the precise thing they don’t have and desperately need — and they spend it on what they actually need.

This information flies in the face of the widely-held belief that “cash transfers would either be abused or misdirected in alcohol consumption and other non-essential forms of consumption.” From Quartz:

A recently published research paper (paywall) by David Evans of the World Bank and Anna Popova of Stanford University shows that giving money to the poor has a negative effect on the consumption of tobacco and alcohol. Evans and Popova’s research is based on an examination of nineteen studies that assess the impact of cash transfers on expenditures of tobacco and alcohol. Not one of the 19 studies found that cash grants increase tobacco and alcohol consumption and many of them found that it leads to a reduction.

Quartz lays out a couple of reasons as to why this might be the case, including the fact that the infusion of money could change a family’s “economic calculus.” Also, the money is often given to women and is earmarked specifically for “family welfare” by the agency giving it. When given money with a specific purpose in mind, most people are inclined to spend it on that purpose.

This should hopefully lay waste to the erroneous and false assumption that if you give money to someone who doesn’t have it, they’ll immediately blow it on a bender and not use it to buy their kids new shoes or whatever. People who live in poverty aren’t dumb — they just don’t have any money. The way you solve for that problem is to give them money, be it through government-subsidized programs or otherwise, and watch as your previously-held notions of what the poor are really like are eradicated.

Why a study had to be done to eke out what feels like common sense is beyond my ken, but now we know for sure.

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