Do our choices matter? Not much, but maybe a lot.

Relative to cash transfers giving people their chosen aid program doesn’t make them richer or better fed — but flexible cash transfers do make people more satisfied and feel more respected. Perhaps the aid industry spends too much effort in search of silver bullets and too little doing what already works bigger and better.

It’s hard to find someone who hasn’t spent time bogged down in life’s choices. For me, some of the most ponderous choices have been about my career: Baker or banker? Industry of academia? Economics or political science? Socialist party activist or corporate consultant? I ended up a professional mutt, a sometimes economist, consultant, corporate peon and freelance researcher, which has worked out fine.

But what if I had chosen differently? My choices were shaped by the opportunities I had, and what if those had different? My parents gave me a college education — but what if they had given me a gill-netter like others in my fishing-community hometown? An economist gave me my first research job — what if it that chance had come from a political scientist? Would anything be different? Perhaps not. I’d probably still live in a comfortable house, shop occasionally at Whole Foods and contribute to a retirement account. I have been given many items and opportunities of material value, and I have transformed those into a comfortable material life. So does it matter what exactly those items of value were?

The international development industry, when trying to create opportunities for people in poverty, appears to believe what the items of value are matters very much. Considerable effort is allocated to determining which transfers of value are ‘best.’ Is it livestock and training (here, here and 6 studies here)? Maybe fertilizer subsidies would be better (here, here and here)? And here is a comparison of 48 different programs, each transferring different goods and services of value to recipients.

A recent study conducted by the Busara Center for Behavioral Economics looked at the question: Does it matter what kind of resources are given, or just the value of the resources? And does it matter whether recipients of resources get the resources they would most prefer?

Our study was conducted with 3,000 farming households in rural Kenya. Each household received a transfer of either cash, which they could choose to spend on anything, or another type of goods or services (livestock, free seeds and fertilizer or training in agricultural techniques). Importantly, the value of the cash transfer matched the cost of each program, so people received transfers of the same overall value. In short, some people received ‘stuff’ and some received the cost of that stuff in cash.

In terms of measures of material well-being, such as food consumption, overall consumption and assets, it doesn’t make much difference whether someone received stuff or cash. People who received cash ate no more and no less, owned no more and no less, and said they were no more or less happy than the recipients of chickens, fertilizer or agricultural training. It also doesn’t really matter if people received the type of transfer they most preferred. No matter what their preferences were, they were pretty much equally well off getting the cash or the stuff.

So for myself and others, what we get may matter less than that we got something — at least in terms of how much we eat and how much we own. I do, however, tend to think I am more satisfied as an economist than a fisherman. I feel as though where I am is the result of my choices. I may be no richer, consume no more organic sushi and am no more secure in retirement. But I feel like my life took my own direction. I like that.

The study participants felt similarly. Though the recipients of cash transfers were no better off than the recipients of stuff, and though they weren’t exactly happier, they report feeling much more positively about their experience with aid. They were more likely than the recipients of non-cash transfers to say that they were trusted and respected by the NGO (Busara) that gave them items of value. They were also more likely to feel that they had been treated as an individual, and that the aid they received was tailored to meet their specific needs.

It’s only one study, and it’s only comparing cash to three types of ‘stuff’, but this study suggests two ideas worth considering:

  • First, for transfers to individuals (not for public goods), should the development industry spend less time and money figuring out ‘which stuff’ is the right stuff, and more figuring out ‘how do we transfer more stuff and transfer it better’?
  • Second, material well-being matters, but perhaps choice does too. If we care about respecting recipients, the process of providing aid may be as important as its substance of the aid itself.

You can read the study on which this post is based here and a related study here.