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Sunday, August 25, 2013

Money For Nothing and Cows for Free

Conventional wisdom has it that charity works best when it focuses on long-term needs and skills, such as Habitat for Humanity, which builds and sells houses (at cost) to people in need, Rebuilding Together, which offers home repair and renovation services to cash-poor individuals, and Heifer International, which provides communities with livestock and other material goods, training, and organizational development. A new charity has burst on the scene, however, that breaks all the conventional wisdom rules: just give people cash ("Is it Nuts to Give to the Poor Without String Attached"):
In the past decade it has become increasingly common to give money right to the very poor. After Mexico’s economic crisis in the mid-1990s, Santiago Levy, a government economist, proposed getting rid of subsidies for milk, tortillas and other staples, and replacing them with a program that just gave money to the very poor, as long as they sent their children to school and took them for regular health checkups.
However, a relatively new charity, GiveDirectly, offers people cash with no preconditions, and at its most basic level, it is testing one of the simplest ideas in economics — that people know what they need, and if they have money, they will use it more wisely than some outside agency will. “This puts the choice in the hands of the poor, and not me,” Michael Faye, one of GiveDirectly’s co-founders told a New York Times reporter ("Is it Nuts to Give to the Poor Without String Attached"). “And the truth is, I don’t think I have a very good sense of what the poor need.”

GiveDirectly is the subject of a recent NY Times article ("Is it Nuts to Give to the Poor Without String Attached"), a brief segment on Planet Money ("The Charity that Just Gives Money to Poor People"), and an extended examination on This American Life ("Money For Nothing and Your Cows For Free").

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