The Nonlinear Library EA - Ending Poverty: Today or Forever? Potential Error in GiveDirectly's Rational Animations Video by Alexander de Vries
Nov 6, 2023
11:59
Welcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: Ending Poverty: Today or Forever? Potential Error in GiveDirectly's Rational Animations Video, published by Alexander de Vries on November 6, 2023 on The Effective Altruism Forum.
Epistemic status: as an Economics student who reads a fair amount of dev econ, this might be one of the only things in the world I'm actually ~qualified for. 85% confident that the main claim of this post ("GiveDirectly has presented no strong evidence for their claim that the costs of ending extreme poverty will rapidly & significantly decrease") is true.
Disclaimer: I GiveDirectly and think they're doing fantastic work!
Recently, GiveDirectly collaborated with Rational Animations to make this YouTube video:
The aim of the video is in its title: showing that extreme poverty can be eradicated by directly giving money to the world's poorest, through organizations like GiveDirectly.
I think that the evidence presented in the video definitively shows that giving all the extremely poor people in the world money for a year can end extreme poverty for that year. This is true almost by definition, but I'm genuinely glad that a bunch of researchers decided to check anyway. There's always a chance of unforeseen second order effects, like maybe all the people getting the money would just spend it all on drinks and alcohol (
almost certainly not
) or it would cause huge inflation (
nope
, though really you could guess that one with Econ 101).
Our friends estimate the cost at about $258 billion dollars to end extreme poverty for a year, and point out that this is a small portion of yearly philanthropic spending or rich government's budgets. They're right about the rich countries' budgets (no longer sure about how large a part this is of philanthropic spending). It would be good to just give all the extremely poor people some money every year so they would no longer be extremely poor.
[1]
Where the video loses me, though, is when they make a very strong claim with huge implications based on minimal evidence. This starts at
10:39
in the video, but I've transcribed it for you here:
We also know that cash transfers improve recipients' lives immensely. But what would be the impact on recipients' neighbors and the economy as a whole? A 2022 study led by Dennis Egger found that every $1,000 of cash given actually has a total economic effect of $2,500, thanks to "spillover" effects growing the local economy, as recipients spent more money at their neighbors' businesses, those businesses spent money, and so forth. Not only did recipients' incomes increase, their neighbors' incomes also increased by 18 months later. Even neighboring villages without any recipients saw increased incomes, which could have been from a 'spillover' effect as well. These effects mean our cash transfers will go further, and we may find that we've reached our goal of ending extreme poverty sooner - and for less money - than we would otherwise expect.
The research suggests that the $200 to $300 billion figure we'd need to give for the first year will decrease every year thereafter
[animation of a stack of dollar bills, halved each year]
as the economies of entire regions and countries grow and lift their poorest residents out of extreme poverty.
[emphasis mine]
Okay. There is an absolutely massive difference in cost between "$258 billion the first year, progressively less each year, maybe after X years no cost at all" and "$258 billion every year, eternally". One of these is a cost the rich world may be willing to bear, out of solidarity and self-interest and even just the wish to be on the right side of history. The other is just a pipe dream for teary-eyed optimists like us.
If a lot is riding on the answer to an empirical question, it would be wise to reason well about it before making strong claims one way or the other. But this is j...
Epistemic status: as an Economics student who reads a fair amount of dev econ, this might be one of the only things in the world I'm actually ~qualified for. 85% confident that the main claim of this post ("GiveDirectly has presented no strong evidence for their claim that the costs of ending extreme poverty will rapidly & significantly decrease") is true.
Disclaimer: I GiveDirectly and think they're doing fantastic work!
Recently, GiveDirectly collaborated with Rational Animations to make this YouTube video:
The aim of the video is in its title: showing that extreme poverty can be eradicated by directly giving money to the world's poorest, through organizations like GiveDirectly.
I think that the evidence presented in the video definitively shows that giving all the extremely poor people in the world money for a year can end extreme poverty for that year. This is true almost by definition, but I'm genuinely glad that a bunch of researchers decided to check anyway. There's always a chance of unforeseen second order effects, like maybe all the people getting the money would just spend it all on drinks and alcohol (
almost certainly not
) or it would cause huge inflation (
nope
, though really you could guess that one with Econ 101).
Our friends estimate the cost at about $258 billion dollars to end extreme poverty for a year, and point out that this is a small portion of yearly philanthropic spending or rich government's budgets. They're right about the rich countries' budgets (no longer sure about how large a part this is of philanthropic spending). It would be good to just give all the extremely poor people some money every year so they would no longer be extremely poor.
[1]
Where the video loses me, though, is when they make a very strong claim with huge implications based on minimal evidence. This starts at
10:39
in the video, but I've transcribed it for you here:
We also know that cash transfers improve recipients' lives immensely. But what would be the impact on recipients' neighbors and the economy as a whole? A 2022 study led by Dennis Egger found that every $1,000 of cash given actually has a total economic effect of $2,500, thanks to "spillover" effects growing the local economy, as recipients spent more money at their neighbors' businesses, those businesses spent money, and so forth. Not only did recipients' incomes increase, their neighbors' incomes also increased by 18 months later. Even neighboring villages without any recipients saw increased incomes, which could have been from a 'spillover' effect as well. These effects mean our cash transfers will go further, and we may find that we've reached our goal of ending extreme poverty sooner - and for less money - than we would otherwise expect.
The research suggests that the $200 to $300 billion figure we'd need to give for the first year will decrease every year thereafter
[animation of a stack of dollar bills, halved each year]
as the economies of entire regions and countries grow and lift their poorest residents out of extreme poverty.
[emphasis mine]
Okay. There is an absolutely massive difference in cost between "$258 billion the first year, progressively less each year, maybe after X years no cost at all" and "$258 billion every year, eternally". One of these is a cost the rich world may be willing to bear, out of solidarity and self-interest and even just the wish to be on the right side of history. The other is just a pipe dream for teary-eyed optimists like us.
If a lot is riding on the answer to an empirical question, it would be wise to reason well about it before making strong claims one way or the other. But this is j...