What The Hell America!

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We used to be trapped. And by “we,” I really do mean all of us. A few hundred years ago, the majority of the world lived in extreme poverty, and even in recent decades, people lucky enough to clear the $2.15-per-day threshold were living lives that others in the developed world would find unrecognizable.

Death is inevitable. Living in poverty is not.

From 1981 to 2019, the share of the global population living in extreme poverty fell from 44 percent to just 9 percent—an astronomical achievement.

On this episode of Good on Paper, we’re going to talk about how this all happened. Today’s guest is Paul Niehaus, an economist and co-founder of the NGO GiveDirectly. His new paper details what actually happened in the lives of people who escaped extreme poverty since the early 1980s. As he and his co-authors write, by “how” they mean: “Did they plant a new cash crop on their farm? Find work in a factory? Start their own business? Move to a city?” And further, what happened across the life of one person, versus what happened between cohorts or generations?

The answers provide insight into what a real “success sequence” looks like, and challenge some foundational ideas within development.

“There’s no one story,” Niehaus tells me. “As an author, it would’ve been nice if there was a very simple story to tell, which is, Well, the key thing is everybody’s gotta move to the city or whatever it is. But you see people getting out of poverty while moving to the city. You see a lot of people getting out of poverty while staying where they are. You see a lot of people getting out of poverty while not switching from agriculture into nonagriculture. And also, the stories are different in different countries.”

The following is a transcript of the episode:

Jerusalem Demsas: For centuries, mass poverty seemed inevitable. Starvation, disease, death. As late as the 1700s, roughly half of children globally would die before reaching adulthood. This was the natural order of things.

And then everything began to change. Looking at a graph of development measures over the past two hundred years is to witness the miracle of human development: On any measure you can think of—child mortality, nutrition, poverty—more and more people are able to live significantly better lives than their ancestors could even dream of.

Just 35 years ago, 2 billion people lived in extreme poverty. Today, that number is just under 700 million. That’s still a lot of people, but this staggering improvement proves that mass poverty isn’t preordained.

[Music]

Demsas: My name’s Jerusalem Demsas. I’m a staff writer at The Atlantic, and this is Good on Paper, a policy show that questions what we really know about popular narratives.

Why did extreme poverty fall so fast, and can we finish the job? Loads of research and debate has gone into the question of why extreme poverty fell, but today we’re going to talk about how.

Paul Niehaus is an economist at UC San Diego and the co-founder of GiveDirectly, an NGO focused on getting cash into the hands of the global poor. Few have thought harder—academically and practically—about these questions. Today we’re going to talk about his work with GiveDirectly and a new paper he co-authored, titled “How Poverty Fell,” that details what happened between 1981 and 2019 in the lives of those living in extreme poverty.

Before we jump into this conversation, one last note from me: This will be my final episode with you all. I have loved my time here hosting Good on Paper and feel so lucky to have been able to explore all of my curiosities with you and the brilliant guests who lent us their time. And I want to thank all of you—those of you who listened, emailed, left a review, and engaged with this show in any way. It has been amazing to realize how many fellow wonks there are out there, excited to dig deep into how and why we know things. And don’t worry. The show isn’t going away—just taking a break.

Let’s dive in. Paul, welcome to the show.

Paul Niehaus: Thank you, Jerusalem. Great to be here.

Demsas: I think because people remain rightly concerned about continuing deprivations, we often don’t take a step back to take in just how remarkable the global decline in poverty—in extreme poverty—has been. Can you give me a sense of how much things have changed?

Niehaus: Exactly. And so we’ll talk about the paper I think that you wanted to talk about, which is “How Poverty Fell.” But in some sense, I sort of feel like for maybe most people listening, the key thing that they need to take away is actually just the premise that it fell. And so we start the paper with that observation, that over the course of the last four decades or so, from around 1980 to around 2020, the share of the world’s population living in extreme poverty—so people living on less than (currently we measure that as) $2.15 per person per day—that fell from about 40 percent to under 10 percent around the start of the pandemic. And that is, in my mind, just one of the most remarkable episodes in human history, and just an achievement to celebrate and to try to understand, which is what the paper’s about.

Demsas: And extreme poverty. I mean, $2.15 a day—I mean, if folks remember, it used to be $1.90 a day until that 2022 update for inflation. It’s not the threshold that people are living what we would consider good lives, right? People will starve at this level. They probably lack access to electricity and other important goods. Why is it important to track this number, versus other metrics of poverty?

Niehaus: It’s not the only one, and we’ll do this in the paper, look at other lines as well. And any line has fundamental issues with it, which people have rightly pointed out. Some people are going to have a greater ability to translate $2.15 a day into the sorts of things that really matter in life—health and relationships and things—than others. So it’s just one indicator.

But what I think it has done very effectively is to sort of galvanize attention around the world through the process—the Millennium Development Goals and the Sustainable Development Goals and the World Bank’s advocacy for that number—to a sort of simple metric that we can track and say, Are we making progress or not? And that matters, right? Because it lets us quantify whether we’re seeing the kind of progress that we’d like to see.

Demsas: So “How Poverty Fell” is a very straightforward title, which I appreciate. And I want to start by asking you to explain that question. What does it mean to investigate how poverty fell? Like, what are you looking at? What are you trying to describe?

Niehaus: Yeah. Great. The first thing I’d just say is poverty fell, right? As I said, that premise itself is very important. So literally just that fact, that premise, I think is an important takeaway.

The next bit is the how, with just a lot of emphasis on how as opposed to why. And so a lot of the movement in development economics over the last couple of decades, which has been tremendous, has been towards trying to understand causality: the why. So why did poverty fall? And of course, many of the great debates that we have about the global development process are about the why. Was it because India liberalized in the early 1990s? How much did that contribute?

But this is a paper about how. Descriptively, if we look at all these people who moved out of extreme poverty, what happened in their lives, right? Is it that kids were able to start out life much better than their parents did, because they had access to better schooling or other early-childhood investments? Is it that people moved out of agriculture; they moved to the city and were able to get a manufacturing job as they moved off the farm? These are all sorts of things that we know happened, but how important, quantitatively, were they for all these people that made that step over the poverty line?

Demsas: I’d love for you to walk us through how you did this paper, because a big part of why I wanted to talk to you about this is because it’s a pretty ambitious attempt to collect data over time from so many different people and families across several countries. So you focus on five countries. What are those countries, and then what did you do to get this information?

Niehaus: We’re looking here at, as you say, five countries: India, China, Indonesia, South Africa, Mexico. And actually, most of the work—you mentioned all the hard work, so enormous amount of hard work—but actually, most of it was done by people other than ourselves, the people who went out and collected these original survey data sets that let us do this. And so our filter for the project, when we decided which countries to look at, are the countries that have some of the highest-quality household-survey data sets available. That let us really drill into, What are people’s standards of living? and also, Where are they getting their income from? so that we can understand how that’s changing.

And that’s a really hard task. And so one piece of context I want to set is that if you’re used to thinking about, say, poverty in the United States, we can measure that pretty reliably—you know, issues and so forth—but looking at sort of data that people report to the government automatically through tax reporting and so forth. And we want to supplement that with surveys and so forth, but there’s third-party reporting. There’s all this machinery that exists.

And so in the countries we’re studying, that’s not the case. And the data that we’re looking at are going to come from people that are going out into remote corners of the country because we sampled a village there—and going to that village and trying to track down some people that we sampled that we want to interview, and then asking them if they’d be willing to sit for a multi-hour interview, and asking them really detailed questions like, How much rice did you and your family eat last week? And how much money did you make from your vegetable farm? And how much money did you make from doing some casual labor for other people in the village? And it’s an incredibly painstaking and laborious effort. What we’re trying to do is capitalize on all of that hard work that other people have done and say, If we now put it all together—because for a bunch of these countries, we have data that are really sort of the best, that adhere to the highest standards of data collection in fieldwork in development—what can we learn from that?

Demsas: And, I mean, I think a lay person hearing those five countries would think there’s something important missing. I mean, India, China, South Africa, Mexico, Indonesia: It really doesn’t include some of the countries where most people think about extreme poverty being the biggest issue. Like, it doesn’t include much of sub-Saharan Africa, where we do see the most deprivation. Are you worried about that in terms of—I know you said you picked these countries based on what the best data allowed you to study—but are you concerned that it’s not going to extrapolate to the places that are of most concern today?

Niehaus: Yeah, there are two parts to that. One is: It is backwards looking, and so these are actually the countries that contributed the most to extreme-poverty reduction during the period that we’re looking at, especially India, China, Indonesia. So South Africa, Mexico—relatively small. And we may get into this, but there they’re different economically in a bunch of other ways as well.

So actually, during the time period that we’re looking at, these countries are pretty attractive and may be the ones that you’d want to prioritize. For today, I think you’re totally right: If you wanted to sort of look at what’s happening in the last five years or think about what might happen in the next 10, you’d probably want to be looking elsewhere in the world.

That said, there are also examples of smaller-scale studies—a few regions in Uganda or in Tanzania, for example—that track migrants. And so one of the things we try to do in the paper is to also tip our cap to those and point out some similarities in terms of the findings from those as well. But yeah, those are places where we do face this very deep constraint that the same kinds of data, and especially panel data—meaning, data where we follow the same people over long periods of time—are much scarcer.

Demsas: Yeah. It’s a hard problem because the very places that are most deprived are the ones that are most difficult to study.

Niehaus: Yes.

Demsas: So how did poverty fall, Paul? What did you find?

Niehaus: I distill three things. So the first is: We look at this intergenerational aspect of it. And probably you’ve heard language like breaking the cycle of poverty or [breaking] the intergenerational cycle of poverty. So really sort of interested in: To what extent, as poverty fell, was it because one generation was sort of stuck at where they were, because they never had the chance to get a good education or whatever it is, but then they’re able to make the sacrifices so that the next generation can have a better life?

And so what was really interesting to me—I think I would’ve expected a lot of that. Actually, what it looks much more like is: When we see a new generation entering into the workforce, they’re starting out about as poor as their parents’ generation—so much less poor than their parents’ generation was when their parents’ generation entered the workforce 25 years earlier, let’s say. But their parents have made a lot of progress in the meantime. So overall, what seems to be happening is people are making a lot of progress during their lifetimes in parallel to the improvements that they’re then able to pass along to their kids.

And so we take away from that that it’s important to understand what is happening during people’s lives, because it’s certainly true that, you know, what you get at the start in terms of nutritional investments your parents are able to make, looking after your health, vaccination, schooling—all that stuff’s important, but it’s not like that’s the end of the story, right? We see that there’s much more after that, and a lot of people are making progress during their lifetimes as well. So that’s sort of fact No. 1.

Fact No. 2, we’re now going to turn to these panel data sets I mentioned that let us track the same people over time. And so those are even more scarce. You can imagine the difficulties involved, especially when we want to track people as they—you know, maybe they’re moving to a different part of the country for better opportunities and so forth. But we have data for these five countries, and what you really see in all of those is an enormous amount of churn, of movement in both directions.

So if the first thing I wanted you to know about this paper is that a lot of people got out of poverty, the second might be that even more people got out of poverty in gross, but then on net, poverty rates fell less fast than they might have, because a lot of those people fell back into poverty. And that’s a really important fact. We may come to it in terms of how we frame the way we think about poverty and poverty reduction. You hear a lot of conversation talk about poverty traps, people being stuck in poverty. I think that contributes to this mindset that’s like, Unless we come in and intervene in some way, unless we kind of find the magic key to unlock this situation, people are going to stay stuck where they are.

And what the data actually looked like is much more that, like, people are getting out of poverty all the time at a very fast rate. The biggest problem is they’re facing a lot of headwinds, things that knock them back. And we can get into what some of those things are. It might be illness, droughts, agricultural shocks, things like this, but it’s that getting knocked back that I think is really important.

There’s some caveats to that finding. There’s going to be some measurement error in our data, right? And that’s going to generate more of this. It’s going to look like somebody got out of poverty, when actually they didn’t. So it’s a little tricky, to be completely frank, to say just how much of this is churn versus measurement error. But it’s so strong, it’s so pronounced in the data, and it lines up with a lot of other research. I just think that’s a very important reality to kind of get your head around.

Demsas: And you mean measurement error that you’re losing people as they move, or you just can’t find them again?

Niehaus: More just that, like, when I come in and I try to do these surveys and figure out your living standards, it’s hard, right? And we don’t always get the answer exactly right. And so that’s just going to create some noise in the data, and it will look like somebody fell back into poverty when maybe they didn’t. So a little bit of it’s going to be that.

Demsas: And then you had a third stylistic fact for us.

Niehaus: So the third is—now we look at these people as they’re moving out of poverty and get to some of these questions I posed earlier about what’s happening in their lives. And I’d really say there’s no one story. As an author, it would’ve been nice if there was a very simple story to tell, which is, Well, the key thing is everybody’s gotta move to the city, or whatever it is. But—

Demsas: Yeah.

Niehaus: —you see people getting out of poverty while moving to the city. You see a lot of people getting out of poverty while staying where they are. You see a lot of people getting out of poverty while not switching from agriculture into nonagriculture. And also, the stories are different in different countries in interesting ways.

So maybe a good sort of broad way to think about it is: It’s good to not be looking for, sort of, the solution and saying, What is the path that people need to walk? and more thinking about, like, What are the right paths for a given person in a given context, and how can we accelerate that and help them along that? As opposed to coming in expecting there to be one thing that’ll work well for everybody.

Demsas: So now I have to talk about my priors here, because you pushed against them in ways that made me uncomfortable. So economists, urbanists, immigrants—we tend to see migration as a huge part of the story for modernization, poverty reduction, increasing the quality of life.

I mean, I’m obviously going to be biased, also, because of my own life. My family immigrated here from Addis Ababa when I was very young, and my dad moved from Asmara to Addis Ababa in order to get an education. And it’s just, like, this is ingrained in not just personal experiences but also, the economic literature really pushes that moving towards cities—higher-productivity cities—is the key way to improve both economic growth and productivity, but also giving people access to the good life, like access to higher standards of living and other things that they care about.

It’s not that your paper invalidates this entirely, but it does push back against this dominant view, in some ways. That classic story of rural peasants moving towards cities and towards factories, it’s only a part of the picture, and it’s not even the dominant one. In some ways, I would think it’s not really the movers that are the stars of your stories; it’s the stayers, both in terms of geography but also in terms of staying within specific sectors. Is that an accurate kind of read of a takeaway, and did that surprise you?

Niehaus: Yeah, that’s about how I read it. A few things there. One is: International migration, which you brought up, we’re not going to see here. And it’s probably not relevant for getting people over $2.15. I’m guessing that your family, when they moved, had access to much better opportunities but that you’re moving from a much higher starting point than that poverty line. And so we are really kind of zooming in here on the left tail of the income distribution and trying to understand that.

Point two is—and this is where the economics comes in—that when a few people move to the city, let’s say, that’s going to change wages and labor-market outcomes and other things for the people who stay behind. And so one of the things that economists need to really unpack, and this is something that’s been important in other papers that I’ve worked on, is that bit of not just the direct effect on the person who leaves but also the indirect effects and how that changes things for everybody else.

And so that’s not something we can see very easily in these kinds of data, but that’s one of the questions that we should be asking of them, is how much of that was playing a role. But, you know, all that having been said, yeah, I think it’s very clear that a lot of people have been able to make significant progress while staying in place.

And, you know, to me, one of the most interesting cases was Indonesia, because we have really good migrant tracking in Indonesia, and there were a lot of people who got out of poverty while moving, but while moving from one rural area to another rural area. So that, again, as you say, it’s a little bit different from the standard story. It’s an interesting twist. I think that’s a good thing to drill into.

Demsas: Yeah. I mean, regional economic convergence is something that has been studied at a different level—not really that I haven’t seen in the extreme-poverty space. But one of the editors at The Atlantic, Yoni Appelbaum, has written about this, and it starts with Peter Ganong and Daniel Shoag’s really great paper about declining regional convergence, which just kind of shows, you know, exactly what you were saying, that when people leave lower-productivity, lower-wage areas towards cities that are higher wage, higher productivity, the places they leave are net better off because there are fewer people there or because the average poverty level declines because the people who remain are often those who are in the good jobs.

But I want to tease apart something that you pointed out in response to my question, which is: We’re talking about people escaping extreme poverty, not people like my family and others who were not at, like, $2.15 a day or below that level.

Do you think that these answers that you’re finding—these facts that you’re finding—are really just about extreme poverty, and that questions about how to move people into the middle class, into higher levels, are going to be quite different? That industrialization will play a much larger role, urbanization will play a much larger role? How do you think about that?

Niehaus: Yeah, possibly. And I think most of the answer to that is: That’s something that I think we’ll keep doing as we continue with the project and look more at that, so probably better to just look at the data than to speculate too much.

Demsas: The second part of this is that it’s not just about geographical moving; it’s also about within sectors. So you talked a little about this with agriculture, but what is happening within agriculture that is allowing people to get themselves out of extreme poverty? The traditional story, as you said, is that they have to leave that sector to make money.

Niehaus: Well, one of the things we can look at with the data is whether you’re self-employed or not. And so the sector you choose to work in is a big one, as you say. We tell a lot of stories in economic development about the role of self-employment as opposed to wage employment. And so one of the things that I thought was very interesting here, and one of the ways in which, as I said earlier, some of these countries look very different from each other, is that in the lower-income countries—the countries that started out poorer at the beginning of this period, which are India, China, Indonesia—you see that people who switch into self-employment are making a lot of progress. That accounts for a fair share of the poverty decline, and sort of the rates at which people who make that change exit poverty are relatively high. And then in Mexico and in South Africa, it’s the exact opposite, which is that the people who seem to be doing best are people who get a job.

And I think that also maybe relates a little bit to your question about the ladder and sort of what the later stages in the ladder look like as well. Because Mexico, South Africa are more developed countries—they’re more industrialized countries—agriculture plays a smaller role to begin with.

And so that is a place where people who “become entrepreneurs” look to me a lot like these sort of entrepreneurs of necessity. They’re sort of doing it because they couldn’t get a wage job, which is what they really wanted. And the best thing they can do is to be a small vendor, sell something at the roadside, try to scrape by until they can get back into wage employment—as opposed to these other countries where I think it is actually: For many people to own their own land or to start their own non-ag business, that would actually be a really high return and exciting thing to do if you could get the capital to do it.

Demsas: You hinted at this, but I think the nonlinearity of the stories underlying this research kind of speaks to a lot of people’s personal experiences. It’s the slippery slope where people are making their way out of poverty to a slightly better position than falling back. Can you just describe what’s going on there and maybe give us some of those facts within countries? I think Indonesia, for instance, was a place where you looked into this.

Niehaus: Yeah, what we do in our paper is, you know, we’re trying to give you the kind of broad-stroke facts here. I think for this question, I would go to other sources. I really like, for example, Anirudh Krishna’s book One Illness Away, which sounds like it’s a book about health, but it’s really a book about poverty dynamics and this dynamic of getting knocked back into poverty.

And he called it One Illness Away because for many people, that is the thing that does it. It’s like: A primary breadwinner gets sick. You have to spend a lot of money on their health care. Hopefully that works, but maybe it doesn’t. Maybe you spend all that money and then they still pass away. In the meantime, they’re not earning. And that’s just a huge shock, right? And during that period, maybe you’re selling off assets and so forth to try to cover their medical bills and to make ends meet. And so I think it’s things like that we should have in mind when you think about these people who get knocked back.

Demsas: And the numbers were really shocking to me. I mean, in Indonesia, you guys find that 37 percent of households who were poor at the start remained poor at the end of a 15-year panel. But only 16 percent were poor in every survey round, meaning that loads of people are falling in and out. Similarly, in South Africa, you find that only roughly, like, a quarter of initially poor households stayed consistently poor throughout the panel. I think that level of churn is something that we’re familiar with, even in higher levels of poverty in developed nations.

In the housing context, people are finding a place to stay, and they feel safe, and then divorce happens or an illness happens or a job loss happens, and then they fall back into homelessness. I mean, that kind of churn is really well documented. But, you know, it’s interesting because it doesn’t feel like that’s how people talk about the poverty trap, right? They talk about it as if you’re stuck there and waiting for an intervention, and until that intervention happens, there’s really nothing to be done. You’re just, like, waiting there, and it really stagnates. Why do you think that idea persists?

Niehaus: I’ll be honest: I think that the somewhat skeptical part of my nature thinks that it’s attractive to us. It sort of depicts a scenario in which a hero is needed. And look—I got into development economics hoping to be a hero of some sorts, I guess, and so I should be very honest and self-critical about this.

But I think that story sells, right? And it’s effective at getting people to donate money. And so you sort of say to people, Yeah, like, people are stuck in this trap, and if we come in, we can get them out. And so I think that’s very compelling, maybe a little bit easier to pitch to people than the story that, like, people are making enormous amounts of progress on their own, largely without help. Our role is to come in and think about how we can accelerate that, how we can make it faster, and also how we can provide them with some degree of a safety net so that when they get hit by these shocks, they don’t get knocked too far back. It’s a bit more nuanced. But I think that’s true to the data.

Demsas: After the break: Who should receive cash transfers, and who gets to decide?

[Break]

Demsas: I want to move a little bit into takeaways for policy makers, for NGOs, for individuals who care about reductions in poverty and want to make a difference. So you are at GiveDirectly, which is an organization that sends cash transfers directly to people living in extreme poverty. Can you broadly describe how you decide where to direct those transfers into which people?

Niehaus: Yeah. So first I should say I am at UC San Diego. I’m there today, and they’re the ones who pay my paycheck. But I’m also a co-founder and a board member at GiveDirectly. And so: super happy to talk about the work that we do there. GiveDirectly is, I think, the largest global nonprofit focused on direct transfers to people living in extreme poverty. We’re currently in around a dozen countries, mostly in sub-Saharan Africa, to your point earlier.

And you asked specifically about how we choose who to direct the transfers to. Pretty simple: We’re generally looking for people living, you know—the poorest people that we can find, the poorest communities that we can find. We’ve tended to err on the side of simplicity. When we get into a village, let’s say we’re going to enroll most of the people living in that village. We might try to exclude a few wealthy landowners or people that are sort of absentee landowner, landlords, people like that. But generally, the goal of it is to try to find the poorest people we can and then get large amounts of money into their hands, no strings attached. Let them decide what they want to do with it.

But for everybody listening, I think there’s a bit of context that’s very important, which is that this show is called Good on Paper. I would say that, like, most of global-development work was, like, up until around 2000, good on paper—in the sense that we had a lot of theories of what ought to work, a lot of intuitions and things like that. There wasn’t all that much rigorous testing of anything, let alone the very specific questions about the right way or the best ways to do cash transfers and so forth, which are very good.

And so it was only in the last 20 years or so, I’d say, not just because of experimental testing—[randomized controlled trials] (RCTs) and the RCT movement—but especially because of that, I’d say we started to get a lot of really good causal evidence on what works. So that’s why we’re in a world where (A) I can tell you a lot already about what happens when we give money to people living in extreme poverty, which has generally been very good, and (B) we can get into some of those more nuanced questions that you’re asking. But I just want people to have that context.

Demsas: And how much research do you do towards things like anticipatory cash transfers or seasonal cash transfers or targeting specifically at women or different groups? How do you think about those aspects?

Niehaus: I just wrote a review paper on some of these questions with Tavneet Suri, and the gender one I think is very interesting. We have a few studies that compare what happens if you give money to a husband versus to a wife, let’s say. We have fewer of those than you might think. It’s obviously a very important question, and the reason is that the overwhelming view has been that you should give it to the wife, and so almost all cash transfers are run that way. GiveDirectly, by the way, it tends to be around 70–80 percent of the time in a typical program that we’ll give money to a wife, but we actually let the household decide how they want to do that, and so there’s been some variation there.

I’d say that if you look at the studies that have varied this, there isn’t an obvious winner. It’s not like women are good and men are bad, or vice versa. There are differences. There are cases where there are significant differences. There are cases where you see more investment in kids when you give transfers to the mom, maybe more investment in a business when you give transfers to men. That’s a pattern that I think fits people’s priors. But by the way, there are also cases where there’s bigger impacts on kids’ nutrition when you give transfers to the men. And there’s, I think, good evidence that many women have enterprises that they could, in principle, invest in, but it’s harder for them to keep the money safe and keep other people from getting their hands on it, sort of pressuring them for it. So I think it’s just a very nuanced story. I don’t think there’s a clear This is the right person, in terms of the impacts.

For me, this one is much more just about, like, on a priori grounds, we look at everything we know about empowerment, about who has the sort of rights to decide how household resources are used. It’s very inequitable, right? Women generally have much less say in a lot of things. So to me, this is one where I don’t think that the right way to go about it is to go do a bunch of these things and try to show in the data somehow that you get a bigger treatment effect on some particular outcome. It’s more like, I think equity really matters, and so I think it’s good to give resources to people who have less control over them to begin with.

Demsas: How do you think about the balance there? Because a big thing that you laid out for us is that the global NGO community was not sufficiently concerned with outcomes, and it required sort of the randomized controlled trial (RCT) revolution and work by you and organizations like GiveWell that focused on effectiveness and, really, ranking and charity navigators that really tried to force NGOs and force global aid communities to think more deeply about the impact there. How do you balance just focusing on sort of the raw benefits that you can measure and quantify in the spreadsheet versus values that are more difficult to show up in development statistics?

Niehaus: Great question. And first I would say, I think you mentioned the NGOs. Certainly true, I think, that many NGOs are much more evidence focused these days than they were in the past, and that’s been a good thing.

But hey, I mean, let’s remember: NGOs are going to follow the money. I think that the process—and I’m a big fan of the whole evidence revolution and of outcome measurement and all of that—but it is still a very top-down, technocratic process where somebody in a position of power who has the money says, Here’s the outcome that I want to achieve. And then people go out and try to figure out the best way of doing it, and then they come back and say, Here are the results. And then they get to decide which thing seems most attractive, given the impacts, as opposed to a process where the people that we are ultimately trying to benefit have a meaningful say in what gets done.

Cash transfers are obviously an example of that. That’s, like, an extreme case where we’re going to say, We’re going to give all the money directly to these people and let them say what they want to get done, what they want to prioritize. But there are other less-extreme ways that it happens or that you could imagine doing it where people have not just some sort of participatory process—in the sense that we’ll talk to people, but then, at the end of the day, we’re going to retain power and decide what to do—but people are given real control over how resources get used.

So that, to me, is a very important gut check on everything else, because if I come in and say, I really care about health—I’m a health guy, let’s say—that’s great. Obviously, people living in poverty also care a lot about health and about the health of their family members, but it’s not the only thing. And so there has to be some sort of gut check or process check that says, Am I really still kind of pursuing things in a way that’s consistent with their values and their priorities?

Demsas: Returning a little bit to your paper: Your paper doesn’t directly say what one should do in order to reduce extreme poverty. It’s a descriptive paper. It’s not one that’s looking at causation directly, but it does indicate that large reductions in extreme poverty are not really about transfers. Is that because they were insufficient over the time period you’re studying, or is it because these are just dwarfed by things like economic growth and other sorts of changes in people’s lives?

Niehaus: Yeah. Transfers in our data were small, for the most part. If you look in almost all the countries at the people who got out of poverty, after getting out of poverty, transfers are a pretty negligible share of their income, of a couple of percentage points. And so what that means is just that we weren’t sort of trying to get people out of poverty with a program—a very ambitious, large-scale program—of transfers at that time.

What we were doing in most of those countries is trying to use it to offset some of these shocks that we talked about, to kind of make the slope a little bit less slippery. And so you see that the people who are getting a larger share of their income from transfers are the people that were making negative progress, the people that were falling back into poverty.

There’s one exception to that fact, which is interesting, which is South Africa, which has historically had extremely generous social transfers—pensions and others, child-support grants, and so forth. And so you’ll see in South Africa much larger shares of people’s earnings coming from these public transfers. But even there, the people who got out of poverty are going to see that share decline by a lot. They’re not getting out of poverty because the government is ramping up transfers. They’re getting out of poverty in other ways.

Demsas: Does that indicate to you that transfers don’t play a large role in reducing extreme poverty?

Niehaus: Well, I mean, transfers are going to reduce extreme poverty very mechanically, right? If you give somebody $1 a day, they’re going to have $1 more a day. So no. I think what it indicates is that kind of the way we’ve thought about the role of transfers has been social protection. And that’s exactly the language that’s used for most cash-transfer programs, which I think is a very good thing.

I think that now just in the last five, 10 years, we’re starting to think about transfers in a more ambitious way. Which is, (A): Could they be graduative? Could we give people enough money to really push them over the line? And then (B) the question that I’m excited about and would love for us to talk about a little bit is: If we wanted to design a program that would end extreme poverty using transfers, how much would that cost? Because I think we’re actually quite close to it. That’s not a question that we’ve asked before, but I think we can now.

Demsas: I want to get to that, but the thing I’m trying to press on here is: If you’re an individual looking at this paper—and I know you mentioned it’s one paper; we don’t want to just say this is the end all, be all of descriptive statistics on extreme poverty—but it indicates that the most important thing to focus on is economic growth, right?

I think the thing that most people think about when they see the logic of economic growth being so vast in comparison to other interventions is: Is it just that we don’t actually know as individuals and NGOs and governments how to actually spur that sort of change? And so we’re doing the second-best thing, which is, Alright, let’s just send people money and do charity and do other kinds of forms of aid. Or is it that you think it’s possible to get these massive reductions, like what you described at the beginning of this episode, roughly 40 percent of people living in extreme poverty to 10 percent. Is it really possible to get those kinds of levels of changes through programs like GiveDirectly?

Niehaus: For sure. The way I would think about the role of the paper is: It’s certainly not telling us what the high-return things are to do—certainly not. And that’s what most of development economics over the last decade or more has been about. And so, obviously, no one paper is going to achieve that for all of these different things. I think what it can do is give us some clues as to where to look. And as economists, we really want to be thinking about what the investments are that people might like to be able to make that they can’t, because they don’t have the resources, or they face some other constraint.

Because that’s what’s going to drive—you talk about economic growth. We really care about, sort of, growth. But within this small subset—the subset of people who are, kind of, in the left tail of the income distribution—so, you know, economic growth for them might mean paying the cost to migrate or taking the risks to migrate. Or it might mean investing the capital required to start your own business, which we saw was a driver of poverty reduction for a lot of people.

So the way we can use results in a paper like this is to ask ourselves where to look and what sorts of things seem like they might be high-return pathways for people that not many of them are able to take, because they can’t get the money to do it in the first place.

Demsas: And you mentioned that you think it’s possible. I mean, this has been a UN development goal for a while: to end extreme poverty by, I think, 2030, which people are now projecting, due to the pandemic’s effect on increasing the number of people in extreme poverty, is likely not going to happen. Do you think that 2030 deadline is unlikely to happen? And how would you design a program to actually end extreme poverty?

Niehaus: I think it’s unlikely to happen under the status quo, just looking at the world as it is and at what’s happening. I think it’s very doable. And what I would do—in terms of recommendations, what we could do: I’d sort of split it into two parts. I think there are extraordinarily high-return ways of helping people in extreme poverty, which we should do and which we can do for a limited number of people.

So you mentioned, like, GiveWell, for example. They’ll recommend things like bed nets for people who live in areas with a lot of malaria, with a high prevalence of malaria. Or they’ll recommend deworming for kids who live in areas with a high worm load. And so those are going to be extremely high-return things that we can do to help that set of people who face that one particular issue.

If we want to do something really ambitious, like end extreme poverty by 2030, we’re going to need maybe a portfolio of strategies or maybe something that works everywhere and for everybody. And so part of what I find very compelling about direct transfers is that they do that, right? Cash is relevant, whatever your issue is, wherever you live, whatever your problem is, right? Money’s the most flexible thing that we can give people to help them. And also, the numbers on cash transfers and poverty, I think, are very compelling. Like, the global extreme-poverty gap—the total amount by which people who are poor in the world today are below that poverty line—estimates range between maybe $100–$150 billion a year.

Demsas: That’s not that much.

Niehaus: And you put that in global context—that’s like 0.1 percent or 0.15 percent of global GDP. So if we could find everybody and give them the exact amount of money they need to get over the line, to finance that, you and I, everybody, we’d all need to give up 0.1 percent or 0.15 percent of our income, which I think is a bargain. I think most of us would be willing to make that. You take, like, the average American sort of making $50,000 a year. What does that mean? That means 75 bucks. So if I ask, Would you be willing to give up 75 bucks, and that would be your part for ending extreme poverty? I think the answer is, in my experience, absolutely. And so I don’t think people realize how close we are.

The problem is we don’t know exactly how to go out and find everybody and give them exactly the amount of money they need to get over the line. And so I’m actually actively working on that right now, and we’ll get you an answer, which is: Maybe it’s, like, 0.2 percent or 0.3 percent because there’s going to be some buffer, because we don’t know exactly how much money different people need. But I think that, undoubtedly, the answer from this is going to be that there is a feasible, shovel-ready way of ending extreme poverty that would cost much less than you think and is something you’d feel really good about ethically—that, like, I did my part to end this thing.

Demsas: Yeah. So you brought up GiveWell, and there was something really interesting that happened within the GiveWell world. It’s an organization that directs charitable contributions, and importantly for this conversation, they evaluate charities on their effectiveness. And GiveWell and others have often used cash-transfer programs and, in their case, particularly GiveDirectly’s cash-transfer program as the benchmark with which to evaluate other charities. That is, like: How much better is your program than just giving that money directly to people in need? Like, you need to prove that it’d be better for us to pay to set up this whole organization to do anything—vaccinate people, whatever it is—that would be better for people’s outcomes than just giving them cash to do whatever they need to do, including getting vaccinations.

So in 2022, they updated their most effective charities to exclude GiveDirectly, pointing instead to a couple of malaria-prevention programs, a vitamin-A supplementation program, and a vaccine-incentive program in northern Nigeria. At the end of last year, they actually also evaluated the impact of unconditional cash transfers again and found that GiveDirectly was three to four times as cost-effective than they previously estimated, but they still think that those other four charities are significantly more cost-effective than GiveDirectly. Did this evaluation change or affect how you think about GD’s work?

Niehaus: That’s exactly what we wanted to do. I think when we set out to start GiveDirectly, we said cash transfers surely are not the only thing that we should be spending global-development money on, but what’s missing when you look at the sector is a little bit of this gut check of, like, Okay, I think I have a good idea. I think I have evidence. I have all this stuff. Am I confident that I’m better at spending this money than the person who’s actually there, living it, dealing with it, and knows what they need, perhaps better than I do?

And so I just really appreciate that GiveWell have sort of baked that into the way they now evaluate other organizations and sort of the way they think about the world. And I think it’s really good and really important to have an organization like GiveWell that’s out there saying, What can we do that’s actually better than what people living in extreme poverty could do for themselves? Because they can do a lot of really good things for themselves. And the update that you mentioned—the three to four times more effective—I think reflects some of that, as well as taking into account some of the aggregate impacts of the transfers, like the macroeconomic impacts of the transfers.

So in any given year, I think we might make the cut in terms of being on their very top list, or we might not. But I think that way of thinking about the world, which is, like, Yeah, there is some stuff where you need some coordination right there, externalities and public goods and problems like this we need to solve. But, like, our default should always be transfers. I think that’s exactly the right way to think about it.

Demsas: Do you think that more money in the global aid community should be going towards these kinds of public-health programs that GiveWell is doing over cash transfers? Do you agree with their ranking?

Niehaus: It’s a question of: If I were to think about where to give $1—sort of a given finite amount of money—then there’s a strong case for it. I think that the part that they don’t price that we’ve always felt at GiveDirectly is that—I think it’s true that GiveDirectly has contributed, to some extent, to helping to really shift perceptions in the sector more broadly. Cash transfers have now become a big part of how a lot of global-development work is done. And I think there are a lot of other people that now ask this question of, like, Well, we could come in and design a program, try to move outcomes, all this stuff. But are we sure that’s better than just giving money?

So I think if there’s, like, an unpriced part of GiveDirectly’s work that I think isn’t reflected in the GiveWell score, it’s that. And that’s hard to price, and I think we’d all agree with that. So I’m okay with it. But, you know, I don’t think it’s either-or. We should be doing both of these things, and we are.

Demsas: I feel like I’ve cited this, like, five times on the show already, so apologies, listeners who know this already. But it just reminds me a lot of Amartya Sen’s arguments about development as freedom, and that it’s obviously very important to center the literal metrics. Like, are people better off, and can you measure that? And also to realize that there are specific things about—the reason we care about development to begin with is because it gives people access to freedoms. Like, are you free to choose how you want to live your life? Are you free to make decisions for your children, for your family, and be free from discrimination and free from abuse? And that it can’t always be measured, those democratic freedoms. Like, do you feel free to speak your mind about things? It’s hard to show that on a spreadsheet, but that’s important.

And I asked you this earlier because I struggle with this, too, because a lot of the things that I care about, whether it’s gender egalitarianism or the rights of various marginalized groups worldwide, you can see how sometimes a focus on that can move people away from being rigorous about whether their work is actually helping people, because it’s hard to measure those things. Like, you can do surveys, but even those sorts of things are often really riddled with error, whether it’s just, like, people’s perceptions shift or whatever it is. Like, how do you measure whether people are happy on gender-egalitarian grounds? It’s just open questions. And I wonder, like, how do you wrestle with that problem and make sure that you’re able to balance both of those things?

Niehaus: I love what you said. It reminds me of some of the encounters we had in the very earliest days starting GiveDirectly. I remember, in particular, we had a great conversation with Duncan Green, who was at Oxfam at the time, talking about some of the cash-transfer programming they’ve done and talking about some of the things people did with the money that would not show up in any of the metrics.

But that really sort of provoked deep thought about: What is the point of global development? And Amartya Sen, right? Am I really bought into that? Am I okay with that? They found, for example, in one of these programs that a lot of people—there’s a program in Vietnam, and a lot of people use transfers to purchase coffins because for them, culturally, religiously, it was very important to be buried in a coffin and not in an open grave. And that’s not something that I think anybody ever measures in our surveys, right? But what if that’s very important to you? Am I okay with that?

And in my own experiences with GiveDirectly fieldwork, I remember: We interviewed a guy who was part of the basic-income project that we were doing and had worked as a security guard in a town to earn money and send money back to his family, and then who lived in the village. And then when he started getting transfers, he quit that job and moved back, going to live in the village, earn less money but see his kids more often.

Again, that’s going to look like an income reduction in the data that we typically collect. It’s because we aren’t great at measuring things like the quality of your relationships with your kids, which are what I think actually matters in life. So I just think that it’s super, super important to take all of the measurements, the outcome stuff, with a grain of salt and with that humility, and sort of trying to remember that people’s own views on what they want out of their lives are very important if we really take that Senian perspective.

Demsas: It’s funny because there’s a subset of people where I’m like, Okay, yeah, you should take this more seriously. But broadly, I find that when I’m talking to people in the charitable-giving space, it’s like, maybe they’re not taking the effectiveness seriously enough. And it’s like, which message does any individual need to receive?

And kind of on that, we briefly touched on the UN’s goal of ending extreme poverty by 2030. When you look at the global aid and the work that different governments are doing, is the international community largely focused on doing the right thing? What would you change—maybe setting aside what’s going on in the US for a moment—what would you change about how countries, intergovernmental organizations, etcetera are doing to try to actually attack this problem?

Niehaus: Well, it’s a really interesting moment, and I think that actually taking the institutions as given might be a mistake. We might want to actually sort of reimagine the institutions themselves to some extent.

Demsas: You mean, like, the UN?

Niehaus: The whole architecture for aid. So if you take, for example, the UN architecture for humanitarian response, it’s built around these silos that say we’re going to have some organizations that are focused on shelter, some organizations that are focused on food, some organizations that are focused on education, and so forth. And so in a world where service provision is done by NGOs, then you need that specialization, right? Because you need to kind of pick something and be good at it.

In a world where we’re going to give money to individual people and let them decide what they want to do with it, and more of the provision—the service provision—is going to be done through markets, maybe we don’t need that same institutional structure. And in fact, seeing the way that’s played out within the United Nations system as it’s become, in humanitarian work especially, much more receptive to it, I think people now agree that cash transfer should be a much bigger part of humanitarian response. It doesn’t sort of fit very neatly right within that system.

So I think it would be—and John McArthur and Homi Kharas at Brookings sort of suggested this, as well, that it might be a good time for a new multilateral that’s focused on direct transfers. And that would let us think a bit differently, as opposed to trying to fit new wine into old wineskins, so to speak.

But in terms of the things that we would be doing, look—we have 20 years now of really rigorous evidence on cost-effectiveness and impactfulness. And so there are a bunch of things that are fantastic. If you’re wondering, like, Do we know good things to do with money? Yes. We know great things to do in education that are really effective at improving learning outcomes. We know great things to do in public health that reduce disease burdens and improve people’s lives for long periods after that.

And we have cash transfers, which are just a great way of helping people do whatever it is they want to do, and have an enormous evidence base people are using money responsibly. They’re generally not wasting it. They’re generally not using it in self-harm ways, like drinking it away or smoking it away. And in many cases, they’re making investments that have long-lasting impacts on their lives.

So the point is, like, we have so much good stuff to do. And we, up until now, have been doing a lot of stuff that’s really based on old thinking, right? This sort of good-on-paper-type reasoning, “Teach a man to fish” type thinking. And seeing USAID essentially evaporate overnight, obviously it’s sort of a gut-check moment, but I think it’s also an opportunity to rethink how we do the whole thing.

Demsas: Well, I think that’s a great time for our last and final question. Paul, what is something that you once thought was a good idea but ended up being just good on paper?

Niehaus: So I would say—and I sort of said this earlier, but—I think that idea of teaching a man to fish is something that when I first heard it made a lot of sense and seemed good on paper. But, like, as we started to test impact over the last 20 years and say, like, What impact do our fishing lessons actually have? I don’t think it works very well; the data don’t support it.

Demsas: We’re bad at teaching people how to fish.

Niehaus: Unpack that a little bit, right? I mean, if you take it a little bit too literally than it’s meant to be, it presumes that the guy doesn’t know how to fish in the first place. Maybe, actually, he did know, and what he needed was a fishing rod. It presumes that the lake isn’t getting overfished, right? Maybe there are tons of people out there fishing, and the big issue is sort of overextraction of natural resources, and we definitely should not be teaching more people to fish, right? It presumes, as you said, right, that we’re good at teaching people how to fish. Maybe we’re not. Maybe it’s hard, and it’s not something that we know how to do well. So there are all these sorts of assumptions baked into it, and that’s why it’s important to test. And you go out and test it, it actually doesn’t.

The other thing that I think is really interesting—I’ll just riff on this a little bit about teaching a man to fish—is the origins of it. So today you hear it, and the way we interpret it is it’s saying, like, Don’t just give people money, because they’re not going to use it in ways that have a lasting benefit. It’s important to kind of help them in these other ways, which I think is just empirically untrue.

But actually, if you trace it back, the first place that I’ve been able to find it, it shows up in this Victorian novelist Anne Thackeray Ritchie, and she has this ironic character in one of her novels saying that the reason that we don’t do these things is because affluent people really don’t want it. They said you could really help somebody make progress, but affluent people would feel uncomfortable with that—it would upend the social order. So it’s funny that the origins of the term are actually this critique of inequality and of people’s unwillingness to—

Demsas: Wow. I’ve never heard that.

Niehaus: But somehow, over time, it’s completely changed. And now the interpretation is: You can’t trust people to make financial choices for themselves. That’s not what it originally meant.

Demsas: Yeah. Well, Paul, thank you so much for coming on the show.

Niehaus: Pleasure to be here. Thank you so much.

[Music]

Demsas: Good on Paper is produced by Rosie Hughes, edited by Dave Shaw, fact-checked by Ena Alvarado, and engineered by Erica Huang. Our theme music is composed by Rob Smierciak. Claudine Ebeid is the executive producer of Atlantic audio and Andrea Valdez is our managing editor. I’m Jerusalem Demsas.

Thanks again for listening. And keep an ear on this space for when to expect new episodes from Good on Paper.