GiveWell’s Recommendation of GiveDirectly
GiveWell recently updated their recommended charities. The principal change was that they now have a third top-recommended charity, GiveDirectly, a charity that makes unconditional cash transfers to the very poor in Kenya. GiveWell gave GiveDirectly their #2 ranking — above Schistosomiasis Control Initiative but below Against Malaria Foundation.
My initial reaction to this recommendation was surprise, and, after reading the material available on their website, I remain surprised that they have chosen to upgrade GiveDirectly to the #2 slot. This post explains why. In a follow-on post, I’ll take the opportunity to make some more general comments on things that I find lacking or am concerned about in GiveWell’s research and recommendations. Before I begin, I’ll note that their blog and website does repeatedly mention that more information will be released soon, so hopefully the issues below will be addressed there. I’ll also note that GiveWell takes direct criticism from others as both helpful and a sign of respect, which is exactly how I intend what follows. Finally, I’ll caveat that the views below are my own first reactions; they aren’t meant to represent the views of GWWC as a whole.
Concerns about GiveWell’s Recommendation
GiveWell mention that cash transfers face an unusually low burden of proof. If that’s a low burden of proof for doing some good, then I agree. I think that cash transfers would be a reasonable standard of comparison by which to judge other charities — it would be an indictment on the charity if they were performing worse than cash transfers.
However, there are theoretical reasons why direct cash transfers should be less effective than the best intervention in the world. There are a number of ways in which we might be able to ‘leverage’ our resources to achieve a surprisingly large impact, discussed below. Cash transfers do not exploit any of these.
1. Positive Externalities
Let us suppose that those in extreme poverty are perfectly rational, with perfect information. Even if so, we should expect people — anyone, but especially those whose basic needs are not met — to use money in order to benefit themselves or their household rather than whatever would have the largest total benefit, including the effect on those around them. That certain goods have positive ‘externalities’ is not a reason for individuals to purchase them, whereas it should be a reason for donors to purchase them. So by purchasing and providing goods with high positive externalities, the best charities should be able to outperform cash transfers.
Far from being a purely theoretical point, positive externalities actually seem to be key for the best interventions. The best health interventions increase productivity, which benefits the individual but also benefits those around them. In addition, preventing one person from catching a contagious disease prevents them from passing it on to others. Furthermore, parents may not be motivated to invest the socially optimal amount in their children’s health and education. Not only does a lot of the benefit of this go to their children into the far future, but higher productivity will help other future citizens of the country. J-PAL has found that income increases of the extremely poor are often spent making life more pleasant, such as by buying nicer-tasting food, rather than more, or more nutritious, food. This is discussed in an accessible way in the book Poor Economics.
GiveWell have data on how these cash transfers are spent: they could compare the positive externalities of tin roofs with healthcare. All of the points above have also been noted by GiveWell in one of their blog posts, which makes it surprising that this issue wasn’t discussed in this release.
2. Economies of scale
The extremely poor can’t currently buy albendazole (a deworming drug) for $0.50. Those living in rural areas simply can’t access it without using considerably more than $0.50’s worth of time travelling. In contrast, thanks to economies of scale, a mass deworming program is able to provide albendazole and other drugs for ~$0.50 per treatment. One could respond that the market would provide albendazole if it there was demand for it, but it’s unclear whether that’s true in the situations in which deworming charities operate. This is at least worth discussing.
Like the issue of externalities, this concern holds even if we assume the extremely poor to be ‘perfect’ economic agents. But there are predictable ways in which they are not.
3. Lack of Information
An important way in which the extremely poor differ from idealised economic agents is lack of information. How much can we expect the extremely poor to know about the health benefits of consumption of albendazole? Or even the difference between long-lasting insecticide treated bednets and untreated bednets? For the world’s poorest people, reliable health information can be too expensive, or simply impossible, to access. This creates a large industry of local practitioners with no medical training who dispense unhelpful or even dangerous advice. For those who would like to learn more, this problem is also discussed in Poor Economics.
Healthcare is often regarded as a case where markets fail because the ‘information asymmetry’ between the consumer and supplier is so large. For this reason among others, government and non-profit providers play a much larger role in healthcare around the world than they do in most other markets. We should expect, and have plenty of empirical evidence suggesting, that the extremely poor are extremely poorly informed about medicines and healthcare. As a result, it is not foolish to hope that experts could do additional good by promoting or distributing medicines they wouldn’t otherwise choose to buy.
4. Poor Rationality
This was the issue on which GiveWell focuses in their analysis, in their discussion of whether cash transfers increase alcohol and drug consumption. I personally would expect this to be a case where the poor behave closest to the standard economic model; with so little money, spending choices can be a matter of life-or-death, so the poor will likely think extensively about their purchases given the knowledge they have.
That said, the poor, like most of us, may discount future benefits more heavily than we would like. This creates a kind of positive externality: as altruists we care about their future selves as much as their present selves, whereas they might care more about their present selves. There is some evidence, again discussed in Poor Economics, that the poor, under high stress and faced with constant temptation, struggle to save as much for the future as they would like.
I don’t take the above theoretically driven concerns to demonstrate that GiveDirectly can’t be one of the best charities out there. But they do make me initially skeptical. What surprised me is that GiveWell didn’t address or even mention any other than the ‘rationality’ concern. There was only a discussion of whether the additional cash is used to purchase alcohol or other drugs, or whether it has unintended side-effects like causing jealousy among neighbours.
In addition to the doubts raised above, I had some other concerns with GiveWell’s methodology.
1. Lack of Evidence
My overall impression of GiveDirectly is that the evidence behind it is considerably more limited than either AMF or SCI. One salient instance of this is that, as far as I can tell, GiveWell rely on self-reported data in their assessment of where received cash is spent (where they suggest that 67% is spent on home improvement), in precisely a context where we would expect self-reporting to be misleading. Another is that, though there is extensive economic analysis of cash transfers, this has focussed on “income transfers” rather than “wealth transfers” (to use the distinction that GiveDirectly make), and we might see very different effects between the two.
2. Lack of discussion of cost-effectiveness
One factor that I found very surprising is that there was no almost no discussion of how beneficial the marginal expenditure of cash transfer recipients actually is. How beneficial is it to have a metal roof rather than a bednet? What are the long-term benefits, and benefits to others, of metal roofs, as compared to bednets? This is something on which GiveWell has said more information will follow, so I won’t dwell on it. But given the crucial importance of the question, I’m surprised it wasn’t discussed in the basic page.
More generally, I was very surprised by the limited discussion around “what do you get for your dollar?” Out of a roughly 8000-word page, only 450 words were dedicated to this question. GiveWell claims to agree with GWWC that one should give to the charities with the best “good out per dollar in” ratio; given this, I would expect them to consider “what do you get for your dollar?” to be the crucial question.
I look forward to understanding better the thinking behind this new recommendation as GiveWell releases more information on the subject. For now, at least, I’m unconvinced.
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They do benefit from the 'lack of information' issue though - local actors suffer less from Hayekian knowledge problem that foriegn donors.
Great post. Look forward to hearing more about this.
I had a few initial worries about this recommendation from Givewell, but also a query about the research. One obvious worry with cash transfers is that they won't be effective long-term. Givewell's research page on GiveDirectly indicates a ~20% annual rate of return that is long-term sustainable. I found that surprising given the high rate of investment in home improvement from unconditional cash transfers that they cite, which I believe Banerjee and Duflo discuss in their book as something that isn't necessarily the best way for those in the developing world to save or invest. But when I looked, the ~20% figure on long-term success is based on only one study by Gertler, Paul, Sebastian Martinez 2012. And this study is assessing Oportunidades, which is a government social assistance program in Mexico that gives cash transfers conditional on regular school attendance, healthcare visits and steps to improve nutrition (p.4-5, ibid.). The page notes that GiveDirectly is a non-governmental program (and they mention that it's quite distinct from governmental assistance programs) and it is an unconditional cash transfer progam. It's not clear to me that unconditional direct transfers should expect the same long-term results, especially if people are investing heavily in home improvements rather than in businesses, education, health and nutrition. Have I missed something?
I am also skeptical about GiveDirectly, but for different reasons. I spoke with Holden on Thursday, and it sounds like they have done some thinking about what you get for your dollar with GiveDirectly. I don't want to speak for GiveWell, so I hope they will respond directly to this post, but it seems that they have thought critically about this issue, and there at least is an argument to be made that it could be in the same ball park as the other two, although I think it's still quite uncertain given the data (which is my guess as to why this wasn't elaborated on in their post).
Positive externalities, returns to scale, and lack of information are good points. The rationality argument, and the question of what they will actually spend the money on, is also important to think about. But I think the idea that we as donors know how to spend money for the poor better than they do is problematic. On the one hand, I agree that J-Pal and others have shown that the poor do not always spend their money in ways we would want them to spend it. (I am pretty skeptical about the extent to which these studies can be generalized, but let's leave that for now.) But I think humility on behalf of the donors is really important when it comes to international development. The additional information that people living in poverty have, relative to donors, about their own needs seems likely to me to far outweigh the possibility they will use it irrationally. The history of the development is littered with failed, well-intentioned aid projects designed by outsiders who felt they knew what is best for the community. Even in the case of a really rigorous, well-evaluated charity like AMF, I think there are still plenty of things that can go wrong (misuse of funds/misallocation of bednets by distribution partners, failure to correctly use the nets, even disagreement about the returns to bednets) that we cannot anticipate well as donors living across the world. AMF's data collection and transparency go a long way towards addressing these fears, but from my own experience with data collection in these environments, I still think some amount of skepticism is healthy.
My feeling is that the most problematic aspect of GiveDirectly is the way these cash transfers will impact communities. I've heard horror stories about families and relationships that fell apart after a well-intentioned outsider gave a big gift to one member of the family, causing fights about whether it was intended to be shared with others or not. These anecdotes underscore the broader issue that donors rarely have any conception of the cultural, political, and communal dynamics in a given location, and thus often cause serious unintended consequences. I am interested to see how subsequent evaluations of GiveDirectly will shed light on this question.
Paternalism vs. liberty
My instincts come down on the side of liberty. I have witnessed too many paternalistic rationalizations of meddling with people's autonomy that tend to do more harm than good.
I'm more motivated to pay beer for poor people who actually want it, than to give bednets or medications to people who have no interest in them.
Will people make decisions that don't optimally increase their life expectancy or productivity? Sure, but why shouldn't they? If they don't care about their long-term future, why should I? That's precisely the kind of meddling I don't want in my life by well-meaning "altruists", and I sure as hell won't force it onto others.
For all I care, they don't even have to research how the recipients spend their money. They can spend it all on ale and whores, and I would still consider it the best charity, because it gives people what they want instead of what strangers think they should want.
Nonetheless, if you want to have the maximum impact possible, you will want to focus on the unusual exceptions where people are doing things that aren't in their long-term self interest. Given the limitations of human rationality, we should expect that there will be a few cases like this out there. While we should be cautious about assuming we are wiser than people who know their specific circumstances, the rare cases where we actually do would offer the opportunity to generate extra bang for buck. So even someone like me, who is in favour of individual autonomy and decentralised decision making almost all of the time, might prefer to give to a charity with some degree of paternalism.
I also think even ignoring the possible benefits of paternalism, the 'externalities / public goods' considerations are compelling.
On Paternalism:
It's important to distinguish two anti-paternalistic views that you could have:
1. You should give cash because doing so does the most (expected) good
2. You should give cash whether or not that does the most (expected) good
I can completely understand someone who endorses (2) on anti-paternalistic grounds. Suppose you think you should give to the extremely poor not as a matter of charity but as a matter of justice: perhaps you think that it's only through an unjust institutional order (or inheritance from unjust acts in the past) that you have so much more wealth than those in poor countries. In which case, you have no right to force them to do spend your donations in one specific way any more than you have a right to force them to spend money that they already have in one specific way. An analogous, but more extreme, case would be: if I stole money from you, I don't rectify that wrong by spending the money in a way that benefits you, even if I the way I spend the money. Rather, what I ought to do is give your money back to you and let you spend it as you want. The above way of looking at redistribution to the poor isn't my own view, but it's a perfectly reasonable one.
But, so far, when GiveDirectly has been justified on anti-paternalistic grounds, by GiveWell or Ben or Daniel (above), it's (1) that's invoked. But if so, then one needs to get into a discussion of things like positive externalities. And, rather than just relying on the theoretical idea "the poor will know how to spend money better than we can work out", we can actually assess whether they do. We can assess and sanity check it: even assuming that there are things that they know that we don't, does it make sense that money spent on metal roofs does more good than money spent on deworming drugs? What are the benefits and costs of home improvement, and what are the benefits and costs of deworming drugs? Do the poor have access to other ways of investing money rather than home improvement? Do they know the potential benefits of certain health treatments? What is it that they want, ultimately (note that we can ask them this)? And are the means they are choosing the best way of achieving what they want? Moreover, it's not just that we can and do this sort of assessment. Rather, this has actually been done. Again, Poor Economics provides a lucid overview of the topic.
Again, the above isn't to say that other interventions are definitely better than GiveDirectly. Rather, I just find it odd that GiveWell seem to lean so heavily on this theoretical anti-paternalistic argument (1), even though it's something that could just be empirically investigated and tested.
Somewhat similarly, Ben says "we should give people what they want." Let's assume that if I give cash to person A rather than deworming person A, that person A gets more of what they want. But deworming person A can give more of what person B (a nearby person who also has worms) wants, by decreasing their worm infestation as a positive externality. And deworming person A can give more of what future persons C,D and E want, by making A more productive and improving infrastructure. So claiming that we should give people what they want doesn't yet provide an argument for cash transfers: we need to get into a discussion of externalities, available information and markets, and so on.
Apologies for typos. The first long paragraph should read:
In which case, you have no right to force them to spend your donations in one specific way any more than you have a right to force them to spend money that they already have in one specific way. An analogous, but more extreme, case would be: if I stole money from you, I don't rectify that wrong by spending the money in a way that benefits you, even if the way I spend that money benefits you more than the way you would have spent the money.
I will point out that the limits of rationality apply to paternalists just as much as to everybody else, and they are blind to their own biases just as much as everybody else. This leads to a world in which many paternalists sincerely do believe they know better, while they actually don't.
As for time discounting and the economics of misery, there are alternative explanations for seemingly akratic and irrational behavior: Opting for a shorter, less productive life with less suffering can be perfectly rational, as pointed out in this blog post: http://theviewfromhell.blogspot.com/2011/04/born-obligated-place-for-qua... (the important subsection starts at "Poverty and Pain").
In addition to these arguments for (1), we might favor (2) not necessarily out of a sense of justice or obligation. Some of us may find intrinsic value in the idea of liberty to make one's own mistakes.
We can ask poor people what they want but talk is cheap. To really find out what they want we should see where they vote with their wallet. We might disagree with their choices, perfering education to alcohol. But it seems disingenuous to suggest this is our knowing what they want better than they do.
Rob makes a good point though.
A few stray thoughts:
GiveWell started out wanting to recommend charities in each of a number of different sectors, to cater to donors who wanted to donate specifically to, e.g., and education charity. While that task proved too ambitious, to me they've always maintained a streak of wanting to cater to donors with specific goals -- they spent a long time on microfinance because they got a large donation specifically for that topic, and as recently as mid-2011 they had a long blog post on KIPP Houston. For a while, they had Partners in Health as a second-tier recommended charity, despite their highly uncertain estimate for a cost per life saved being about 4x those of their other second-tier recommendations. The reasoning was that Partners in Health was delivering different sorts of health services than the more specialised vaccination/TB/etc. charities, and therefore the cost per life saved metric was not so relevant. (Perhaps in DALY terms PIH was more competitive, but I don't recall GiveWell ever making a case along those lines.) Along similar lines, Nyaya Health was rated a standout charity last year. While they've always made a call on the top charity, and that charity has always performed cost-effective health interventions, I've long had the impression that GiveWell sees other areas as, maybe not "equally worthy of your donations", but perhaps "almost as worthy".
So with that history, I see the recommendation of GiveDirectly as fairly consistent with GiveWell's philosophy, which isn't always the same thing as trying to maximise the net positive impact per dollar. I agree with Will's latest comment that they are making stronger claims (especially Alexander Berger in his comment at the GiveWell blog, who says that it's "plausible" that donating the first million dollars to GiveDirectly will have the highest impact, because of the promotion of cash as a benchmark for charity). But while I disagree with them, am unlikely to donate to GiveDirectly, and hope that the GiveWell community gives much less than 20% of their donations to GiveDirectly, it feels like an almost predictable step for GiveWell to take (they've been heading towards cash as charity for years).
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And on the separate thread on paternalism in the comments here, I'd remark that since the health interventions' primary beneficiaries are children (the under-5's are most at risk for malaria; the deworming pills are usually given to school-age children), the liberty argument is weaker than it would be if the primary beneficiaries were adults.
Hi all,
Thanks very much for the thoughtful commentary and discussion. We greatly value critiques of our work and hope that it will lead to better-informed views on all sides.
Responses to the points raised in Will's post:
1. We have since written more about the evidence of effectiveness (see our writeup on cash transfers and our discussion of how the evidence here compares to the evidence for other interventions) and cost-effectiveness (see this analysis) of cash transfers.
2. The first part of Will's post lists several reasons that a non-cash-transfer intervention may be better than cash transfers. We believe these are valid issues; we have discussed some of them in the past (for example, in a blog post from May of this year); but we don't see why the existence of these issues poses a problem for our recommendation. When comparing any two interventions, generally (and certainly in the case of our top charities) each will have many conceptual advantages that the other does not. We don't seek to compare charities by listing the conceptual possible advantages on each side; instead we focus on evidence of effectiveness, cost-effectiveness and room for more funding.
We have not claimed that cash transfers exploit every advantage an intervention could possibly exploit, or even that they are superior to all other interventions (in fact we take the position that both nets and deworming likely accomplish more good per dollar in isolation, though other considerations have led us to rank GiveDirectly #2 ahead of SCI). What we have claimed is that cash transfers are a highly promising intervention; that their cost-effectiveness is inferior to but in the same ballpark as the best intervention we've seen (net distribution); that all things considered, GiveDirectly is one of three charities we've found that does best on our criteria; and that we rank it #2 when we holistically evaluate which of the three we believe is accomplishing the most good per marginal dollar.
As a more minor point, I believe the "economies of scale" argument to be less of an issue than the other points Will raised on this front. Many basic items are quite cheap in the developing world despite being sold to individuals rather than distributed universally via aid programs (for-profit organizations selling to individuals can reach substantial economies of scale). Interventions like deworming and nets don't require constant trips to collect supplies; I'd guess that if people wanted to purchase these things they could do so on their periodic trips into shopping areas.
Hi Holden,
Thanks so much for this; I appreciate it.
On your point (2): It's not just that there are certain conceptual issues on either side, and I've chosen to focus on one side. Rather, to many people, including myself, the fact that cash transfers is among GW's top recommended charities is really surprising. It provokes a salient gut reaction saying "that can't be right". Given this, I'd expect the surprisingness of the recommendation to be acknowledged, an explanation and understanding of where that gut reaction might come from, and a response as to why our gut intuitions go so astray here. In the above post, I was detailing what might lie behind that gut intuition, and hoping to explain that, once you've got the economic vocabulary to express yourself, there's a lot more to it than just the worry (often expressed) that recipients will spend the money on drugs or alcohol. So it's the surprisingness of the recommendation that warrants discussion - the fact that, if cash transfers represent a minimal baseline for charity effectiveness, only one charity GW knows of does better than that minimal baseline - not the mere fact that there are some conceptual issues with the intervention.
I think your follow-up posts are excellent, and they give me a better understanding of where GW is coming from. I hope my post helped in crafting them. Even though I don't ultimately agree with the conclusion, at least I 'get it' now, whereas I didn't before.
In your response to my other blog post, you mentioned that you don't put that much time into making your research and views easily digestible. It's obviously extremely difficult to condense such a large body of research into a easily understandable form but perhaps, when it comes to announcing your annual recommendations, this is an area where it's worth special effort. I think the fact that a lot of the explanation for your views came after the recommendations was problematic for me, and I think that the fact that it takes quite a lot of digging in order to understand your views could be problematic for those who are time-restricted. If you wanted me to think more about this and provide suggestions about presenting the same information in as accessible a form as possible, in a way that would have been beneficial to me, I'd be very happy to (and already have some thoughts on this).
There's more I could say on (1), but I'll leave that for another day.
I think David Barry's recent post on GiveWell's blog puts the challenge excellently:
"GiveWell was recommending deworming... because of its developmental effects. Since these benefits should show up later in life in the form of increased incomes in adulthood, a comparison between deworming and cash transfers makes more sense: what generates more extra money, an investment of a cash transfer or a higher income thanks to deworming? Put like that, deworming’s not the obvious winner."
I haven't fully examined the evidence, but it seems perfectly plausible that transfers should raise incomes by more despite all the points you raise, Will. Are you skeptical of this claim, Will? Or do you think the immediate health benefits more than make up for any lesser income produced by deworming?
I like the comment of Libs, "We can ask poor people what they want but talk is cheap. To really find out what they want we should see where they vote with their wallet. We might disagree with their choices, perfering education to alcohol. But it seems disingenuous to suggest this is our knowing what they want better than they do."
Those people really afford a healthy lifestyle as they don't have the resources and so are living an insane life. We can help them in many ways and should take care of them with our positive efforts.
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