Tyler Cowen and Alex Tabarrok, two marginal revolution bloggers, are fascinated by GiveDirectly. In a post yesterday, Alex mentioned that four economists have started GiveDirectly. It metaphorically puts their money where their economists face because economists believe that the most effective way to help people is to give them money and spend according to their priorities. I basically agree. I think some people will spend for drugs and alcohol and not for their children but that does not mean that the government’s choices would be better: Spending on things that have been defined will improve their family life in the long run.
In his post yesterday, Alex Tabarak reported that the Chicago city government is getting a direct give to run a program that “will pay $ 500 per month to 5,000 families in Chicago by the end of June.” The city government is receiving that funding from the federal government.
I see two problems that could end this plan badly. I’m leaving aside the question of whether Universal Basic Income is a good idea. I don’t think so, for reasons I highlighted in length in an article in 2015.
In the sense that I think it could end badly, $ 31.5 million is a big enough number that could distort how GiveDirectly works. There can be two levels of supervision from government officials: supervision from federal officials and supervision from government officials in the city of Chicago. Governments like to get their hands on things by pointing out how different aid recipients will work. They can do this in two ways: (1) controlling how GiveDirectly works and (2) controlling how the recipients of the funds work. My biggest concern is (1).
If government penetration is large enough, it could turn Give Direct into something quite different from what the four founding economists envisioned.