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New Findings From War on Poverty: Just Give Cash

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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There is a typical debate that tends to happen whenever people start talking about poverty. Conservatives try to blame poverty on the bad behavior of the poor. If lower-income people would just get married, stay married, avoid drugs, work hard and not commit crimes, say the conservatives, the poor would make a lot more money. Liberals typically assert that it’s the structures of society that cause poverty, not individual failings. Poor kids start with a disadvantage because of residential segregation and bad schools. Powerful bosses hold down the wages of unskilled workers, making it difficult for them to escape poverty. Even good behavior, liberals say, wouldn’t help the poor get ahead. 

This is a tired and familiar argument, and I’m sure that the truth, as usual, lies somewhere in between. But I’ve been seeing some recent research that tends to shift my view toward the liberal side of the debate. Basically, we’re starting to learn that what conservatives label “bad behavior” is often a result of growing up poor. 

First, there is a new National Bureau of Economic Research working paper by Randall Akee, Emilia Simeonova, E. Jane Costello and William Copeland. The authors find that giving poor families money, on top of the benefits they already receive, improves their children’s behavior:

We examine how a positive change in unearned household income affects children’s emotional and behavioral health and personality traits. Our results indicate that there are large beneficial effects of improved household financial wellbeing on children’s emotional and behavioral health and positive personality trait development...Parenting and relationships within the family appear to be an important mechanism. We also find evidence that a sub-sample of the population moves to census tracts with better income levels and educational attainment.

Like so many economists these days, the authors find a natural experiment to test their hypothesis. They realized that the opening of a casino in western North Carolina would provide a sudden flood of cash to members of the local Native American tribe, the Eastern Cherokee -- about $4,000 a year for every adult. The researchers found that in the wake of this sudden windfall, poor Native American children suddenly started doing better on various psychological measures of emotional well-being. 

Because the authors’ data is longitudinal, with repeated observations made over time, they confirmed that the change wasn't ephemeral. Children whose families got the money ended up having better job outcomes at age 25. Examining surveys of these families, Akee et al. hypothesize that much of the improvement comes from more harmonious family relations. Parents are happier because they have more money, leading to less fighting within the family. This lowers stress on kids, making them healthier, happier and better-behaved, and leading to a more productive adulthood. 

This, of course, flies in the face of conservative claims that welfare encourages bad behavior and destroys families. 

The second big new piece of evidence comes not from economics, but from neuroscience. In a study published this year in Nature Neuroscience, a large team of neurologists led by Kimberly Noble found a correlation between child brain structure and family income. Simply put, family income is correlated with children’s brain surface area, especially among poor children. More money, bigger-brained kids. 

Now as we all know, correlation doesn’t equal causation, so it’s important to establish that income differences are actually causing brain development to change. That’s why Noble and a team of social scientists are planning an experiment. They are going to randomly dispense cash to a number of poor families, and observe whether the brain structure of their children changes over time. Noble points out that cash transfer experiments have shown encouraging results in developing countries, in terms of boosting kids’ long-term economic outcomes. Now, we will find out if the neurological outcomes match up. 

These results are not simply bolts from the blue. They are part of an emerging program of research across social science and biological fields. Again and again, researchers seem to be finding that bad behavior is a result of poverty. Another researcher in this area is the acclaimed Harvard economist Sendhil Mullainathan, who has found that unhealthy activity among poor people is often used as a coping mechanism. 

This research should change how we think about poverty and welfare. Even if bad behavior does make poverty worse, it’s also the case that poverty causes bad behavior in the first place. By giving poor people money, we may be able to break that cycle. 

Improving the condition of poor children is not only good for them, it’s also good for society. Children who are more emotionally stable and better behaved engage in  less crime and less violence in schools and out, making the country a safer place to live. So we shouldn’t see poverty alleviation as merely a mission of mercy. It would make the U.S. better for all Americans. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net