The Happiness Lab with Dr. Laurie Santos - Giving Away Cash Makes You Happy... and Transforms Lives

Episode Date: November 27, 2023

YOU can boost your happiness and transform the lives of people in one African village with a cash gift by going to givedirectly.org/happiness Giving money to others makes you happier than spending the same cash on yourself. That's been proved by science. But new research also shows that giving people in need cold hard cash is an amazing way to help them improve their lives. We explore why trusting people to help themselves is a cheaper and more effective way to solve poverty - and hear about Kibobo in Rwanda, where any money you donate will have a huge impact.    Read more about Kibobo at givedirectly.org/happiness   Former British politician Rory Stewart used to manage billions of dollars in aid money - and like other international donors thought poor people needed to be told what to do with charitable gifts. He was shocked how effective no-strings-attached cash turned out to be, and now promotes "giving directly". He was also surprised how good giving away even small amounts of money made him feel.  See omnystudio.com/listener for privacy information.

Pushkin. is a bit of an exception. Today, I'll be telling you that sometimes cold, hard cash, no strings attached, can really do amazing things, like transforming lives. In fact, I'll be giving you the chance to use a small amount of your own cash to make a huge difference to hundreds of families. Kobo, I think, is a great place if people want somewhere to support.

People there are living in really desperate situation. They lack almost everything. But more on that in a moment. The holiday season is upon us, that most wonderful time of the year. And there are indeed lots of wonderful, happiness-inducing activities about to take place, from festive decorating to family gatherings to parties. But this wonderful time of the year is also known for another happiness boosting tradition, giving. And I don't just mean wrapping gifts. This is the season to help people in need. The importance of generosity has even been codified into one of my favorite annual

occasions, Giving Tuesday. The Tuesday after Thanksgiving, coming after consumption-oriented Black Friday and Cyber Monday, is now a day when many charities launch fundraising campaigns and many people commit to donating to good causes. Traditionally on Giving Tuesday, we've brought you an episode about the happiness benefits of charity, but we don't just focus on any old giving. No, we want people to give as effectively as possible. The reason why we're spending money on charity, let's say,

is because we really want to help. We want to do some good. And very few of us would say, well, I want to do good, but not that much good. This is Josh Green, a Harvard psychology professor and one of the brains behind Giving.org. Most people don't know this. The most effective charities in the world are orders of magnitude more effective than typical charities. And when I say effectiveness, I'm talking about how many lives can you save per dollar or per thousand dollars or ten thousand dollars, or how much can you improve people's lives. And that's where givingmultiplier.org comes in. It allows you to give to the charities you already care about, but to also contribute to one of these super effective organizations, preventing disease and curing blindness with every dollar. You enter the amount of money that you want to donate,

and then we have this very nifty little slider where you put the amount in and then you can slide it to decide, okay, do I want to split it 50-50, or do I want to give like 80% to the one charity and 20% to the other? Over the last two years, listeners have been going to givingmultiplier.org slash happiness lab

and being pretty hardcore with their generosity. You've raised nearly a half a million dollars to date. And a lot of that money has gone to super effective charities, which is totally incredible. If you like splitting your donations between your favorite cause and an effective charity, please go back to givingmultiplier.org slash happiness lab.

But this year, we want to zoom in on just one of the amazing nonprofits that Giving Multiplier works with. One with an incredibly simple mission. It's called Giving Directly. And that's basically its mission, to simply give money away. Which might at first glance sound kind of irresponsible, right? Charities should be carefully spending your donations, buying medicines and school textbooks or digging wells. But GiveDirectly transfers cash to people in extreme poverty, no strings attached, no questions asked, and trusts them to spend it to improve their own lives.

This idea challenges a lot of our prejudices. Can we really be sure that people will use the money well if we don't control how they spend it? My name is Jiaying Zhao. You can call me Jay-Z. I'm an associate professor in psychology and sustainability at the University of British Columbia. Happiness scientist Jay-Z is an expert on how people make decisions

when they don't have enough money for their basic needs. It's a problem she's experienced. I grew up in poverty because I was born and raised in China in the 1980s. So I grew up in poverty for the first 10 years of my life. But when I got my PhD from Princeton, I was homeless for three months. My student status expired. I was waiting for my work permit from the Canadian consulate, which was on strike indefinitely. I basically couch-surfed for three months.

I probably slept on 10 different couches that I could keep track of. It was rough. It was definitely very difficult. Jay-Z's lived experience has informed her research, but it's also been a source of continued pain, especially when people challenge her right to talk about poverty or dispute her life story. I've gotten a lot of the comments from the public on, you're not really homeless. You are such a privileged person. What do you know about poverty? Then I had to tell them about my own lived experience. And then they try to discount it by saying, you're not on the street. You're not the ones that we see on the street that are using substance and sleeping outdoors.

And my response to that is people on the street, the typical homeless person that we have in mind is not the actual typical homeless person in reality. People who are sleeping on the streets using substance in daylight only represent, I would say, less than 10%. The vast majority of people are hidden. They're not in public view because they're in shelters, they're couch-serving, they're sleeping in their cars, they're sleeping in abandoned buildings. And therefore, the public perception of homelessness is highly distorted from reality. Talk to me first about the usual approach to solving homelessness. How do people normally try to target this issue? Yeah, the typical approach

to homelessness is to provide emergency services like shelters. You can only stay for one month. That's kind of the maximum length of stay. Usually a social worker is assigned to you in a shelter to help you find housing and food, et cetera, or health services. So detox programs, if you have substance use issues, et cetera. Those are, in my mind, paternalistic services because it's already assuming that people need somebody else to tell them what to do. That's the social workers aspect. And I think these approaches are not working. I mean, this is not just my personal opinion. It's actually evidenced by this exploding homeless populations in North America.

So it's clear that the current approaches are not helping reduce homelessness. And that's what got us thinking, is there something else we need to try? This led Jay-Z to study the effectiveness of a radical solution, one many people might consider naive or irresponsible, what are known as cash transfer programs. So cash transfer is giving money directly to people living in poverty. This can happen with some conditionality attached to it, like you need to participate and finish this, you know, detox program to get paid, or the cash can be unconditional, finish this detox program to get paid, or the cash can be unconditional, meaning you're just getting the cash with no strings, no requirement attached. A lot of the current welfare programs

in the world focus on asking people to jump through hoops and file applications for various income assistance or welfare programs. Those hurdles can be taxing. For people living in poverty, they have multiple jobs to juggle with. They are already short on physical, cognitive, and time bandwidth. And asking people to do extra things so they can qualify or get social assistance is, I think, actually counterproductive. And this is why we don't see a huge take-up rate of the government-provided social assistance. So I think that's partly why the current welfare programs are not really helping people get out of poverty. And another

aspect of this is that the welfare programs are designed with paternalistic mindset, and by that I mean dictate what people in poverty should and should not get. Whereas cash transfer is the opposite. It basically tells people, you can do whatever you want with the cash. We believe in you. You make the best decisions for yourself. And so walk through the nuts and bolts of the cash transfer program you applied in Vancouver.

How did it work? So we deployed a team of interviewers to 22 shelters in Vancouver to recruit participants. We ended up recruiting 115 people into the trial and we randomly assigned 50 of them to receive a one-time unconditional cash transfer of $7,500. And the reason for $7,500 was that it was the annual income assistance in British Columbia back in 2016 when we designed the trial. They also receive income assistance also. So this is in

addition to the welfare checks they're getting, not to replace what they're currently getting. We carefully screen people based on substance use, alcohol use, and psychiatric symptoms. So this particular subset represented about a third of the shelter population in Vancouver. When you followed up, what did you find? So we followed them for a year, and we found that this cash transfer reduced homelessness by 99 days per person. And that's pretty significant. I mean, I couched there for three months and I had great social support during those months, but putting somebody into stable housing three months earlier is tremendous. It reduces risks of harm, assaults, developing

further substance use or mental health issues. And also importantly, they became less reliant on social services over one year. So each cash recipient actually saved the government $8,277 on average. So the net savings was over $700. That suggests that this cash transfer is cost effective. It's less than what we currently spend on managing homelessness. But I think a lot of people have this paternalistic instinct because they start worrying that people might not spend the money on things that are good. I think there's this stereotype that low-income people are going to spend the money on drugs or quite frivolously. What does the data really say when it comes to cash transfer programs? Yeah, you point to an excellent barrier for a lot of public policy,

which is people's stereotype of those who live in poverty. And I think this stereotype is not only wrong, but also harmful. It's wrong because that's not what data says. The evidence, including our study, says that when people receive the cash, even when they're homeless, when they're in extreme poverty, they actually don't really spend the money on alcohol and drugs, these temptation goods. Instead, they spend it on rent, food, things that you need to survive. And there are dozens and dozens of studies out there to show cash transfers actually don't increase spending on temptation goods. Instead, there's a significant decrease in spending on temptation goods after the cash transfer. It's almost like people don't need the temptation goods as much when they aren't stressed because they can put food on the table and these things, right?

Exactly. I mean, that speaks to kind of the self-medication part of poverty, or at least with the homeless population in Vancouver, what we found was there was actually a marginal decline in substance use severity after getting the cash transfer. So what this suggests is that people don't need to use alcohol and drugs when they're back in housing. When you are in poverty, you're short on cognitive bandwidth to use substance to even survive on the street. Some of the participants say they actually need to stay warm with alcohol. And that's why they drink on the street. But once they get back into housing, they don't need alcohol anymore.

So it's kind of a survival coping mechanism instead of the cause of homelessness in the first place. That's why this stereotype is wrong. And I think it comes from the misconception that people end up in poverty because they screwed up, they made mistakes, therefore they cannot be trusted with money. That's typically not the case. People become homeless because they couldn't pay rent for two to three months, and then eventually they're evicted by their landlords. And that's a primary reason for homelessness, at least in Vancouver. I just think that our idea of somebody in poverty or homelessness needs to change. That's why I did the subsequent studies after the cash transfer studies looking at public perception. The average person thinks

that the cash recipients will spend more than $300 on alcohol, drugs, and cigarettes per month. That's the prediction. Whereas in reality, the spending was only around $100. It's actually less than an average person spends on alcohol, drugs, and cigarettes on a monthly basis. It just seems so obvious then that we need to start using cash transfers more often to alleviate poverty. Oh, completely. So first of all, people actually, I see the system of justification bias all the time. They think the governments are doing great when it comes to poverty or homelessness.

What they don't know is how much we're currently spending on homelessness. In the US, the government is spending over $80,000 per person per year. So they don't know that poverty is extremely costly. If we use the $80,000 to do the cash transfers, I feel like we can actually get a lot of savings and actually reduce poverty meaningfully, as opposed to the status quo. Jay-Z's work shows that cash transfers, just giving people cash directly, saves money while solving tough problems of homelessness and poverty in North America. But what about extreme poverty? Well, there's one non-profit that gives money to the world's poorest people and thinks Happiness Lab listeners can transform

the lives of an entire village. We'll learn more when the Happiness Lab returns in a moment. in a moment. Thanks so much for taking the time for this. We're so excited to be collaborating with GiveDirectly. No problem at all. Former politician Rory Stewart used to be in charge of Britain's foreign aid budget, billions and billions and billions of dollars. He now works with GiveDirectly,

the non-profit we're partnering with, to send money straight to people in one poor village in Africa. Giving people cash directly is a very radical idea because traditionally people used to say, give someone a fish they eat for a day, teach them to fish they eat for a lifetime. And cash seems like the ultimate fish giving program. The strange thing is that when we've studied this scientifically, the astonishing revelation is that cash out've studied this scientifically, the astonishing revelation is that cash outperforms almost all the traditional programs. Just giving someone cash

leads to better nutrition outcomes than running a nutrition training program. Now, why is this? And we see these results again and again. There have been sort of 300 of these studies, so many that we can't doubt it anymore. And it seems to me that the reason for this is that what people in villages around the world in extreme poverty lack is not knowledge, it's cash. So you turn up thinking that what you need to do is teach people to fish, but the truth of the matter is they either already know how to fish, but don't have the money for a fishing rod, or they don't want to fish, they want to open a bakery. And my understanding is that this is something that you came to, like slowly over time, that you weren't necessarily a huge fan of cash transfers initially, but that you came around to

the data, you know, so talk about your path to changing your mind on this. When I was the minister responsible for international development in the United Kingdom, we were then spending nearly $20 billion a year on international development. I was still buying into the old system. I still thought it was all about training people, teaching people. And I thought, well, if we give away cash, what are we all doing? You know, I've got thousands of civil servants all over the world. What's the point of their master's degrees in international development, their speciality in health or education, if we're just going to give people cash. It's a very threatening model. So my mind was changed really by visiting a community on the Rwanda-Burundi border, which was funded by GiveDirectly. It was

life-changing. I mean, absolutely life-changing. This was almost two years ago now, because I saw that giving about, in those days, $750 per household to a village of about 100 houses completely transformed people's lives in a way that I could never have guessed. And in a way that I knew perfectly well, the international development community would never have achieved with its normal programs. So what does that mean? That means that if you were to go to that village, you would find that within about three months, suddenly you go from almost nobody having a tin roof to almost everybody having a tin roof. You suddenly find electrification going from about 40% to about 80%. Livestock ownership, again, going from about a third of people to almost 80% to people having livestock.

Huge improvements in the number of kids in school, in bone density, and you're achieving it all for a village that size for, I suppose, probably about $100,000. Now, if you were to turn around and say to a traditional nonprofit, how much would it cost you to achieve all those things I've just been talking about? The answer would be millions, because they would go and they would survey every house, they'd try to procure the metal roofs, they'd bring in their engineers, they'd run education enrollment programs. They'd run nutrition programs, et cetera. And they would probably achieve potentially even less for much, much more money because they're not tapping into the knowledge of the local individual.

The point is that every individual in each house in that village has a separate set of needs, and we need to respect that, give them dignity, give them freedom to address them. And that turns out to be the most effective way of doing development as well. And so given all these successes, I'm wondering why more organizations aren't just giving cash away. Why are people skeptical given all these amazing data suggesting that it works really well? I think there's an element of vanity. I think a lot of philanthropists don't just want to give cash. They want to feel that they've got a brilliant business brain and they've set up an amazing company. And therefore, what people need is not their money, but their brain.

There are endless stories of wealthy people thinking that they'd be embarrassed saying to their friends when they say, what do you do for your philanthropy? Oh, I just give cash. They want to have an interesting story at a dinner table. They want to be able to say, oh no, I've invented a seesaw, which also acts as a pump for water. So when children go on the seesaw, it pumps water for the village. Or I've realized that if you give chickens to people, the chickens have eggs and the eggs have more chickens. They want to feel that they've found some new idea, some silver bullet. They're not at all comfortable with the idea that actually their ideas are much less important than their money.

And so that's kind of the wealthy philanthropist's version of why they're a little bit worried about giving money directly. What do you think about people who are just, you know, I'm going to donate $50, $100, someone who's donating a small amount, but that has some worries about whether or not that money will go to something really useful? Well, I think if you're donating a small amount, there that has some worries about whether or not that money will go to something really useful. Well, I think if you're donating a small amount, there's almost nothing

better than cash. If you give $50 or $100 to a traditional nonprofit, I don't know what they do with that money. Their budgets are enormous. They have incredible number of staff. Their implementation costs are very high. So that money will disappear very quickly. But $50 or $100 delivered to someone in extreme poverty has 100 times the impact that it would in the United States. It would be like giving $5,000 or $10,000 to someone in the United States. It might be the recipient's first chance to have a roof on their head, the first chance to get the children to school, the first chance to eat more than one meal a day. And that's the kind of thing that GiveDirectly does. So talk a little bit about this organization and how it really gets money directly to the people who need

it. Well, GiveDirectly was the brainchild of some economists at Harvard and MIT who began seeing all this data and thought, well, why don't we try to see what would happen if we just gave cash? And they started in Kenya and they learned by doing. Initially, they took loans from their parents and they started giving money and the results were absolutely staggering. And it's grown since then very dramatically. GiveDirectly was the fastest growing non-profit in the world a couple of years ago. It's funded by everything from large donations to small donations, but its key ethos is recipients first. In other words, every policy decision in the organization is determined by what is in the best interest of

recipients. And above all, how do you get the most money to recipients with the least bureaucracy? And so as part of this Giving Tuesday episode, we're asking Happiness Lab listeners to consider donating to a special GiveDirectly campaign. This is a campaign that's going to be giving money directly to people in Kabobo, which is in the Kigali province of Rwanda. Tell me a little bit about life in Kabobo and why GiveDirectly is trying to do some campaign there. Well, Kabobo, I think, is a great place if people want somewhere to support. It's a village.

It's a village with just over 90 households, a typical small village in Rwanda. And people there are living in really desperate situation. They lack almost everything. Lack clean drinking water. So you will see communities going down to a dirty riverbed to try to get their water. And of course, that has a huge health impact in terms of waterborne diseases. Many of them lack decent shelter. The school is a long way away. The clinics are a long way away. Getting anywhere is difficult.

Setting up a small business is difficult because the road infrastructure just isn't there to support you. So you're held back by public infrastructure, but you're also held back primarily by the fact you don't have simple cash. Getting a little bit of cash is what will allow you to fix your house, buy a cow which could have a calf, provide milk for your family, set up a small tailoring business or a bakery, or just buy a motorbike in order to get into town,

provide the support to get your children's uniforms and textbooks into school, get a relative who's ill to the local hospital, start investing a little bit in your land, buying some seeds, buying some fertilizer. These things are genuinely life transforming. It's one village. And if we were able to raise $100,000 through the Happiness Lab, that would be enough to cover almost everybody in that community and really transform their lives. And a small donation of $50, $100 goes a very long way because we're looking for $1,000 per household that would cover generally two adult individuals and a number of children.

And yeah, anything would go a very long way. And with the caveat that the whole point of giving directly is that the people in Cabobo will get to use the cash for whatever they want. What's the expectation of the kinds of things they're going to use this cash for. The majority of people will invest in running electricity into the community, fixing the roofs of their houses, getting livestock cows, providing nutrition for their children, meals, investing in small businesses, in many cases, running clean water pipes into the community, all these kinds of things that addressing the basic needs, which will be very different village to village, house to house. But the great thing about cash is it's flexible. And this is really powerful because it suggests that these kinds of donations aren't just ones

where you're adding to some administrator's hefty fees. The cash is really going to go via mobile phone into people's pockets directly, right? Right, exactly. And that's the fundamental thing. We believe that individuals know better than anyone else what they need and how to spend that money so if you think about a group of your friends or family you Laurie might want to be setting up a small business because by some miracle your kids already in school I might not have my kid in school so that might be my priority my neighbor might already have a small business and a kid in school but might have a very sick aunt. The person four doors down might be blind. And what they would really need is

someone to support them in bringing water up to their house and getting a decent front door. But what you can't do as an outsider is guess all these things from 5,000 miles away. What the cash does is let the individuals in those communities address their own needs directly. And a lot of what we talk about in the happiness lab are the kind of benefits that come from doing these kind pro-social acts, not just to the people who receive these donations, but to the people who are doing the donating. As you've worked with GiveDirectly and kind of seen the impact of their work, has this really changed your happiness? Do you think it can change the happiness of the people who are making these small donations? Absolutely. I mean, for me, visiting that village on the Rwanda-Brundy border, realizing that giving $1,100 could transform somebody's life was extraordinary.

I mean, it was a great gift to me, not to them, to feel that I was able to do some good in the world so simply and so straightforwardly. You know, the woman who I was supporting, I mean, in her house, there was only a single object, which was one metal pot. She didn't have a plastic bucket or a chair or a mattress or anything. And she was looking after three grandchildren on $6 a month. And I think it's deeply fulfilling to be able to engage with supporting communities. And I think GiveDirectly is also quite good at keeping you up to date on the progress those communities are making

so that you can have a feeling of what the practical impact is. But yet there's so much pushback about the possibility of just giving cash directly. I mean, is this something you find frustrating? Kind of how do you deal with it? Without being too geeky about it, I would say follow the evidence.

And the evidence is that people put the money to better use than almost anything else. When I say evidence, I mean really compelling, randomized control trials like medical trials, where you're following thousands of people, a random group over many years. And what you find is, yes, a few individuals might misuse money, but by and large, there is almost no intervention in poverty, which has the impact that cash has. And I know it's a difficult step. It was a difficult step for me when I was working in international development. I was just like, what are you talking about? I mean, we've spent decades trying to come up with cunning plans and building things for other people. And now you're

saying we'd be better off just giving them cash and stepping out of the way. I know that's a very radical, difficult view, but particularly in a world that's understandably worried about colonialism, about patronizing development aid, this is the most radically respectful thing you can do because you're saying that people in extreme poverty know more, care more, can do more than I can. You're respecting their dignity, you're giving them freedom of choice, and you're trusting them to spend the money far better than any outsider could do on their behalf. I hope this episode has convinced you that cash transfers are a great way to help people in need. But knowing about the effectiveness of giving directly is only the first step.

To really see the power of cash transfer, nonprofits like GiveDirectly need that cash to transfer. So this Giving Tuesday, why don't you join me and other Happiness Lab listeners to help the people of Cabobo. Last year, our listeners raised a lot of money for people in need. But this year, we might be able to completely lift an entire village out of extreme poverty. So head right now to givedirectly.org slash happiness. That's givedirectly.org slash happiness. And give what you can, even if it's just a couple of bucks. As we heard in this episode, that $3 that you might waste on a cup of coffee

may be able to do a lot more good when you give it directly, both for the people in need and for your own sense of happiness and purpose. That website again is givedirect directly.org slash happiness. The happiness lab is co-written and produced by Ryan Dilley. Our original music was composed by Zachary silver with additional scoring, mixing and mastering by Evan Viola. Jess Shane and Alice Fiennes offered additional production support. Special thanks to my agent Ben Davis and all of the Pushkin crew.

The Happiness Lab is brought to you by Pushkin Industries and me, Dr. Laurie Santos.