That’s the title of this New York Times Magazine article. As a long-time advocate of replacing Western welfare states with a negative income tax, I obviously don’t think it’s nuts at all, and it’s encouraging to see that this idea is getting some traction in international aid circles (if not in domestic policy making).

There’s evidence that this works.

After Mexico’s economic crisis in the mid-1990s, Santiago Levy, a
government economist, proposed getting rid of subsidies for milk, tortillas and other staples, and replacing them with a program that just gave money to the very poor, as long as they sent their children to school and took them for regular health checkups.

Cabinet ministers worried that parents might use the money to buy alcohol and cigarettes rather than milk and tortillas, and that sending cash might lead to a rise in domestic violence as families fought over what to do with the money. So Levy commissioned studies that compared spending habits between the towns that received money and similar villages that didn’t. The results were promising; researchers found that children in the cash program were more likely
to stay in school, families were less likely to get sick and people ate a more healthful diet. Recipients also didn’t tend to blow the money on booze or cigarettes, and many even invested a chunk of what they received. Today, more than six million Mexican families get cash transfers.

A new charity called GiveDirectly is pushing the idea further. They’re giving away money to villagers in Kenya with no conditions attached at all. The initial results are encouraging and http://www.givewell.org, which ranks charities by their effectiveness, puts them as #2, just under the Against Malaria Foundation.

But most aid is still of the traditional teach-a-man-to-fish variety, with bloated expense ratios to pay the salaries of all those upper middle class graduates too righteous to work in the private sector. After all, someone has gotta teach the wretched how to fish.

I don’t know why the paternalistic assumptions regarding the poor still dominate. It just seems natural to the non-poor that the poor are where they are because they were brought up with the wrong habits or beliefs or something, so helping them out requires elaborate schemes (eg food stamps, training programmes) to save these people from themselves. Perhaps paternalism regarding the poor comes from the fact that it flatters the rest of us. After all, the corollary of that view is that we’re well-off because we have the right habits and beliefs.