Two professors at the University of Pennsylvania’s medical school have identified an exciting new treatment to improve health outcomes. It consists of basically giving people money. The marketing department has developed better sounding terms for this treatment, like cash transfers or guaranteed income, but if the marketing folks were really clever, they would be calling it “money-cillin.” That worked for penicillin, right?
Whatever we call it, the idea being advanced by Drs. Aaron Richterman and Harsha Thirumurthy in The Atlantic is that this new treatment is one of the most important interventions in medicine: “when designed with the right basic ingredients, cash transfers are one of the most powerful levers that governments have to alleviate poverty and improve health.” As prominent professors at an Ivy League medical school, we can imagine that Drs. Richterman and Thirumurthy think that “money-cillin” should be studied by leading medical researchers and taught to future doctors. Sure, anatomy and physiology are important for healing patients, but so is welfare policy.
The only problem is that the effects of cash transfers on health outcomes have been rigorously studied and the results have been very disappointing. There was a large-scale experiment in the U.S. in which low-income people were given $1,000 in cash per month for three years and compared to a randomized control group that was given $50 per month. The evaluators, including leading economists from the University of Michigan and the University of California, Berkeley, produced two studies, one describing results on health outcomes and another describing results on labor outcomes. It is worth quoting their findings at length. On health outcomes they found:
Over the three year time horizon that we study, we find no effect of the transfer across several measures of physical health, and we can rule out even very small improvements. The transfer also did not improve mental health after the first year and by year 2 we can again reject very small improvements. We also find precise null effects on self-reported access to health care, physical activity, sleep, and several other measures related to preventive care and health behaviors. We find no effect of the transfer on the health of participants’ children, but we do find that children in treated households were more likely to be up to date on their vaccinations.
Not only did “money-cillin” fail to improve health outcomes, but it actually harmed people’s motivation to work. Again, quoting the results at length, the economists found:
The transfer caused total individual income excluding the transfers to fall by about $1,800/year relative to the control group and a 4.1 percentage point decrease in labor market participation. Participants reduced their work hours as a result of the transfers by 1-2 hours/week and participants’ partners reduced their work hours by a comparable amount. Among other categories of time use, the greatest increase generated by the transfer was in time spent on leisure. Despite asking detailed questions about amenities, we find no impact on quality of employment, and our confidence intervals can rule out even small improvements. Treated participants broadly increase expenditures, led by spending on non-durable goods and services, with smaller increases in spending on durable goods and human capital. We observe no significant effects on degree attainment, though the magnitudes of the estimated effects generally appear larger among younger participants. Measures of subjective well-being are higher among treated participants in the first year of the transfers but then revert to control group levels. Overall, our results suggest a moderate labor supply effect that does not appear offset by other productive activities.
Not surprisingly, giving people cash allows them to work less and spend more on leisure.
In The Atlantic article, Drs. Richterman and Thirumurthy briefly mention that guaranteed income pilot programs in the U.S. “haven’t delivered the dramatic health improvements associated with cash-transfer programs elsewhere.” Without mentioning the large-scale randomized controlled trial described above, they (falsely) assert that these programs have “seemingly produced only modest health gains in the United States.”
But don’t worry. Even when the evidence is against them, these scientists are so smart that they still know they are right. They offer a variety of hypotheses, unsubstantiated by research, to rationalize why money-cillin has not produced the results they expected in the U.S.
First, they falsely describe past efforts as providing too little money to make a difference: “a few hundred dollars a month for a relatively short period of time, typical of guaranteed-income pilots, rarely matches the steep costs of housing, child care, and health care.” The experiment described above provided $1,000 per month for 3 years.
Second, they suggest that cash transfers are insufficient given deeper societal problems: “In the U.S., the dominant health problems are chronic diseases shaped by neighborhood environments, structural inequities in housing and health care, and years of accumulated risk from unhealthy diets and other long-term exposures. These problems are far less responsive to short-term financial boosts. Cash can reduce stress and improve stability, but it cannot, on its own, undo the deep roots of these conditions.”
But if this were true, then it would be a pretty convincing argument against expanding cash transfer programs. Short of revolutionary change, simply providing money would make no difference. Along these same lines, they argue that cash transfers won’t work unless millions get them: “U.S. pilots have been small, reaching only hundreds or thousands of families—too limited to change the broader conditions that shape health outcomes.”
Third, they suggest that cash transfers need to be conditioned on other behaviors to be effective: “cash works best when it is woven into social infrastructure that families already rely on. In many low- and middle-income countries, payments are linked with health visits and other essential services.”
But if that were true, then they are really advocating for traditional welfare programs that place conditions on support rather than arguing for cash transfers or guaranteed income programs. And even though they have no evidence to support this hypothesis, any success of conditional cash transfers would leave it unclear whether the cash or the required behavior was producing any benefits.
After offering all of these rationalizations (and falsehoods), they point to food stamps to prove that expanding cash transfers is essential for improving health outcomes. But they have no experimental evidence—the kind typically required for approval of a new drug—-to support this claim and instead point to observational evidence reliant on complicated and opaque research designs to draw this conclusion. The problem with this kind of evidence is that the results are highly sensitive to researcher choices about research design and model specification, making them very easy to manipulate. When presented with conflicting evidence, we should believe the results of experiments over observational studies.
Arguments like those made by Drs. Richterman and Thirumurthy in this Atlantic article are the equivalent of advocating for communism because it’s never really been tried. It reveals an ideological commitment that is impervious to empirical evidence or scientific examination. Medical research and education should not be wasting time on money-cillin and should instead be focused on scientifically backed medical interventions that doctors can use to help their patients.
