The experiment takes place in Kenya and involves two groups of poor people chosen at random.
Those in group A will receive a fixed payment every month for 12 years.
Those of B, the same monthly salary but only for 2 years.
Which of the two groups will be more likely to invest?
Abhijit Banerjee (Mumbai, India, 63 years old), one of those responsible for the experiment, hoped to find more investors among those in group B. His reasoning followed the following logic: in group B, where payments end after two years , the urgency to develop a venture that allows maintaining the level of well-being must be greater than in A, where the twelve years of payments provide some peace of mind to the recipient.
As the reader may have already imagined, the result was just the opposite.
“We were surprised to find that the people whose monthly payments lasted the longest were also the ones who invested the most,” Banerjee said in an interview with EL PAÍS during a recent visit to Madrid to talk about poverty at the Ramón Areces Foundation.
Tranquility was the key variable, yes, but not because it caused inaction, but quite the opposite: the guarantee that payments would continue to arrive for twelve years worked as the safety net that allowed the business adventure.
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Basic income is no longer a utopia
After more than twenty years dedicated to the subject, Banerjee is no newcomer.
In 2019 he received the Nobel Prize in Economics together with his wife, Esther Duflo, and the academic who inspired them both, Michael Kremer, for their research on poverty following the method that the pharmaceutical industry uses to develop medicines: Randomized controlled trials (also called RCTs) in which there is a treatment group and a control (or no treatment) group to compare measurements.
In the Kenya experiment, they observed the behavior of more than 22,000 people in 195 villages who received a salary (treatment group) and another 11,000 people who received nothing (control group).
According to
The Economist,
“the most shocking result was seeing how those who received the monthly payment abandoned their jobs as wage earners on farms to open businesses.”
In the twelve-year-old group, the number of companies not related to agriculture was 25% higher and their profits almost doubled.
“Recipients ate more protein and demonstrated lower rates of depression;
“Land rose in price but consumer goods did not, apparently,” the British weekly detailed.
Instead of becoming lazy or starting to consume in a crazy way, they behaved in a way similar to that expected in middle class people: they invested in health and preferred to have a support network (the family, in the middle class) before launching into to the business adventure.
“In many, many, many studies we have found the same thing, that when these people can access money they allocate a large part of it to do the things we consider correct, such as investing in education or nutrition,” Banerjee explained.
"What makes them have self-destructive behaviors is precisely not having money; when they do have it, they become more optimistic and with a greater willingness to do things that are good in the long term."
Prejudices
Perhaps the most surprising thing is not that poor people are governed by similar criteria as the rest, but that it was necessary to demonstrate it with experiments.
What the French economist Michel Husson considered a stigmatization of the poor inherent to capitalism is, according to Banerjee, a widespread and long-standing prejudice.
“Christianity is not the only religion with the idea that only if you work will you reap the fruits, in which it is implicit that if you do not have the fruits it is because you are lazy or you are doing something wrong.”
In addition to overturning prejudices about the poor in developing countries, RCTs have also helped them better frame the problem of many poor people in rich nations whose discomfort comes from having lost the place they occupied in the middle class.
As Banerjee says, “it is not that money transfers are not important in this group, but that the measures cannot be limited to that.”
“For a desperately poor person, getting something to eat is very relevant, but when you are not so poor, there are other important things that cannot be solved just with a money transfer because an important part of the discomfort is that your life has lost meaning. ”.
In his opinion, designing specific economic measures for this population that has lost part of its identity is more urgent than ever.
"One of the challenges that Spain is going to have to face with artificial intelligence is the loss of meaning for a lot of workers who will lose their jobs, it is a challenge that all societies are going to have to face."
An example of a more comprehensive solution is the one that Banerjee and Duflo propose in their book Good Economics for Hard Times (2019), where they make the second account of their findings with the RCT (the first was Poor Economics, best book in economics of the year 2011 for the Financial Times newspaper).
Help U.S. communities harmed by international trade with much more generous assistance and education programs.
But hasn't that always been known?
Was it a problem of economic ignorance or lack of power?
According to Banerjee, in this case ignorance has been a problem.
“In the United States, for example, there is a program called Trade Adjustment Assistance that just isn't used much, even though the money is available,” she said.
“Economists say, in theory, that people should be compensated, but no one makes much noise when it is not put into practice.”
RCTs have been around long enough to have received criticism.
The Nobel Prize winner in Economics Angus Deaton, for example, has wondered if restricting economics to specific measures in limited populations is not a way of also limiting the relevance of a science accustomed to dealing with big questions.
“In economics you can go to big things and say that this or that factor caused the growth of the country, or prevented it, but in some way all that is still a fantasy;
The truth is that we generally don't have very good answers to these questions, and I prefer to find answers rather than propose ideological or false solutions.”
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