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Submitted by Theresa Osborne on

The Economist article does a service by opening a crucial debate and underscoring principles and realities that are sometimes forgotten when development interventions are designed. The discussion can also spur us all to think (and act) more creatively and resolutely to maintain a couple of key principles: first is the utmost importance of agency and individual/local knowledge; second is the device of market exchange (in well-functioning markets) for improving quality and value of services. Myths persist about the poor, farmers, women, or ethnic minorities, but the evidence from some of the evaluations discussed in the article (and its publication in a leading periodical) provides a useful corrective to those who tend to consider others' choices as irrational. While there will always be examples of people who do not always act in their long term interests or the interests of their children, by and large under the right conditions people can be trusted to make decisions that improve their well being and the well being of their children -- whether it is to invest in a business, shift resources inter-generationally, or send their children to school. But the question is also those certain conditions.

To remain consistent with this principle, strict conditionality about a particular outcome (say, school enrollment) -- even if more effective in achieving that outcome -- may not be appropriate. Forcing people into corner solutions is rarely optimal, and while it is difficult to argue against pre natal care, nutritional supplementation, and schooling, assuming that we "know" what is best for households and individuals who must make difficult choices with limited resources remains problematic. Rather, the goal of CTs could be to expand the choice set, offset distortions, and improve the quality of the choices available, while also transferring the means to choose among goods and services.

Although the role of experts in aid is rightly being questioned, it remains necessary to consider the underlying issues in a given "market" and whether the conditions are in place may be can also be commitment problems (i.e., in saving or investing today), collective action problems, spillovers, information failures, and other market failures that cash transfer programs may not always be useful for addressing, or which they could address if well designed. Rather than thinking in terms of "unconditional" versus "conditional" CTs, perhaps the discussion should be about the appropriate type and degree of conditionality, based on the type and severity of the "failures". In general, some degree of unconditionality seems optimal nonetheless for improving well-being (even if paired with strict conditionality in some dimension). Cash transfer programs could be, for example, designed to let people choose what mix of assets to invest in (education, training, health care, livestock, funeral bonds, etc.), while also providing the commitment device and financial means for them to better their lives -- including, perhaps, through collective action.

In this vein I wonder whether one could one use CTs as an element of a more comprehensive strategy to eliminate poverty. I do not believe that one can ignore the broader enabling conditions of an economy or governance and simply transfer cash. Is there a way to exercise some influence on these conditions as part of a broader portfolio/strategy? Could transfers of cash to the needy semi-conditionally (perhaps through grants rather than loans) provide the leverage to spur governments to change as well? (Answering this may require help from our political economist colleagues). Simply put, policy and institutional reforms are often needed to allow markets to respond (with minimal information asymmetries, public or private monopolies, etc.) to meet new demands. While market exchange can provide the accountability and disciplining device needed where public services have traditionally failed, this would not work as well where information asymmetries are important (e.g., in the quality of training or health care provided), or where basic physical security and property rights are not guaranteed -- where corruption is high, the rule of law is weak, or common property resources are being mis-appropriated. Thus, I wonder whether the CT approach can be scaled up effectively and made part of a broader strategic engagement with countries which is cross-"sectoral" and linked to improved governance.