Comparing Psychotherapy to Cash Transfers

close-up photography of 1 U.S dollar banknote lot

There is a new paper (thanks, Habakuk) that compares psychotherapy to cash transfers in Kenya (direct link). It is witty and interesting to read. And it is brutal. Here is the abstract:

We study the economic and psychological effects of a USD 1076 PPP unconditional cash transfer, a five-week psychotherapy program, and the combination of both interventions among 5,756 individuals in rural Kenya. One year after the interventions, cash transfer recipients had higher consumption, asset holdings, and revenue, as well as higher levels of psychological well-being than control households. In contrast, the psychotherapy program had no measurable effects on either psychological or economic outcomes, both for individuals with poor mental health at baseline and others. The effects of the combined treatment are similar to those of the cash transfer alone.

And one of the most important lines:

Importantly, the per-household cost of the cash transfers was lower than that of the PM+ intervention [(the psychotherapy condition)]. The PM+ intervention is therefore both more expensive and less effective in affecting our outcomes of interest

As far as I can tell the authors do a thorough job to address concerns and compare their results to previous published results. Much to my liking, they use Bayesian statistic to obtain their results:

We show that even with a 90 percent prior in favor of its effectiveness, the post-study probability that PM+ produces effects larger than 0.40 SD in our setting is only 10 percent.

What also increases my confidence is that the study was pre-registered.

Other people have studied unconditional cash transfers as well and found them highly effective. GiveDirectly who provide unconditional cash transfers to the poor is among of givewell’s top charities. In case you want to donate and claim German tax benefits, you can do so here.

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