"while there were large economic gains for recipients (targeted as the poorest), gains for non-recipients were so substantial that the gap between the poorest and least-poor within villages widened slightly." Now that is a novel result!
Publicising that might be a way of overcoming the resistance of the large number of people who are mainly interested in their own relative status, and so dislike giving assistance to the poorest members of society. If you can show people that yes this intervention will help the poorest but it will help you more then those concerned mostly with their own relative status might be more likely to back it.
If you can show people that yes this intervention will help the poorest but it will help you more then those concerned mostly with their own relative status might be more likely to back it.
Folks have been trying this. When the poorest folks have enough money to spend on things, everyone tends to benefit - it isn't a new theory. But mostly, teaching folks this has failed. It is either that, or you need to settle on "people simply dislike giving others help, even if they reap rewards."
I think part of the issue is that the rewards aren't nearly as visible or shockingly impactful as actually being given money to thrive.
One important caveat is that in the study, as far as I can tell, the money is coming from a different country (presumably the USA) than the target country (Kenya), so there is a baseline effect of increasing the net wealth of Kenya. If the money is collected from and distributed to the same community, the results may not necessarily be the same. I think it would be very interesting to see a study along these lines, but I’m not sure how feasible it would be.
I think it would. There exists at least two economic systems in a country, the capital economy and the productive economy. The capital economy represents assets and wealth that aren't involved in day to day things. Inflated property values, portfolios of gold holdings, etc. The productive economy is the one where most people participate in with daily life. Its' the $7 you hand to a worker to transmute into a sandwich. The $80 a wage earner gets paid over a shift that is mostly parted out to things like groceries and rent.
Universal income promises to tax the capital economy and shift that money into the productive economy. In effect, you are taking gold that previously was sitting idle underneath the sleeping dragon and returning it to the village, increasing the real productive money supply by taking money that's just being sat upon and using it for real productive use.
The general trend of history seems to suggest this isn't true.
Why do you think it is?
I mostly see propaganda and lies directed at stopping this from happening rather than a basic human response to it.
Like say the 'welfare queen' myth, or the trope that 'giving people money will just cause them problems or make them lazy', seems you have to really stretch to convince people that helping the poor is a bad idea and the standard human response is to help.
> Like say the 'welfare queen' myth, or the trope that 'giving people money will just cause them problems or make them lazy', seems you have to really stretch to convince people that helping the poor is a bad idea and the standard human response is to help.
In my experience, these attitudes are more common among those who live around poor people than among those who don't. It's my wife who taught me the difference between "people who are good at being poor and ones who aren't." Coming from a privileged background, I had no idea.
It's a sociocultural adaptation to scarcity. Historically, whether you were in a Bangladeshi village or rural Oregon, even the rich don't really have sufficient surplus to help more than a few people. And there were no rich foreigners or central government to swoop in. In that scenario, anticipating and expecting help is maladaptive. Everybody in the village needs to be incentivized to work as hard as possible for themselves before relying on anyone else.
When did rural Oregon find out that there was in fact several layers of central government available to help them? Didn't they feel a bit foolish at that point?
It's great that they were all working so hard in grinding poverty and just letting the weak die or whatever, very inspirational, but being vaguely aware of reality might have served them better overall.
The New Deal agriculture subsidies must have really confused them if they didn't even know about the state government.
>In my experience, these attitudes are more common among those who live around poor people than among those who don't
It shouldn't exactly come as a shock that the people who have to live in proximity to the results of such systems have more to say about the downsides than those who can just observe from their ivory tower and can look at some spreadsheet, do a little math and say things like "net positive" with a clear conscience. Even if you have very good results the former group is simply going to be much more aware of the tradeoffs than the latter who will at best only know second hand.
"even the rich don't really have sufficient surplus to help more than a few people"
This wildly underestimates how rich some people are in the US. For example, just 5% of the wealth from only the 20 wealthiest Americans would cover all federal, state and local funding for housing support in a year.
My thought was, "I bet $100 billion is actually a pretty decent chunk of the US welfare state". Turns out, that's about as much as is spent at all levels of government on housing (primarily direct subsidies, legacy housing project upkeep and funding for newer tax-credit housing construction).
Then I wondered, "what kind of tax could cover that cost?" and I found a list of net worths and saw that about 5% of the wealth of the top 20 US billionaires covered that entire spending for a year. There's much more compelling comparisons to be made but I didn't have all day.
It not that simple. The same theory say that government should spend more money during recessions since that send more money into the hands of citizens, thus increasing peoples ability to consume more and drive up the economy. However, by doing so the amount of money in the system increase and thus you get inflation, forcing the government to spend even more money.
This doesn't happen every time as is demonstrated by this study, but history has plenty of example where it has and hasn't worked. The open question is to figure out when it work and why it doesn't work in other situations.
The cause of the inflation matters in how the response plays out. The inflation we're seeing currently isn't being driven by the general population having too much money but the response by central banks has been to act like it is.
Personally I view the two major factors to be post pandemic shipping costs and the Ukraine. A meaningful response from government could have headed this off but instead we're seeing energy producers hit record profits while large parts of society are going to be unable turn their heating on over the winter and on top of that rising interest rates are going to see every other aspect of their budget become even more expensive as well.
> The inflation we're seeing currently isn't being driven by the general population having too much money
Actually, it partially is. One third of the current inflation is demand driven according to the Fed (i.e. stimulus checks, unemployment payments, above-market wages due to unemployment checks, etc.) [1]. There are also supply shortages but it's hard to disentangle what part of the supply shortages are due to shipping costs vs. having labor shortages due to said unemployment checks.
We're seeing a lot of the price pressures calm down now as coincidentally, the labor force grows back to pre-pandemic size. [2]
> A meaningful response from government could have headed this off
Like what, putting a price cap on oil? That doesn't work and you and I both know it.
>(i.e. stimulus checks, unemployment payments, above-market wages due to unemployment checks, etc.)
Yours source doesn’t mention these at all. Unemployment stimulus ended last year at the latest. It mentions supply being half the cause, and demand, being a third.
This doesn’t deny your point, but your reasoning is unfounded. When are people going to stop blaming stimulus and unemployment that stopped happening years ago at this point?
> When are people going to stop blaming stimulus and unemployment that stopped happening years ago at this point
Because even though it stopped happening a year and a half ago, a lot of stuff was closed down still so people weren't spending yet. They were saving. Americans built up $2.7T in "excess" savings [1]. That money is being spent, and has been spent, over the last 6 months to a year. Notice that inflation really only started up after re-opening.
The article gives two examples, one of a public policy employee who got an extra $500/mo from the pause in student loan payments and built up substantial savings, and a family that was laid off but received equivalent funds from unemployment, and ended up with more money than they previously had due to stimulus+child tax credit. The family ended up spending money on dance/karate lessons for their kids.
So not only did a lot of people not seek alternative employment (e.g. in a different field) when laid off due to inflated unemployment benefits, but they also ended up being able to spend more than they could previously afford due to stimulus. What does that additional spending require? More labor, which there was a shortage of due to unemployment payments.
If it was only energy costs and supply chain that was causing inflation, we'd see substantially decreased consumption and few wage hikes. Wage hikes are driven by labor's supply relative to demand, not by cost of living (although CoL can affect supply). We are seeing relatively high demand relative to supply and increased bargaining power for a lot of labor, which implies decreased supply. Guess where that decrease came from?
There are multiple studies and theories being put out on why inflation occur, both now and in the past. I don't really see a major consensus on a single explanation.
The two major one that seems to make most sense to me is "net importing vs net exporter", and the other is the theory about low supply. For the first one, if a country is importing more than exporting, then the imports is being paid over time by the exports. Increasing the amount of money in such country does nothing since its the exported products that pay for the imports, not the currency.
The second theory is that in periods where demand exceed that of supply. In those situation people will bid to buy the limited resource, and if you increase the amount of money circulating then the bids will simply go up for the same limited resource. Natural gas is being used as an example in Europe, where the only way to reduce inflation is to reduce consumption. Reduced consumption however slows economic growth and thus a conflict between inflation and growth.
> There are multiple studies and theories being put out on why inflation occur, both now and in the past. I don't really see a major consensus on a single explanation.
I wasn't suggesting a general explanation for all cases of inflation. I'm saying that the current inflationary period has some easily identifiable causes and the measures that central banks take against general background inflation are actively harmful in this situation and instead should be tackled by government directly.
The second theory is the closest explanation for the current inflationary period and the measures are perfectly fine if you're talking about curbing the consumption of luxury goods and services. It falls down when you're targeting the necessities of survival because at that point you're effectively choosing to kill off some of your population because of a refusal to regulate.
Government can always respond by taking money back out of the system in the form of taxing wealthy people. You don't have to print money. You can just redistribute what's already there.
They might dislike rational helping because they see their own place in the economic game as irrationally hampered, and under conditions of perceived injustice, would rather get their own before extending access to others.
Some years ago I was talking with a friend of mine about how things were going badly in a particular country that is culturally of interest to us. I was saying something about how it would be so much better if they had better economic growth so that people there could be less poor, and she said something like "but then they would consume more!". She's not rich, but she's definitely not poor -- she's a divorced professional, she works at home, and she has a wonderful, large house in midtown Austin (in a great location) that she owns outright. Her house is probably worth a lot of money, but she and her ex-husband bought it decades ago. I probed a bit and she was not embarrassed by what she said. She consumes a fair bit, but she doesn't want others consuming more than they do, even though they consume a lot less than she does.
The problem is that the conservative perspective would largely rather go without these net benefits than see someone they think is undeserving, or worse "immoral" in some way, get any benefit.
That's why we have means testing at all: not to prevent people from needlessly getting benefits, but to prevent those who are undeserving of them from getting them.
A lot of things make more sense when you understand this imo, and stop trying to frame other people's views into your own moral framework (giving you the mistaken impression that they're hypocrites about it).
The conservative perspective is not, and has never been, that poor people deserve to stay poor. It is that I can and will give my money to poor people, and you're free to do likewise, but we're not going to point a gun at old Steve and make him do the same.
Now that gun-pointing redistribution programs are fully entrenched, some people are still trying to have some say - ANY say - in where their money goes.
> The conservative perspective is not, and has never been, that poor people deserve to stay poor.
It's a good thing I didn't say it was then, isn't it? I'll help you, if you really want to try to strawman what I said, it would be closer to: "the conservative perspective is that bad people deserve to be poor."
But I do think "poor people stay poor" is the net effect of conservative policies, because they prioritize other things over lifting people out of poverty, as you're doing in this post.
Instead they focus on lifting the "right people" out of poverty. Because that's the main reason to be able to pick and choose your charity: to make sure it goes to the people you think deserve it, or will use it right, or so on.
I think to be a conservative in this sense you actually have to first believe the myth that money you are taxed was yours to begin with, and you aren't merely a temporary holding container. After that myth dissolves, the whole anti tax conservative ethos logically falls apart. If you want more money, lowering taxes is objectively backwards. Just ask for a raise if you aren't happy with your pay or seek out a better job.
All allocation of property, including maintaining the status quo, involves the use of social convention backed by force. There are many people who would happily not live on the streets if a massive gun-pointing programme on behalf of property owners didn't evict them and deter them from finding another nice presently-unoccupied property.
(Smarter conservative arguments focus on utilitarian claims that [forms of] redistribution reduce incentives to grow the economy and build houses, rather than dubious moral claims that Uncle Sam pointing his tax collectors at Steve is somehow more immoral than Steve pointing his bailiffs at tenants)
Or trickling from the people who do nothing to the people who have to produce something nice for the lucky ones to buy. From the non-workers to the workers.
For capital gains, doing nothing to earn them is the rule. The fact that economic activity doesn't appear out of thin air and that someone has to pay those capital gains either by foregoing income or through higher prices is usually forgotten.
What really disappoints me is that Marxist don't follow a very simple idea, let profits and capital gains reach zero through market forces. That would fulfill the spirit but not the letter of communism.
Did anyone suggest it was? That seems like a very weak straw man of the very many sensible arguments from multiple angles, for why vast wealth inequality is a bad thing for society, including the members of the society with the extreme wealth but surrounded by poverty.
Supplying handouts does not affect the wealth gap - giving the needy some real capital like own housing, shops, etc would actually contribute to that goal. Handouts don't help enough because the money is spent on their necessities (which was the point), and obviously that means the money immediately flows to the rich ones that supply those items (housing, food, etc).
Reducing the wealth gap is crucial, I think you're severely misunderstanding.
Yeah, this is an unfortunate side effect of many social programs. Eg. housing assistance is just money that (1) goes directly to landlords and (2) removes market pressure and keeps prices for low quality housing higher than it should be.
Way more effective would be caps on rent, but for some reason politicians don't want to use this tool....
Let's imagine this in the most extreme form in a thought experiment. An identical twin is stranded in the desert. You have the means (water, transport) to save one of them. Is it better to save one (which one?) or leave both to die? (I have not settled on a firm answer so far.)
Any value system in which "save one person" is not obviously and objectively better than "save zero people", with no other tradeoffs or details present, seems objectively incorrect.
tbf real world tradeoffs are usually more like "save one person with high degree of likelihood of success" vs "attempt to save two people with significant likelihood of failure"
It's interesting, this is the sort of thing that Angus Deaton suggested when he argued against the EA program in a Rationally Speaking podcast[1]. His premise is that cash transfers to the needy won't work in a country where an oppressive government can just take the cash for themselves. Perhaps this is part of the effect here? (Bribes, taxation, etc.) I'm a bit skeptical that this is a knock-out argument against the GiveDirectly program, but it's definitely something to keep in mind and explore further.
But you can also say the opposite: handouts increase inequality and poverty.
Who is going to suffer because of the enormous covid handouts and subsequent inflation?
It was nice while it happened but a lot of rich people really benefited and a lot of poor people are going to go through the worst consequences of inflation and recession.
> Who is going to suffer because of the enormous covid handouts and subsequent inflation?
Don't know how it played where you live, but in my country, most covid handouts went to the rich, not to the poor.
1. Cash was given to companies they could then give to the people, instead of straight to the people.
2. Cheap/free loans were given to companies/rich people, not poor people, because poor people can't pay off loans so nobody gives them any.
The insane stock market profits were the result of this - rich people getting excess money. If it went to the poor people, they'd buy food and shelter, not stonks.
In the US 1 & 2 happened in a big way certainly, but there were also large direct payments to people below a certain income along with significantly bumping up unemployment benefits (to the extent that many were making more unemployed than they were when they had jobs)
The amount of fraud in the PPP program alone might be north of $80B. And the fraud in the other programs isn't inconsequential either. "large direct payments" is a joke, right? $2500 for a family? That's about one month's income for people who had lost their jobs. And many states decided not to extend their unemployment, or to limit it drastically because business interests started to complain about not being able to find enough wage slaves.
More for families, many state programs which added to this, hundreds of billions of federal funding to states for responses.
And much expanded unemployment payments, +$600 and +$300 *weekly on top of normal unemployment for long periods, as well as significantly expanded eligibility for who could get it and for how long.
Plenty of people made more money unemployed for significant amounts of time than they did with their jobs pre-pandemic.
Something like 10% of the population was on unemployment for a good while.
The people making more money from unemployment were not high wage earners to begin with. They were struggling to bet by. Look at this breakdown of the sorts of jobs that recieved more in benefits than wages and those that didn't. Skilled labor like nursing saw less earnings even with the CARES act under unemployment. The people who saw substantial gains were in fields like food service, not known to be a field that lets you get by in most high cost of living areas as it is.
One can so see how pandemic unemployment and other direct payments also substantially benefited existing businesses by not having demand for their goods and services drop, causing a cash crunch in otherwise healthy businesses.
> But you can also say the opposite: handouts increase inequality and poverty.
They didn't say anything that would let you conclude either of those things in the article, one they said the exact opposite of. Not read the whole paper yet though.
Even if I also have a hunch that your attribution of inflation to handouts is true, I do not believe that it has been established.
What is clear however, that increased prices for labor, wheat and energy, combined with post-covid logistics issues, have very clearly increased consumer pricing.
Inflation is due to the amount of money (over $10 trillion? hard to find a solid number that doesn't end in bickering about small details) created by the US Federal Reserve, in no small part in order to pay for handouts to people in businesses.
Or perhaps another way to say it is this: cash doesn’t matter. It’s all about capital. If you want to reduce inequality, give the poor some capital. Unfortunately, I think they’ll likely sell their capital to buy food or pay rent.
Capital is only valuable when your basic needs are met. If shelter, food, energy and transportation costs creep into you every week it's just logical you'd trade some capital for cash to meet those needs...
And homeowners are increasingly becoming massive companies rather than individuals. That's going to end up being feudalism, right? The ownership of these companies is going to be passed down through families.
We use handouts to prevent revolutions and political instability. You don't recognize the absolutely massive benefits that those payments have to everyone because they get to ignore the poor.
When the government was handing out money indiscriminately to everyone right after Covid, we just put the money in the bank. That helped us. But it didn’t stimulate the economy. When they gave the same amount of money to some people we knew that lost their jobs, they spent it on necessities - helping the economy.
Giving money to people who will spend it obviously helps everyone. But there have been plenty of studies showing that people will hurt themselves financially even if it will help other people. Especially if it helps “them”.
I like givedirectly very much, especially because they try to do actual research on the outcomes. However I would love to see some research that is not done directly by them, but is more independent.
Givewell has pretty in depth reports on the charities they recommend. They’ve spent a very large amount of time trying to figure out the efficacy of giveDirectly, largely because it is effectively an infinite sink that all other philanthropic activities can be compared against. Interestingly givewell just recently demoted giveDirectly to instead recommend a charity that does cash handouts to parents who get their children vaccinated. I’ve got the report on my reading list but haven’t had a chance yet.
Note that in this case one effect these cash payments don't have is: coming out of the pockets of those who don't receive them. That's because these cash payments are from abroad. There's a very big difference between cash payments from influxes versus domestic cash payments paid for by loans, taxes, or inflation.
In fact it's almost exactly the opposite. Rather than the supply-side economics which trickle-down focuses on, this sounds like a clear example of demand-side economics. By improving the income of some consumers in a community, they are able to buy more goods and services that they wouldn't have otherwise, thus improving the local economy altogether.
Does it improve that economy by at least as much as the cost of the transfers? It seems like a lot of economic benefits can be created by injections of money from outside the system under study.
That's the point of the fiscal multiplier figure: according to their estimates it improves the economy by a multiple of 2.6x the cost of the money transferred.
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Seems like reverse "trickle down" in another respect too: the poorest recipients got better off but the gap between rich and poor still widened, presumably because the poor spent much of their increased budget buying things from the rich.
Imagine someone who sewed things by hand, given (or even loaned) the money to purchase a sewing machine, making them many times more productive. Now the community can have things sewn faster and more easily with less effort, with tons of downstream effects (more sails, better clothing, stronger soft goods, etc) and it's easy to see how the net improvement to that community can far exceed the price of the machine.
Another way to ask that question is "does there exist tools whose price is less than the total amount of increased economic activity they enable", which when phrased that way, it seems clear that the answer is "yes".
I would think that the more consumers that can "vote with their wallet" on which products are the best, the more quickly the market will identify and reward good products. Identifying and rewarding the best products (i.e. those processes that create the most valuable outputs from the inputs) is one of the primary benefits of market-based economies. The positive feedback loop of reinvesting profits helps them lift above the general noise.
Yes now go ahead and pay out the benefits in a demurrage currency so that benefits payments can't be withheld from the economy which means the amount you need to inject will be much lower.
It's probably worth applying some scepticism to this study:
1. It's an economics paper. Not a field with a reputation for accurate predictions beyond the basics.
2. It's commissioned by a charity that wanted academic evidence of the benefits of its own policies, so it's as conflicted as can be.
3. It's research by academics who are as a group notoriously left wing, so they're being asked to do research to support their own ideological preconceptions.
That doesn't mean the conclusions are wrong, but it does mean they shouldn't be accepted at face value, and you'd have to review it very thoroughly - ideally with external double checks of validity - to be able to conclude anything from it.
Doing even a very fast check of the paper immediately reveals a major problem: the headline claim of 0.1% price inflation excludes the price of labour, which inflated significantly. This pretty much explains the entire effect. Not surprisingly, if you start handing out cash at random in poor communities then the people who aren't lucky enough to get it start demanding some of that cash too. But you don't need research to know this. It's economics 101, that's what's happening right now in western economies (big cash transfers from governments -> inflation).
We may suspect the paper is being undermined by ideology and funder bias because its early statements on inflation try hard to hide this fact. At the start, it's saying:
"Importantly, we document ... minimal price inflation"
(abstract). Then it becomes:
"For inputs, we find positive point estimates [of inflation], but they are not always statistically significant. For outputs, we document statistically significant, but economically minimal, local price inflation."
(page 4). Unless read very cynically this sounds like good news. But then we notice how obfuscated this statement is. "Positive [input] point increases but they are not always statistically significant", i.e. some are and the magnitude of the increase isn't mentioned. Later we find:
"we do see significant increases in the factors that we directly measure, and particularly in the wage bill: enterprises in treated (control) villages increase spending on labor by USD PPP 82 (70), a sizable change relative to the control mean"
(page 20). So we've gone straight from "minimal price inflation" to "significant increases ... a sizeable change". I've read so many academic papers in the last few years and whenever you see such large slippage between claims in the abstract and claims buried deep in the paper, it's always a bad sign. It's a leading indicator that there's going to be other kinds of problem, probably involving bogus stats/models/assumptions.
Moving on. We might have hoped that people would use the money for investment that could permanently increase their standards of living after the cash transfers end, but that doesn't happen:
"Strikingly, we do not see strong evidence of a firm investment response"
But this isn't something that needs research to know, it's the story of decades of massive and sustained foreign aid to Africa. Aid money gets spent on increased consumption but not sustainable investment.
> So we've gone straight from "minimal price inflation" to "significant increases ... a sizeable change".
I'm not sure the fact that a different variable (total wage expenditure) from the one discussed in the abstract (price inflation) recorded a different outcome is a particularly pertinent critique of the paper.
Since the paper also records that the increased wage expenditure allowed wage earners to buy more goods because the price of goods inflated minimally, and the enterprises spending more on wages nevertheless experienced a [non-statistically significant] increase in profit, leaving all groups materially better off, this is GDP growth, not inflation.
A more pertinent observation is that this is pretty much what you'd expect from injecting additional money into a local economy operating well below capacity and buying most of its consumer goods from areas not receiving cash injections, so it doesn't necessarily work at national scale or if the jurisdiction self-funds its poverty alleviation funding.
Although I agree with your conclusions that the study doesn't tell us much, I don't think wages should be excluded from claims about price inflation, especially in non industrial economies heavily reliant on cheap labour. The charity advertises the headline 0.1% rate and the abstract makes no mention of the fact that actually some of the most important prices in that society increased significantly. If they'd admitted to this up front of would have seriously reduced the apparent success of their initiative.
But there is really a deeper problem here. Every time researchers do this they're training people to assume their claims are deceptive in some way. Large groups of people are just tuning out academic claims because of this sort of thing, they don't care. But this is bad for social cohesion because the people who take academic output on faith then conclude that they must be a superior breed of person: "reality based", "understands the science" etc. We already have this problem and it's getting worse. To wit: you can't afford the time to double check every claim presented as important or that will affect social policy that affects you, so you have to generalize, and increasingly that means assuming that if an academic makes a claim convenient for their prevailing ideology, it's probably a trick or misleading in some way. If caught they tend to blame journalists for "misrepresenting" their work, or they'll point to a footnote on page 67 where they redefine a standard term and use it to claim nobody should have ever assumed the obvious interpretation of what they were saying. It's just so tawdry. Then for people who stop listening, it gets used as a weapon to beat them around the head.
So I think academics have a moral obligation to be brutally honest in their claims and abstracts. This sort of word game where they arbitrarily exclude the prices that went up from their definition of price inflation, is ultimately self defeating.
Wage spend literally isn't price inflation though, and real wage increases (or employment increases) due to increased output aren't even likely to cause price inflation. Local enterprises sell more, so the workers get more money, with which they are able to buy more stuff. That is economic growth, not price inflation.
If you would like to argue that people earning more money is always and everywhere a negative outcome aid agencies should do everything in their power to avoid, that's a bold argument you're perfectly entitled to make, but it doesn't change the fact that it is not - by itself - price inflation. If the paper has computed price inflation wrongly that's another matter, but it won't be because they haven't created a new definition of price inflation which includes wages (or profits or units sold or unfilled vacancies or speculator activity or anything else which isn't price inflation, no matter how often it correlates with it or causes it).
Put another way, academics should continue to use definitions correctly, and not add fake caveats to stuff which is tautological to pander to the sensibilities of people who (i) don't understand the basic definitions (ii) assume that a reasonable starting point is to assume that if their view on what the basic definition should be conflicts with the academic's understanding, it is because the academic is acting in bad faith.
Inflation is a general rise in prices, and what the paper reports is not merely that people who received money paid their employees more (yay!) but also that employers in villages that didn't receive any money also had to pay more in wages. Literally they experienced an inflationary shock in the labor market. The research is very quiet on this part - in the control villages the little businesses suddenly had a big problem. They couldn't/didn't raise prices because their competitors in the next village over weren't doing so, but they suddenly had to pay more in labor costs.
You can say this isn't a problem but the goal of aid is to try and create sustainable increases in wealth that stick around after the money flow stops. That clearly didn't happen here.
As to definitions, that's exactly the problem in talking about. The academic definition of inflation is useless and misleading. They say prices didn't go up, as if labor is some magical thing that doesn't have a price. And they neglect to mention that a very important category of prices did inflate unless you read most of the paper.
Price inflation is a rise in product prices. Period. This definition is not contested, not even by politicians who currently have very strong incentives to pretend that the headline rate of price inflation is "useless and misleading" and we should use a novel measure which factors in relatively low wage growth instead.
The paper is not at all quiet about the spillover effects on other firms. On the contrary, it is quite clear that there is no "problem" because the firms spending more money on labour make more profit from selling more goods [at approximately the same prices as before]. This is what economists call "growth".
If ever there was a case to change a definition of a term academics, politicians and headline writers all agree on, I suspect it won't come from somebody whose principal objective is to argue that "everybody has more stuff" is actually an adverse side effect.
Is your argument for why it's not misleading "but journalists and politicians repeat what academics say"? If so that's not very convincing and exactly the kind of argument I'm talking about. Headline writers are not exactly highly trusted.
Anyway, I disagree that's true. I don't recall ever seeing a discussion of "price inflation" on it's own, headlines are always about RPI or CPI, i.e. where adjectives are used to narrow the range of prices being discussed. Even there, the definitions are certainly controversial with many prices that affect ordinary consumers being excluded, and hedonistic adjustment frequently being a source of surprise.
It's also the kind of thing that led to catastrophic economics over the past 15 years or so because central banks kept rates very low and then near zero or even negative, printing lots of money that inflated giant bubbles in housing and then the stock market. They did this because "inflation is low", due to definitionally excluding the prices that were going up. Many people have tried to sound the alarm about this and central bankers (who are usually ex academic economists) simply ignored them.
But again, really, repeating my wider point, your response is exactly the problem I'm talking about. A normal person will interpret "price inflation" as almost definitionally redundant, because inflation is a general rise in prices. There's no reason to expect anyone to interpret this as excluding wages. Same as how public health researchers define "unvaccinated" as including lots of people who have taken a vaccine, or "COVID death" in such a way as to include traffic accidents. When these people blame the reader for assuming a plain English definition, it's the sort of thing that just leads people to assume nothing academic can be trusted.
> I don't think wages should be excluded from claims about price inflation, especially in non industrial economies heavily reliant on cheap labour.
As I read your quote above, it sounds to me like "increased spending on labour" refers to an increase in the quantity of labour demanded, more than an increase in the hourly wage. That's consistent with both economic improvement and low inflation.
> 1. It's an economics paper. Not a field with a reputation for accurate predictions beyond the basics.
If your first reason for dismissing an economics paper is because you don't like economics, that's a bad start. Especially since the rest of your comment reviewing this economics paper consists of you doing economics. You're preemptively dismissing everything you yourself have to say.
I mean, if economists suck, then surely the economic theories of people who don't think economics is real suck more.
To me, your point reads very differently from their comment. A skeptic outlook informed by events and criticisms in the field, justified by a reference to those events, is very different from dismissing a field out of hand.
A charitable read of their comment interprets it as you do, but starting a criticism like this is not a good way to engage readers. I personally stopped reading reflexively and skipped to the replies to see if other people found anything worth engaging with, much like I do with clickbait titles.
Thing is, it's not my first rodeo with misleading research. How many papers does one have to read and walk away feeling short changed before you're allowed to generalize, in your view? 50? I've easily achieved that number across different fields (not exclusively economics).
Worth pointing out the summary (2nd link) by the people is arguably pretty bad. They are basing being better off on reactionary feelings and money left in the bank. That makes no sense at all for people with little wealth. It seems like they purposefully picked things to make the study a failure.
Publicising that might be a way of overcoming the resistance of the large number of people who are mainly interested in their own relative status, and so dislike giving assistance to the poorest members of society. If you can show people that yes this intervention will help the poorest but it will help you more then those concerned mostly with their own relative status might be more likely to back it.