Which Foreign Aid Programs Work? The U.S. Runs A Test — But Won't Talk About It

It was the summer of 2013 and Daniel Handel had just moved to Rwanda. He was unpacking boxes in his new house, when his wife walked over with her laptop and said, 'You have to listen to this radio story!' The piece she played him was by NPR's Planet Money team, and it profiled a charity that was testing a bold idea: Instead of giving people in poor countries, say, livestock or job training to help improve their standard of living, why not just give them cash and let them decide how best to spend it?

Handel was fascinated — because for some time he had been mulling this exact question. He was an economist with USAID — the U.S. government's main agency for distributing foreign assistance. And although he'd only been with USAID for two years, Handel had already grown concerned over what he saw as an agency habit of spending enormous sums on programs to help poor people, only to boost their incomes by a fraction of the program's per-person cost. At this rate, Handel had often thought to himself, might it be better to just hand over the money to people directly? Now it turned out there was a charity doing precisely that. (Indeed the charity's name is GiveDirectly.)

Handel wasn't ready to propose completely scrapping traditional programs in favor of cash aid. But at the very least it seemed reasonable to make sure that any given traditional program produced more benefits than simply giving people an equivalent amount in cash. In other words, he wanted to use cash aid as the benchmark by which all other forms of aid are judged.

So Handel went to his bosses at USAID's Rwanda office and proposed an experiment: Take one of