Third, it seems intuitively surprising that a $1,000 cash transfer for a household in a low-income country would have a substantially smaller effect than 3-4 months of therapy (0.5 SD for cash transfers vs. 1.6 SD for therapy in HLI’s study).
What I think might have been overlooked here is that therapy is only being given to people diagnosed with mental illnesses, but the cash transfers go to poor people in general (only some of whom will be depressed). Hence, it’s perhaps not so surprising that directly treating the depression of depressed people is more impactful than giving out money (even if those people are poor). If you were in pain but also poor, no one would assume that giving you money would do more for your happiness than morphine would.
What I think might have been overlooked here is that therapy is only being given to people diagnosed with mental illnesses, but the cash transfers go to poor people in general (only some of whom will be depressed). Hence, it’s perhaps not so surprising that directly treating the depression of depressed people is more impactful than giving out money (even if those people are poor). If you were in pain but also poor, no one would assume that giving you money would do more for your happiness than morphine would.