Sounds Great! ... But Can You Proof It?

The article "To Beat Back Poverty, Pay the Poor" is about a large-scale solution for the very poor, often in overall low-income countries, which uses payment plants to increase social welfare. That made me think back about a documentary I saw a couple of weeks ago, where a different large-scale solution is proposed to increase social welfare. This time in the richer countries though. The documentary featured Richard Wilkinson, a researcher from the UK. He and his wife claim that there is a relationship that greatly imapcts social welfare in rich countries. If this true, and increasing social welfare is our goal as social innovators, than this could would be highly interesting. So what is this magical relationship that could increase social welfare? Income inequality, claims Wilkinson.

Wilkinson and his wife compared numerous statistics between rich countries and everytime they found the same relationship: the higher the income inequality in a country, the lower the social welfare.
Here is a talk he gave on TED. Have a look:

Now the work of Wilkinson does not go uncriticized. On the contrary. Countless allegations of cherry-picking, biased conclusions and plains Fs for statistics have been voiced. The biggest critique: No causality. What does that mean? That the observed relationship might be there, but that they are not caused by income inequality. They are both just the effect of another, omitted, factor. These critiques made me think a little bit more about causality. I want to draw a link to social enterprises. Social innovation lacks an easy yardstick to measure performance. (See article: Let's hear those ideas) Since tell me, how are you going to proof that your innovation caused that long-sought change? Let me give an example: consider a social workplace such as the Greyston Bakery, that has as its mission to employ inmates to keep them from dwindling back into the criminal system. Suppose that after having read all kinds of articles, the manager of the Greyston bakery made an agreement with the government: they agree on a number of concrete and firm performance indicators. If they ensure that criminality goes down by employing ex-fellons in their bakery, then they are succesfull. Time goes by, and luckily, crime has gone down. Cheers! But how to prove that this was the effect of solely the Greyston Bakery? Now I absolutely loved the video of that Bakery. But can we really proof that? Couldn't a decline of crimininality just be the effect of a larger government program? It might just be true. Often there initiateves concentrated on one problem. And why would we care? Criminality went down right? Sure, but if tax-payers money is involved, it sure matters which program actually was succesful. Most of the companies who are solely focused on making profit do not have this problem. If they sell handmade glassware which according to them makes your wine taste better, than true or not, it doesn't matter. As long as the people who believe it pay for it, than it's all good! (See Seth Godin, All Marketeers are Liars)

So ask yourself:
- What do you believe? Does income equality determine social welfare? What are your reasons for (dis)believing that?
- Does causality form a problem for governments and social enterprises?
- If so, what do you think should governments and social enterprises about it?