Should government anti-poverty programs transfer income in cash or in kind?
Transfers-in-cash means programs like welfare or the Earned Income Tax Credit; these provide unrestricted income that recipients can spend as they see fit. Transfers-in-kind means programs like food stamps, subsidized housing , Medicaid, or public schools; these force recipients to spend their income transfers on the particular goods the government dictates.
The argument for cash transfers is that the needs of recipients vary, so recipients can benefit from choosing how best to spend the income they receive. The argument for in-kind transfers is that some recipients might spend cash transfers unwisely.
My view is that cash transfers are better overall. Cash is unambiguously better for households that make good use of the flexibility. And the households tempted to misuse this flexibility are not readily manipulated by government restrictions. For example, such households can choose bad neighborhoods, or fail to encourage their kids in school, or avoid using government-provided health care. So, policy should focus on those most eager to help themselves.
Beyond these considerations, government paternalism (whether towards the poor or otherwise) opens a Pandora's box that permits ill-intentioned as well as benign uses of government power.