Basic Income: Unintended Consequences
jonthewang.com
jonthewang.com
I think overall the net positive effect of BI probably counteracts the concerns above - but it will be interesting to see if such a phenomenon develops in Finland.
I think that cultural islands such as GP is worried about would not be entirely or even substantially broken down by any educational system.
(i.e. evolve its own culture and make it hard for a child born in a poor area to leave)
Joking aside, I'd be really interested to see what happens in an economy where starting a business is easy because you don't have to worry about it covering your basic needs. I'd imagine many people within ghettos would finally be able to leave and seek opportunities elsewhere, or be able to create their own opportunities within their current situation.
Would some people sit around not working while spending money on drugs or booze? Of course. But those people exist already. I'd be interested to see how the ratio of these types of folks compares before and after BI, and also the ratio of people making money from jobs vs self-created small businesses.
I really want another country to try this out =]. Not saying I don't want it for the US (I do, and if nothing else than for an interesting experiment), but I really don't see that happening with the weird fear we have of anything even remotely perceived as socialism/communism.
BI lowers the bar from "people okay with sustenance farming" to "people okay with roughing it." In the extreme case the only tether needed is a dirt road or body of water suitable for a delivery vehicle to bring supplies[1].
You might ask who would be willing to break off from mainstream American culture so severely, and I think the easy answer is religions and cults. It could be this isn't as bad as I think - perhaps the cultural and religious development done in these communities would be valuable - but the point of this argument was to bring up something unexpected.
[1] Coordinating the exchange of the BI for the supplies could be arranged in various ways. I think clever people will find loopholes and thus there isn't a practical way to force people to be present in "civilized" areas.
On the margin, basic income should make it easier to move, rather than getting stuck in one place because you're out of funds. I'd guess that applies to children too (when they grow up).
Because first thing financial industry would use it against the poor, get them lump sum and eliminate benefits of basic income.
I am sure this can be made in a way that wouldn't be limiting too much, yet prevent obvious abuses you are bringing.
That being said, the point of a basic income in the first place is to introduce financial stability to all households so any costs associated with preventing lending on basic income collateral may be societally optimal.
The reason why banks require evidence of ability to repay the loan is because, without them, there would be a huge incentive for borrowers to take loans without paying them back. This is where the adverse selection comes in - the information asymmetry results from the borrowers knowing what their intent for the loan is and the incentive to mislead the lender. This leads to lenders being more wary (and implementing requirements) when issuing loans.
Anyone getting basic income should be completely free to spend it any way they want. That is essential.
Such as to pay off a loan? Therein lies the problem: if you make it illegal to lend money explicitly based on BI, and the debtor pays with BI, who is liable? And if someone is liable, is the debtor truly free to spend BI as they wish? If nobody is liable, then what stops me from claiming that my BI is instead my paycheck, and then taking a loan based on it?
Yes, the poor would be disadvantaged by this. The solution isn't to take away everyone's ability to take loans on BI; this would leave people unable to take loans on their BI once they've got a stable income. The answer is to educate, to explain that taking that lump sum leaves you unable to use BI later when you need it. At most, pass a regulation stating that loaners are liable if they don't make it clear that the loan is paid off with BI over the course of X years.
https://www.doleta.gov/business/incentives/opptax/wotcEmploy...
It's also a disaster because the UK gov is famous for changing payment rules, sometimes retrospectively. The most recent changes leave some of the poorest people owing between a quarter and twice a year's income in supposed overpayments - which they accepted in good faith, with no suspicion that the government would change its mind about them later.
Any tax credit scheme is going to be open to similar abuse - whether accidental, because of incompetence, or deliberate because of political malice.
This is assuming we don't raise the BI in response to inflation. We shouldn't do that. (Matching or slightly exceeding targeted inflation seems a good idea; raising in response to observed or expected inflation seems potentially disastrous).
Or we'll find a way to survive with a lot fewer minimum wage grocery clerks in the future.
The big difference I see is that truly unpleasant and unsafe jobs will see wages rise. Being a clerk is not a great job, but it's not a bad job unless you have an awful boss. If your boss at the grocery store starts giving you trouble, it becomes much easier to just walk away and eat rice and beans for a while until you can find another job.
Sounds great to me.
Right now in some cities, Amazon and other services will deliver your food. I'd expect this to gain popularity as delivery costs come down and the cost of running an Amazon warehouse type grocery store would be significantly cheaper than running a traditional grocery store. This will drive down prices and will eventually run traditional stores out of business. So you're left with an automated warehouse moving your food around and a self driving car to deliver it. Shouldn't need that over prices clerk after all.
Of course, you'll still need some workers, but if their jobs are still needed after mass automation, they're probably already worth a lot more than minimum wage.
Across all sectors of the economy, lots of low-income jobs will be eliminated. If we don't have BI to protect those soon-to-be-ex-workers, we're going to have a sizable portion of population in poverty, with no skills that let them outperform automated systems.
Rather than added to with BI, what really needs to happen is the reduction of rent. Specifically the financial rent paid to the cabal of moneyprinters for the "privilege" of partaking in the markets that said moneyprinters have inflated the fuck out of - housing, cars and education - via the Fed policy of forced inflation. Real goods get continually cheaper (that's central to economic competition) so to make the CPI inflationary in a time of increasing productivity gains, the credit-based expenses skyrocket. Their only limit is the carrying cost of the principal - if interest rates halve, home prices double.
Without addressing how the Fed and banks have perverted our society away from wealth-based independence and toward mass indentured servitude, I fear the only thing BI would do is turn the treadmill up correspondingly quicker.
Similarly, local minimum wage laws might be eaten by rent increases, since they're tied to those area and jobs. But a BI would make it much easier for people to move out, distributing the demand over cheaper areas.
"Since the lifetime of the average person is roughly 78 years, net present valuing a lifetime of $12,000 yearly basic income payments works out to roughly $287,000 assuming that yearly payments total $10,000 and applying a 4% yearly discount factor. That is enough to purchase a median priced single family home"
While factually true, in total, $12k a year isn't going to buy you a house anywhere near the median in your life time. Too much hyperbole in the read.