YCs Basic Income Experiment
jacquesmattheij.com
jacquesmattheij.com
The author does have a valid point, however, in that knowing the income won't last forever will change how the beneficiaries behave.
I assume it is part of a long-term effort to move governments towards a Basic Income. But a more useful campaign to make BI a reality is not to juice the early experiments to make them look more appealing. A much better strategy is to do good research and find which aspects of BI would really work and which aspects don't actually hold up.
The main problem around BI is there's a massive lack of data available for how people actually behave. All of the conversations around BI end up as circles of speculation around how people would react and others saying: "boy, it sure would be nice to have some real data around the topic".
So, to answer the first question: the desired outcome is a better understanding of how people in the real world react to a BI, and a better understanding of which BI mechanisms work well and which BI mechanisms fall apart under real-world conditions.
Preventing a new october revolution in its infancy seems to be high on the list.
It's basically impossible to imagine a perfect (ie. time-unlimited) basic income experiment. For one thing, we kind of need results sooner rather than later. I don't think waiting a generation to get crucial results for the future of political economics is tenable.
Moreover, financing for such an experiment would have to be truly massive.
For example, if the participants who receive this money are poor and they know that the money will stop coming 5 years from now, they may save every penny they can. This may lead us to conclude that basic income does not lead to irresponsible spending. But if any government institutes basic income indefinitely based on the results of this study, it may produce a very different outcome.
Wouldn't it make more sense to start at a small-scale and validate that it's even possible that it works? What if they spend the money to do a 5-year study and find that all participants are massively irresponsible with the money and that BI would be a disaster of a social policy?
Why commit to a 45-year experiment when we have no data right now? The scientists working on nuclear fission aren't saying: "Let's give up because we can't build a commercial scale energy positive reactor". They're saying: "Let's make progress one small-step at a time on a path that gets us there eventually".
We need results for every experiment today. Unfortunately that's unrealistic and not how science works. You can't simply compromise your study to get results faster; you'll never know how valid your study's results really are in such a case.
It sucks that if you want a good study for basic income you pretty much have to do it, effectively, forever while aggregating and gathering results over time but you can't just shortcut science because "we kind of need results sooner".
The only downside of all UBI experiments I personally do not like is how there is no way to model the cultural shifts involved with it, and how the children of the UBI generation will grow up and mature into society, because I imagine it will be incredibly divergent once you can ask fundamental questions about what all the schooling is for and how one should best model their life for fulfillment.
That might be true, but financing basic income for life is a rather expensive research proposition.
You can't really judge a states spending exclusively in tax dollars in, or you get where we are in the US with derelict infrastructure and understaffed hospitals, fire departments, and public schools. You are taxing money to spend it for a reason. As long as the results are worth the price paid (and infrastructure at least is enough of a force multiplier to give you a lot of overhead for corruption before it is inefficient) you aren't "spending a lot of money" because your economy is growing more than you shrink it by taxing it.
It is only effectively dead weight taxes (corruption, the military, modern foreign aid, politicians salaries, bureaucracy, insane overregulation) that is tax money wasted. And sure, a lot of it is wasted. Which is half the argument for UBI - the metrics are simple and should be transparent to prevent anyone corrupting what would be a force multiplier.
Ultimately, shorter term studies are an approximation. They're the best you can do. We can't do a life long study on this drug before making it available but we can draw information from shorter studies. Similarly, we can't do a life long basic income experiment, there's not the money out there, but we can study the shorter approximation and do it with more people and draw conclusions from that. All experiments entail compromise. The fact that neither of these bodies of science can have the ideal experiment is not a flaw but just part of doing science.
The general critique seems to be: the only way to study BI at any level is to run experiments that last for a person's full lifetime. It seems insane to me that you wouldn't do small scale studies and pilot programs that gather data and build up to longer and longer studies.
When I'm designing a new system I don't say: the only way to validate that the concepts are correct are to write the production-grade code at all levels and see if it works. You find ways to validate key assumptions and build smaller scale proof-of-concept models to see if any of your theories are just totally broken.
No, the experiments don't need to run a persons lifetime, the benefit, however, needs to be believably of indefinite duration, because we already have both an understanding of the economic rationale and empirical studies showing that explicitly-limited-term benefits or costs induce notably different behavioral impacts than open-ended ones.
Its the benefit, not the study of the effects of the benefit that needs to be open-ended.
[to explicitly note, I am curious about this element only and my question is not a critique or comment on the experiment]
Where are you going to get the capital to make 40k, 50k, or 100k happen?
Edit: I originally wrote 12k or 9,600k are a likely place to start. To be clear, I do not think 9,600,000 USD is a reasonable place to start the BI salary.
People can still be irresponsible (or whatever you'd like to call it) with welfare. They can spend it all at the beginning of the month or barter their credit for cash/drugs. In the end they'll be left hungry. They made that choice for themselves. It's not cruel. To say otherwise is to deny them of their free agency, and if that's the case, perhaps they belong in the care of someone else.
Identifying the little bugs early (Visa gift cards versus Amex gift cards prove to be a better option for folks that don't have bank accounts...etc) while streamlining the reporting structure will allow the larger, long term experiment to run smoother.
The author is concerned with the 5 year "long term" study. Consider the following:
- You know you're going to get, say, $2,500 a month for the next 5 years.
- You know you're going to get, say, $2,500 a month for the next 15 years
- You know you're going to get, say, $2,500 a month for the rest of your life.
Do you plan each of those the same? Differently? You'll likely plan those completely differently because two of them have a maximum amount of payout whereas the last one, for the rest of your life and what real basic income would be, would not have a maximum.
Unfortunately this means the experiment is flawed from the start. You won't be able to apply effective controls so that people who know the maximum payout want act differently than someone who expects it forever.
Basic income is almost impossible to test with proper controls unless you want a valid but very, very long term study of probably several decades.
I don't necessarily agree that the study is unethical; the participants, one assumes, are told of the cut-off before the start. I do think that the outcomes might be less valid.
- 0 years (ie no income, as per current)
- 1 year
- 5 years
- 15 years
- life
For example, it's possible subjects knowing they will get zero or one year of BI could have better outcomes than ones who know they have a lifetime of BI. Or not.
In Australia, and I imagine the US too, there is always a lot of noise and strong support for movement of power and money out of government and into increasingly consolidated corporations. Privatisation of state assets and services, etc. I know that the idea of "small government" is very popular in the US.
How might BI come to pass into popular use? The jobless masses taking up their garden tools? Or private enclaves of some sort?
On the surface you might think that successful experiments could encourage government support, but many point to the successes of the Nordic model and it rarely motivates the right to widen the safety net.
Why?
The old Welfare rolls created generational poverty and dependence and low or zero productivity in the multi-generational groups who received it.
Also, the German government decided Basic Income was not feasible for the following reasons:
- it will cause a significant decrease in the motivation to work among citizens, with unforeseen consequences for the national economy
- it requires a complete restructuring of the taxation, social insurance and pension systems, which will cost a significant amount of money
- the current system of social help in Germany is more effective because it's more personalized: the amount of help provided is not fixed and depends on the financial situation of the person; for some socially vulnerable groups the basic income could be not sufficient
- it will cause a vast increase in immigration (leading to unbudgetable costs to cover everyone)
- it will cause a rise of the shadow economy
- the corresponding rise of taxes will cause more inequality: higher taxes will translate themselves into higher prices of everyday products, harming the finances of poor people
See https://en.wikipedia.org/wiki/Basic_income.
It's troubling that so many of our educated young people fail to correctly predict that giving people money will de-motivate them.
California, Illinois and New Jersey -- and Venezuela -- tax the bejeezus out of their citizens. And the problem is, the tax base can leave. The taxpaying citizens can look at their taxes going up with no tangible benefit to them personally (no roads, bridges, schools etc. improvements, just transferring their money to others to provide 'basic income').
All three states are losing taxpayers and job creators and in some cases gaining non-taxpaying, benefits-seeking citizens in greater numbers than those who leave.
(Sorry for the snark, but I am actually interested.)
But I could certainly be wrong and would very curious as well
I was musing about how to implement the Georgist idea of replacing all taxes with a single tax on land value, even if you don't have the authority to do anything about the other taxes.
Eg think a local government that can raise a land tax, but can't muck about with federal income taxes; or even a private community of people banding together. They can buy land as a cooperative/corporation, and lease it out to individuals (ala collecting land tax), but don't have any proper taxing authority.
For convenience sake, I will assume a city in the following.
Now, there's an interesting result in economics that given capital and labour mobility, All Taxes eventually Come Out of land Rent (ATCOR), and all subsidies, benefits from infrastructure etc eventually go towards land rent. (See https://en.wikipedia.org/wiki/Henry_George_theorem)
The plausibility (even if not correctness) of this claim is easy to see: real estate next to a train station or a good school is more expensive. Real estate in an area of high taxation is cheaper. (You can see that nicely on the border between Switzerland and Germany, where it's entirely feasible to live in one country and commute to the other for work.)
My first idea was thus: everybody records the federal taxes paid on economic activity within the city. If ATCOR is true, land values (and thus land taxes collected) will increase until the refund is fully covered. People pay higher land rents, but don't care about federal taxes any more. Especially, not about the marginal tax rate.
Of course, this system might be gamed. So I added some bureaucracy: instead of direct refunds, give people tax credits that they can trade and use in a combination with cash for paying the land tax. (Or pass on to their landlord, grocery shop etc for them to pay land taxes with. Or give to grandma as a gift.) Also, you might only count one dollar of federal taxes paid as much as 80 cents of cash for paying land taxes (to preserve some private incentives for lowering your federal taxes); and do something in case you get more credits handed over in the beginning of scheme than you are actually taking in land tax. And you'd also want to be very careful about auditing people's claim about how much federal tax they paid.
The impact on marginal tax rates remain: their disincentives are blunted. Earning an extra dollar more means an extra dollar more in your pocket, as long as you don't have to directly or indirectly use more land to earn that extra dollar.
Where we might turn a profit is that effectively untaxing economic activity might make the economy of the city boom, thus increasing the value of the land beyond the status quo---even after taking the discounts/refunds we give into account.
(There's a bunch more stuff to explain, eg how to assess the land values. For the sake of argument, please take the Georgist ideas for granted.)
Now to re-introduce the basic income: the city could give out some credits per resident for free. Someone who only uses a very small amount of land might come out net-positive (via trading their credits on eg a centralised exchange).
Of course, if everyone tried to loaf of their basic income, the whole system would collapse. On average, people need to still generate economic activity that keep the value of the land high.
But in some sense that's a very familiar argument against universal basic income.
I said you might turn a profit on the whole scheme. That requires two assumptions: first that the basic scheme without basic income creates enough of a boom to make it worthwhile for a private investor to set up; second that providing a basic income would further encourage economic activity. (An argument that some basic income proponents already make.)
Please critique the above sketch. I suggest a two-pronged approach: if you want to show that the approach is impractical, please steelman it as much as possible before you shoot it down. (Ie please try to shoot down the best possible argument you can think of, even giving all the concessions about what might or might not work in practice you can.) This is so that we can get a definitive verdict.
If you are on the other side, and think the scheme might succeed: please point out all weaknesses (and try to repair them, if possible).
I am fairly confident that a scheme like the above can succeed for a city. The land tax plus credits scheme will bring in revenue at less deadweight loss than any other taxes.
I am less confident that adding basic income to the scheme will increase its net profits. But a city might do it anyway for humanitarian reasons.
(If you believe that a universal basic income should be the only welfare benefit necessary, any other welfare benefits would be subtracted from your tax credits. This single-benefit-scheme is a nice symmetry to the way we can emulate a single tax. I am not sure, whether that's a good idea, or even legally possible.)
When money comes so easily it will drive up prices. If it's done on a spot level it won't make an impact but once you increase the size of the population that received this free money, it will just drive up prices.
For example look at there mortgage interest deduction. It's purpose was to make home ownership cheaper but what it ends up doing is causing house prices inflation, at least in areas like the bay area. The deduction gets factored into the financial engineering required to figure out how much you can afford to pay for a house, which causes there prices top rise.
The same thing will happen when people get free money every month. Just like how rent prices increased around face book when they offered a subsidy if they lived within 3 miles of HQ, the same type of increase will happen if a larger enough population gets this free money.
* How much more food will be consumed if we add a Basic Income? Most people are already eating enough food to keep them alive. It might go up at the margins as people who are currently food-insecure would be able to consume more, so let's say the overall consumption of food rises by 1-2%.
* How much more housing will be consumed if we add a Basic Income? Most people are again already consuming enough housing to keep themselves sheltered. It, again, might up up at the margins as more homeless participate in housing programs and people move up a little bit. But, again, the overall consumption of housing will only increase by a couple of percentage points.
Will Basic Income increase inflation on bare necessities? Yes, a little bit. But significantly less inflation than the income provides. The real increase in inflation will be in discretionary spending (movie theatre tickets, video games, investment portfolios, etc). But, bare necessities won't see a massive increase in inflation simply because, by definition, people are already mostly getting these.
However, ever-larger scale studies are the only ways to get real data on these effects.
It's bad enough we have television shows ruining people's metabolism, likely for life, just for some ratings. But then to come from someone claiming to be doing academic research, especially in light of the history of research like this, is repugnant.
I'm not convinced this is a good study but unethical seems to be a reach.
> Experiments on people like this will absolutely have dramatic changes that will last their entire lives.
What about all those focus groups and clinical trials that people partake in every single day? Are those somehow better than this case where we're giving people money and asking them some questions every so often?
Plus this is really well intentioned.