Finland ends Basic Income trial
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If everyone got it and it was funded by expanding the money supply it would be inflation plus redistribution (since the new money is distributed uniformly instead of e.g. to government bondholders). If you're funding it with taxes, it's plain redistribution.
This comes with some caveats, of course:
This would probably cause a demand shock as spending shifts from the things the rich do to the things the newly-not-poor do - so there would probably be a short-term jump in the price of e.g. low-end smartphones and middle-end IKEA furniture, and a crash in the price of international travel and of certain investments, until the economy properly shifts over to the new production priorities. Which can be interpreted oh so hilariously from a Marxist perspective.
There may be an increase in money velocity when shifting income to (on average) lower income brackets; i.e. it may be the case that money changes hands more quickly in the case of (poor people consume items, and then the places they buy it from plow that money into both investment and into the taxes necessary to fund the UBI program) than in the current case of (rich people put money into their more high-brow consumption and into investments, and the Apples and Fidelities of the world put their revenue and investments to use). That is, the same amount of money gets spent more often. And that could cause inflation. But of course the determinants of velocity of money, and its effects on inflation, are an open question in economics.
Let’s also assume it’s revenue neutral, so the government doesn’t need to raise taxes. I hear that’s the claim of most ubi proponents.
If it's revenue neutral, then that means you're taking money from other programs - which by definition spend that money. Just on different things. (And probably a lot of the same things, if you're taking that money from existing welfare programs.)
Generally, if I see a claim that a proposal for UBI is revenue neutral, I assume they're either a) left-wing Americans trying to sneak welfare hikes by right-wing Americans, or b) right-wing Americans trying to sneak a drop in net income transfer to the poor past left-wing Americans.
[1] https://www.economist.com/blogs/economist-explains/2016/06/e...
No, because:
>The real question is whether people who already are employed would stop working had they received "free" money.
So: will unemployed people stop looking for a job if they receive free money?
That's not quite the question. The question is, will unemployed people look less for a job if they're guaranteed free money even once they get a job, compared to the status quo where they are guaranteed free money (for awhile) that stops once they get a job.
There's also a follow-up question, that is something like "Will people on permanent disability start getting jobs if you stop punishing them by permanently taking away disability payments if they get a job?"
That destroys your argument.
Feeling like you can loudly assert things not in evidence is a sign of some pretty tall ideological blinders.
But a hypothesis is just that: a hypothesis, not a fact. There's plenty of existing research on how changing unemployment benefits change work incentives (answer: not too much), but it's also true that longer time horizons might change that answer. That's why experimental tests are needed.
edit: the whole system is more complicated than this, of course, but the point here is that this safety net is permanent – you can not lose it even if you are unemployed for a long time (recently, a tiny reduction of welfare payment was introduced for those who do not meet certain criteria for activity; however, you are in any case entitled to certain level of income, and government-paid rent, etc., in any case.)
Also “will people be more likely to start their own enterprises if they have basic income?”
I know a few people who live in some of the most expensive areas of the country and are permanently unemployed, they live fine (although not a lifestyle that I'd want) and spend their time pursuing creative endeavors. They do have to do things like grow their own vegetables and brew their own beer to save money. You get different benefits depending on age, disabilities, if you have children (and if they're yours or if they have disabilities), partners, etc. For the general unemployment benefit you have to be going to job seeker support and looking for work, but some people are just not employable (for instance if they have drug convictions).
It's worth noting that this social welfare system was put in place under a conservative government, when we had a more liberal government we had state support for artists as well with no restrictions.
It's hard to give exact numbers as a monthly income because unemployment benefits are broken up into cash and vouchers and credits. For instance in NZ if you're unemployed or poor the government will pay your rent, give you cash, subsidise a lot of your expenses, give you vouchers to use at the supermarket, etc. The state and city councils also own housing for the poor and unemployed.
In addition the system is administered by private industry who are rewarded based on number of interviews, not placements.
I would hold up Australia’s unemployment welfare system as a prime example of what to not do.
I guess what the government wanted to see is that given it "unconditionally," would people take up low paying jobs because now they don't lose any more aids by doing so.
I agree it was dumb to coin this as a UBI.
The real fear of most against UBI seems to be that the majority will quit their jobs, resulting in the government losing way more in income tax than they pay out in UBI.
But I think it's reasonable to point out that this is fuzzing the price signals of the market. Generally, I don't care for government meddling in the economy for this reason - I gather that you share this view.
In order to be satisfied that the impact will be negative, though, I find myself needing to understand whether the current price signals are optimized for the most important values.
Currently, in the crony capitalist system, the scenario you describe is rampant: "Handing somebody 'free' money takes from the productive sources that earned the money and distributes it to people...". I mean, isn't this basically all defense contracting and prisons? And most finance, insurance, and real-estate?
Meanwhile, things that are unquestionable worthwhile, like art and philosophy, aren't particularly economically viable.
So how do you line up price signals with genuine value? It's a hard question. Like what I gather is your position, I am far, far more inclined to trust a free market than government. But if I'm reading your comment correctly, you seem to have a bit of a fetish for "jobs" and capitalist ambition.
I don't care whatsoever is somebody has a job. I don't think most people want jobs, and I don't think most jobs need people. The vast majority of the population can find something better to do than a menial job, and I don't think it's reasonable to suggest that they need to be "uncomfortable enough to be ambitious" as a result.
If we are able to automate many (even most) jobs out of existence, don't we want people to thrive while doing something better with their time than pumping your gas or checking you out at the store?
Often ignored in this discussion is the viewpoint that this isn't something to fear, but to celebrate.
There are a lot of dumb jobs out there that don't need anyone working them any more. What if those people can instead write poetry or paint or dance or invent? That's more the world I'm interested in. I don't give a hoot if the government can't raise enough money to drop explosives on people - at worst, that is a pleasant side effect.
Not necessarily: if the purpose of the test is to determine how basic income affects outcomes over a period for the unemployed, having the experimental group to whom BI is given be exclusively drawn from the set of people unemployed at the beginning of the experiment and comparing that to a similar group of unemployed people not given BI is a fairly sane experimental design.
Testing it on a series of population subsets before testing on the entire population seems reasonable.
- no management support (government was divided and attention wandered)
- unemployment benefits sre privately managed so those entities lose out if UBI is successful
- not universal (no entire village/city was chosen)
- tiny sample size
- only unemployed people chosen
- no employed people, chosen from a range of income brackets
But regardless of the flaws, the experiment will be held up as an example of why UBI doesn’t work (never mind that the experiment was not UBI).
It’s interesting that the OECD feels “Basic Income” would increase Finland’s poverty rate while their proposal for a “Univeral Credit” (a consolidated benefits system) would lower it. But, it gives no clear reason why.
560€ for the unemployed? We've had this in France for decades[1]. Not sure why they needed such an experiment.
[1]https://en.wikipedia.org/wiki/Revenu_de_solidarit%C3%A9_acti...
- crime prevention
- justice system (the state gives you a free attorney if you cannot pay for one)
- jail is more expensive than an expensive hotel
- people without shelter going to hospital emergency rooms
The idea is that by giving them money they would get back on their feet. Some people don't care though.
Personally I think it should not be universal, and that there should be certain amount of merit to apply for it.
If proponents can't propose sensible and limited tests to de-risk a UBI proposal, it's not a serious one. There are downside risks to raising tax levels by 30%. That has to be offset with experimental data.
Even a nation-wide UBI scheme would be vulnerable to political risk. This sounds like a No True Scotsman risk. If a UBI scheme fails, you want to be able to learn from it. Not discard the attempt as not having been ambitious enough.
But you make it sound like most UBI advocates are insisting it be inplemented in one fell swoop and have no idea how to test it empirically. That's not the case at all: this was one such test, and I'm eager to see the actual methodology and results.
Another is being run by YC itself.
This isn't some imaginary proposal that can never fail and can only be failed.
Pardon me, didn't mean to come across that way. The history of social programs informs us to start small and scale carefully. If a program doesn't work in a town, it's unlikely to work nationwide.
In the case of the UBI, though, those effects can be worked around by designing the experiment well.
In Alaska and Saudi Arabia citizens receive a portion of the income generated from oil sales, and have for decades.
Can't we just look at what the effect has been on those economies? Did it incentivize smarter decision making and long term planning. Did it result in decreased productivity in the bad way (laziness)?
Is this really an economic problem or a cultural one? Just decide on what everyone should have and how much and then find those who lack those things and give it to them.
EDIT: the responses below are interesting but unconvincing. Why wouldn't giving everyone X amount raise all prices by X?
In a world with targeted advertising and unprecedented advertising I'm confident basic income would be counter productive.
If giving everyone X works, why not 2X? 3X? Lastly, where is the money for this scheme coming from and why would anyone who doesn't need it agree to this?
Unemployment provisioning in the United States is relatively inexpensive. I wonder if the administrative savings are being overstated, having been estimated before governments digitized such things.
UI isn't about identifying very specific needs, it's about identifying a particular easy to assess monetary need and meeting some of it: people whose lifestyle is adapted to the income provided by their job, without it, need an income roughly comparable to the take-home income from their job.
That's pretty much the easiest need assessment in public safety net programs.
1) Because determining eligibility has administrative costs.
2) Because if you have a job that pays you well enough, you're basically just getting your money back.
Also, people who need help with basic survival have the least ability to jump through paperwork hoops.
Another problem is how we're supposed to decide what people need. Why not just give people money and let them decide what they need. You'll need some system to handle those who fail to satisfy their basic needs due to problems of mental health (including addiction), but most people are better at deciding what they need for themselves than a bureaucrat is.
Sure. However there are concerns to where this money would come from and how much should be given.
1. Cliff effects. If you receive $1000/month while unemployed, and you have the opportunity to take a job that pays $1250/month, the actual delta is now only $250, which may not exceed your threshold. A basic income doesn't go away when you get a job.
2. Administrative costs. Figuring out who needs what costs money, can be gamed, and creates bad political incentives (pandering either to the group that wants more welfare, or the group that's upset about paying for peoples welfare).
3. Fairness. Some people feel that it is unfair that the poor receive monetary benefits from the government just because they are poor. If everyone gets the same benefit, unconditionally, that may be more palatable to this group of people.
1. This is an implementation problem. Hardly inherent to the idea.
2. Sure there are administrative costs. There also costs to giving everyone X amount of money, especially when a large percentage of them don't need it to begin with.
3. Indeed there is fairness. However since everyone receives it everyone's relative position is unchanged. So the question is, if giving everyone money somehow helps everyone, why not give everyone more? To what point does this end?
I wouldn't call it an implementation problem per se. How would you fix this with regards to current welfare, without implementing a UBI-equivalent, for instance?
> 2. Sure there are administrative costs. There also costs to giving everyone X amount of money, especially when a large percentage of them don't need it to begin with.
This is a bit of an empirical question, of course. But I think the argument would be that money spent on administrative costs is pure waste, but money distributed to citizens is not.
> 3. Indeed there is fairness. However since everyone receives it everyone's relative position is unchanged. So the question is, if giving everyone money somehow helps everyone, why not give everyone more? To what point does this end?
Indeed their relative positions are unchanged, but the distribution is squished. Giving a poor person $1000 might increase their wealth 100%. Giving $100 to a rich person might only increase it 0.001%.
I'm pretty sure the assistance is not conditional, but the bishop will exercise discretion and help guide the recipient towards self-reliance.
I think UBI has a philosophical appeal, but the practicalities and economic viability I think still favors a targeted model
Basic income is given to everyone. All you need do is prove citizenship so it's orders of magnitude cheaper to manage, and should be far less vulnerable to fraud. No weeks waiting on a claim when circumstance changes, no prosecutions because you didnt report being back at work correctly or fast enough. If govt cuts basic income they will also be cutting income of veterans and those in work - more noticeable, and with a little time, less politically expedient.
It has the bonus of minimising govt involvement and punishments for those who had the misfortune to get ill or be unable to work etc.
OK, so we just give people the things they need. Who decides? e.g.
People need food - give them "approved" food, regardless of whether it's things they like or dislike intensely. Every week they get things they will not use because govt says they "need" it.
Giving people food is expensive - give them seconds and rejects from retail. Why not out of date? Give the nationwide contract to the cheapest bidder. Those in need eventually get to live off the modern day equivalent of gruel. (See prison and school catering contracts)
Why not just put them in the workhouse and be done with it?
Isn't this ripe for fraud as well?
Your rebuttals are implementation details. The questions remains, as an abstract idea, is it better to give everyone money or give those who need things the things they need?
That depends on the level of abstraction; if you get abstract enough to ignore all the real world problems with central planning, sure, the latter seems abstractly better. Giving everyone money isn't an abstract alternative to giving people who need things what they need, it's a solution to get closer to that abstract goal given the concrete implementation problems with centralized need determination approaches.
We already have this. It turns out that you wind up with lots of overlapping bureaucracies that waste far more of the money than any fraudulent usages that you actually catch.
It's like drug testing people on assistance, it turns out that poor people use drugs less than the population at large. Funny that.
> Is this really an economic problem or a cultural one?
Yes to both.
The cultural problem, at least in the US, is that the politics of the Southern Strategy (ie. racial politics in the South) have made this into "How dare those undeserving so-and-sos get free money?" instead of "How many genuinely needy people did we help with the limited resources we have and can we help more?"
One other thing that a basic income affects is that you may find people willing to relocate to very low cost of living area with high unemployment since they know that they can survive even if they don't have a job. That can kickstart bringing the unemployment rate down because you wind up with a critical mass of people and those people need services.
There are lots of good possibilities. I'm hoping more experiments like this get tried out as some form of UBI is going to be required in the very near future when automation has replaced most manual labor jobs.
Forgive me if this wasn't your intention, but it seems like you're asserting that poorer people are uniquely unable to determine their needs?
> If giving everyone X works, why not 2X? 3X?
The amount you give people relative to their income in aggregate affects the economy, right? If you gave everyone $12,000 a year, the consequences would be vastly different than if you gave everyone $12,000,000,000,000 a year.
I'm asserting people in general are unable to determine their needs. Every year worldwide consumer debt just keeps going up and up. This would imply either an inability to save or insufficient wages, right? UBI would increase the wages, but it's not clear to me why things wouldn't become more expensive.
> The amount you give people relative to their income in aggregate affects the economy, right? If you gave everyone $12,000 a year, the consequences would be vastly different than if you gave everyone $12,000,000,000,000 a year.
Sure, but regardless of the amount. Why not give them twice as much? Ultimately UBI is fiscally absurd.
Getting everyone onboard with taxing the rich to pay for it would be tough in US with its penchant for doing the exact opposite, cutting welfare and giving wealthy tax breaks... how trials like this go will be very interesting. I look forward toy the results even if it’s just targeting unemployed persons.
In fact, you could consider the current system of benefits only if you are not working a form of UBI, if you just treat the UBI not received by the working as a tax against the benefits they would have received.
All in all, UBI isn't much of a departure to what we already have, except that people are expecting the benefits given would be much moar.
Interesting.
Also: Those uber-rich guys who like the idea should pony up some cash, maybe spreading it around the poor community of San Francisco. It'd be a great way to study the concept.