A New Approach to Aid: How a Basic Income Program Saved a Namibian Village

A sustained basic income program differs markedly from just "giving people money" and other "poverty eradication" methods in several ways, and it will be interesting to see if those differences lead to different long-run results in the future.

The two major differences are: basic income is uniformly distributed across the population at predictable rates and on a predictable schedule; the second is that the aide is explicitly in "cash money", and not in-kind.

The underlying logic is this:

(1) escaping from extreme poverty requires making-and-following-through on plans on a long time horizon; for example: deferring present consumption and leisure and instead saving and pursuing education

(2) the circumstances of poverty are circumstances in which it is particularly difficult to make and especially to follow-through on such long-term plans

(3) a basic income program directly addresses the perceived root cause of poverty -- circumstances in which longer-term planning is too difficult to follow-through on -- by providing a stabilization factor (a small but 100% predictable income) and thereby making it substantially easier for those so-inclined to stick to those plans

You don't have to believe in that logic, but that's the logic. Following through on it:

- just giving "windfalls" -- direct lump-sum cash -- shouldn't be expected to have the same impact (even if, in an abstruse enough outlook there's no difference between a windfall and an equivalent annuity; we're explicitly talking personal psychology, here); it allows for a temporary improvement in one's circumstances but does not directly address the predictability factor

- just giving aid in kind -- wells, books, etc. -- likewise improves material standard of living but does not directly address the ability to make-and-stick-to long-term plans

...so it would be no surprise that earlier aid was ineffective, as it was symptom-patching that didn't do anything to address the perceived root cause of poverty.

Your commentary on the incentive-to-make-children thing is somewhat shallow:

Poor people have little capital to invest and make up for by using the children as a resource. It seems like a great idea at the time, but also virtually guarantees that the kids will be poor. And the cycle repeats itself.

The problem you sketch is this:

- poor people produce children b/c children are an exploitable resource

- poor people lack resources to invest in raising and educating their children

- ergo, the children go on to also become poor, perpetuating the cycle

You seem to have failed to draw the connection between the problem you pointed out and the idea of pegging the stipend per-child; doing so means that the situation now becomes

- poor people produce children b/c children are an exploitable resource

- poor people now receive k$stipend per offspring; so long as $stipend > $cost-of-adequately-educating-a-child there are no monetary* obstacles to educating and raising all k children (for whatever size of k we pick)

- ergo, there's no longer the intrinsic link between "too many kids" and "resources spread too thin to raise them right"; there's still room for moral failings / bad culture / bad choices / etc., but moral failings / bad culture / bad choices / etc. were present before the experiment and will likely always be with us, anyways

...which is why the stipend is tied to # of children. This now allows us to back up and look at the earlier criticism: "incentive to produce children".

Let's assume you're right: the extra stipend an extra kid brings in is such a material incentive that it materially effects the # of offspring women choose to have.

We must then ask: would increased production of offspring be a problem?

You seem to assume "yes, of course", and then explain your reasoning (what we just went through: inadequate resources => not raised right => cycle perpetuates).

Were the program to result in children being raised "well enough" (to go up a rung or two on the poverty ladder versus their parents) then the link between "moar children" and "bad" is a little less clear; it might even be the case that "moar children" == "good", in that having more children raised right speeds the arrival of some future point in time when the majority of the adult population has been raised right (instead of having learned the shiftless habits of the previous generation).

Time will tell, of course; this experiment would have to run for years or decades to get conclusive results; small changes happen quickly but most cultural and behavioral patterns take longer to iron out.

You're also being a little uncharitable in your fact-check (not incorrect, just uncharitable). Pre-BIG she wouldn't have been raising those chickens, b/c buying chickens to breed-and-raise pays off over too long of a time horizon to be practical; post-BIG, she's demonstrably using some of her surplus income to invest in activities that pay off over a longer-term, which is a clear success with respect to the general goals of what a basic income program is trying to do. So the program's verdict would be "great, we gave people no-strings money and hoped they'd use it to build wealth and lift themselves out of poverty (instead of blow it on alcohol); this woman has done that" and not "well shit, if we'd known she was going to want 40 chickens we could've just given her some for 1/10th the price" (if that kind of aid worked there wouldn't be as much poverty).

It seems to provide good benefits to the poor, while also being the least complex and least gameable welfare technique I can think of.

INTERVIEWER: Some of those debates became very, very heated. I think [Ludwig] von Mises once stormed out.

MILTON FRIEDMAN: Oh, yes, he did. Yes, in the middle of a debate on the subject of distribution of income, in which you had people who you would hardly call socialist or egalitarian -- people like Lionel Robbins, like George Stigler, like Frank Knight, like myself -- Mises got up and said, "You're all a bunch of socialists," and walked right out of the room.

http://www.pbs.org/wgbh/commandingheights/shared/minitext/in...

I thought it is improtant to understand both side of the debate.