I'm a Kenyan and I can tell you that this will do more harm than good. NGO money has been distorting our economy for years now... giving people livelihoods they can't sustain, making job opportunities that create no value and making our government vestigial. The poor people that you're supporting elect the same corrupt politicians every year because they have no idea that the government is supposed to be supporting them.
I pay 30% tax as a lower-middle income worker but I see very little of this used productively. The majority of voters don't pay taxes and rely on aid for everything from farm inputs to school fees. As a tax-payer who understands what taxes should do for me... I live with very poor infrastructure and amenities while the government squanders away money. If developed countries keep propping up our poor majority, they'll never learn to find innovative solutions to their problems and elect governments that will create sustainable wealth.
I upvoted your comment not because I agree with it, but because yours is an important voice to be participating in the discussion, and I'm glad you're here. And actually, I do agree with everything you say about how NGO money distorts the economy. But Basic Income is different, and I urge you to try to understand those differences.
Traditional NGO/charity consists of giving money/stuff/services to the poor. The problem with this is that if you are a poor person who depends on that money/stuff/services, and you manage to find a job to get yourself out of poverty, then the money/stuff/services you've been depending on will no longer be available to you.
This is a problem, because those NGOs are much more stable then your marginal getting-out-of-poverty job. So the person in poverty is faced with a choice: do you trade the certainty of the NGO hand-outs for the hard work and the increased uncertainty that comes with a paying job? The rational decision, in this case, is to stay poor and continue to rely on hand-outs. This is how people get into the "business of being poor". They're not being stupid. They're making a rational choice based on the fact that they've been given a reason not to work.
But Basic Income is different, as I say -- because it is unconditional. It should never be withdrawn. If you are poor, you get the basic income. If you get a job, you still get the basic income. So there is no downside whatsoever to getting a job. This is a profound difference from traditional NGO hand-outs.
In every place where an unconditional Basic Income has been experimented with, it has resulted in an (often quite significant) net increase in economic productivity. That is very different from traditional NGO hand-outs. So please don't think that they're the same thing. I'd urge you to research the subject more deeply.
My take: If institution of a basic income is not accompanied by development efforts within a population to create meaningful opportunities to work, it's not really doing what the population really needs. I don't see a difference between charity and basic income in an environment where extensive economic development is really what is needed. If I don't have an opportunity to work even if I want to work, what difference does it make what the money that is given to me is called?
It's simple: a lot of the actual needed "work" in impoverished communities is informal. These communities are quite good at self-organising -- but barter can only get you so far. What cash grants give you is better liquidity for conducting mutually-beneficial exchanges of goods and services locally -- as well as the means of acquiring external resources for facilitating those transactions. In this context, most low-level jobs are self-creating.
Higher-level jobs require a more educated populace -- but it's been shown that when a Basic Income is given, people will naturally seek out greater education -- either travelling to find it remotely, or paying for education services locally. The jobs can't be "brought in" before the populace has the education to fulfil them.
One thing which Basic Income doesn't address, however, is infrastructure creation (or at least infrastructure which can't be sensibly paid for by end-user fees). So there's definitely still a need to address that, Basic Income or no. But for various reasons that should really be done by the government, rather than an NGO.
I'm Burundian in East Africa and there is a saying in my country that "free things make you stupid". NGO had been giving almost free loans to households ( $50 to $100) and some have been addicted to free stuffs and now that most NGOs have left the country, that's when we find out our true poverty : poverty starts in the head. We were stupid.
But naturally, The Pareto principle [1] made that 20% of clever households acquired business minded practices and they're economically independent now. But the rest is still begging and waiting the return of NGOs.
Your government is already vestigial, I'm sorry to say.
Giving aid is the worst thing possible if its given to the state. But giving it to the citizens is perhaps better, because they can directly improve their lives by investing in their children, in better tools, and in things like cattle that can directly generate sustainable income.
Free money won't destroy your society. It's how that free money comes into your society that is disruptive. If the money comes in top down it distorts the economy. But if its given from the bottom, then perhaps things can get better. Its not an experiment that has been tried before.
It's unclear what the effects of a basic income would be in an undeveloped country.
For example, if a poorer country raised minimum wage too much it could destroy the economy whereas the same raise in a more developed country will have better short term effects.
This could end up being unethical economic experimentation.
That's a bad example since raising minimum wage increases the cost of doing business. Artificially changing the cost of business inputs causes problems in the economy - not the fact that people are earning more money.
Giving people money allows them to buy livestock, supplies for their children or food and shelter. This will help to improve their quality of life and spur the local economy. I'm hard pressed to see how this could be considered unethical.
> It's unclear what the effects of a basic income would be in an undeveloped country.
This is true, but given the evidence we do have (GiveDirectly's previous programs and previous basic income programs in developed countries) I see no reason to believe the effects will be anything but positive.
I think more scary is the macroeconomic effects of a large amount of cash on currencies and prices. $30m is a relatively small amount (compared to a total GDP of e.g. more than $50b for Kenya), but of concentrated in poor areas could have unintended effects.
Wouldn't a basic income reduce the dependency on NGOs? If the situation in Kenya is similar to what humanitarian aid workers tell me about Haiti it's basically people joining NGO programs to make a livelihood but not planning on using learned skills or connections made to make a living independently when the project ends but rather looking for the next program.
This is a sincere question, I'm fully aware that a lot of NGOs intend to do good but do more harm :(
You and @skunkworks both raise interesting points. I'll have to think through this some more... I have more experience with code than economic policies; but here's a first go:
I have a problem with neither paying taxes, nor helping raise up the underprivileged. However, I believe that the former should facilitate the latter, rather than feeding some official's offshore account.
I think that if external funding were withdrawn, then we'd see a lot more done to fairly distribute government revenue and our government would be motivated to increase that revenue by improving our balance of trade.
I'm a little biased towards capitalism... so I believe in equal and opposite reactions. The developed world deserves to eat what it's worked for too. Maybe we need a little negative pressure to see that.
How are poor people supposed to find innovative solutions to their problems and elect governments that create sustainable wealth while they're steeped in desperate poverty? I believe that education is the tip of the spear, but are there any examples where a poor majority has pulled itself up by its bootstraps?
Ironically, at independence Kenya was at par with these countries. Though I cannot confirm the veracity of this, I have also on many occasions heard that some of these countries did borrow planning materials from Kenya - for their civil service.
Economies with strategically located container shipping ports developed via protectionist trade policies.
These economies were 'allowed' to develop into rich industrial economies was because America provided privileged access to the US domestic markets in spite of their protectionist policies.
They allowed that because they saw the value of having these countries developed into 'westernized' bulwarks against the USSR's sphere of influence.
They could all easily have remained poor under different circumstances.
It's a lot more free than it was until late 1970's and China has got tremendously richer as a consequence.
Nor is South Korea a model of freedom; it was authoritarian, it was and still is protectionist. But it did integrate to world economy. Compare it to North Korea, which started off as equally poor, and which has real, concrete, deadly famines in recent memory.
Same applies to R.O.C. Taiwan; autocratic, even corrupt, but reached out to world market (and as a consequence forced the mainland China to follow).
Singapore and Hong Kong: very free trade all the time, and way ahead of others in the region.
All of those countries enacted protectionist trade policies. Singapore/HK tended not to target specific industries but they suppressed the value of their currencies by loading up on US treasuries (their small size made this easy).
In all of those cases those countries were given tacit approval by the US to enact protectionist trading policies and yet maintain their access to US markets.
Protectionism and freedom are not absolute. Yes, those countries as well as the United States also engages in lots of protectionist policies.
However, the mentioned countries integrated more to world trade then most other countries in their region, and as a result they are now among the most developed.
Compare South Korea and North Korea, compare Taiwan R.O.C. to P.R.China prior to impacts of Deng's policy change, compare China and India.
Seems like the arena has changed, though. Several hundred years ago nations/societies could operate independently. Now they're in the global web of trade. Regions that were historically very prosperous (what's now northern Syria, for example) are floundering now.
There are clearly ways to exploit globalization to become prosperous - e.g. the asian tigers. But it's not clear to me that historical examples are as useful. There's no way to know but I suspect the American colonies would not have prospered in the current economic regime.
The western world was already the most advanced and richest part of the world before they started colonizing, which indeed made them even richer. Note that the people they conquered whether it were the Incas or else were also empire with colonial ambitions, except they were way less advanced.
You've got the causality wrong. Europeans exploited other peoples because European societies were more advanced. They did not become advanced because they exploited.
Not to dismiss your experience as a resident of a country that's received significant aid, but there's substantial evidence that cash transfers work, which GiveDirectly has compiled[0], including the following benefits:
—Adults more likely to work, even five years later.
—Children are healthier and get more education.
—Adults do not spend the extra money on things like alcohol or tobacco.
—Adults make significantly more when surveyed years after receiving the cash grant.
GiveWell, which has spent a lot of effort evaluating GiveDirectly, does have some lingering concerns [1] that programs like GiveDirectly's might worsen inflation or hurt people who don't receive a grant and live nearby. Research on these questions isn't conclusive, but suggests some minor, short-term effects. I suspect broadening programs to more recipients will mitigate the latter problem.
>The majority of voters don't pay taxes and rely on aid for everything from farm inputs to school fees.
I am a Kenyan too and this is not true. Everyone pays taxes. Though a poor jobless Kenyan should not be paying income taxes, the same group of people still pay VAT for everything else they purchase, bar a few exceptional goods and services.
Curious what you think about more independent schemes like microfinance or loans for education. Have you noticed any difference between that and outright aid?
Yeah, those schemes tend to work a little better. If the recipients of mircro-financing are subject to the risks associated with taking credit, they tend to invest it better. For instance, the mobile micro-loans given by Safaricom (http://www.safaricom.co.ke/personal/m-pesa/do-more-with-m-pe...) are actually given by a bank and defaulters are black-listed for loans as little as Ksh. 500 (~ 5 USD).
These schemes create opportunities whilst reminding people that poor decision-making has consequences. The only reason that this works is because these schemes are run by banks rather than non-profits. Perhaps there's a little room for more regulation around the margins these institutions should make off of these loans... but at the same time they're opening up credit lines to people who would have never had them.
>they have no idea that the government is supposed to be supporting them.
>elect governments that will create sustainable wealth.
Some people would say that individuals create wealth, and the governments are systems that exist because of the existing levels of wealth in a society. If you want a "generous" government, then you first need a "prosperous" society. Which governments are you thinking of that create sustainable wealth? I'm curious to get a Kenyan perspective on private property rights (i.e. do you think that is a crucial step for creating a "wealthy" society).
Individuals don't build highway systems, rail networks, school systems, transparent and fair courts or the myriad of other things which make countries wealthy.
Africa doesn't need the American cult of the individual to develop. It needs (among other things) America to stop covertly supporting the illegal and corrupt transfers of wealth to tax havens.
Here's a hypothetical question: Imagine GiveDirectly performed a rigorous randomised control trial where they found that the people who received the grant had significantly higher income after 2, 5 and 8 years compared to the control group.
Would that be enough to change your mind that they are "giving people livelihoods they can't sustain"?
Shh, don't bust the bubble of people living in Silicon Valley who think they can solve the world's problems. It is absolutely ridiculous but they will never figure it out. People need to work, this is a nice project in East Africa: http://workingvillages.org/
Recently fascinated by the thought of piping donations directly to poor populations and allowing them to use it as they wish. I watched the documentary Poverty, Inc. [0] regarding the "poverty industry" and how endless foreign aid in these countries is killing the economy. If Toms shoes dumps 1,000 pairs of shoes in the city center every week, how the hell would a cobbler stay in business. Or if the U.S. pumps an endless supply of rice into Haiti, how could Haitian rice farmers sell their inventory?
Instead, give these people the cash to purchase locally sourced goods or open a business of their own. Economies don't spring up out of a pile of free rice.
What you are describing is a mercantilist theory of development.[1]
Giving people free things usually helps them; what doesn't help them is the way that the 'gifts' are chosen, whom the 'aid' is given to, and how the poor are treated.[2] The gifts are usually chosen based on which companies and unions the 'giving' country wants to promote and help, instead of what the poor need. The 'aid' is often given to tyrants, and is a substitute for tax income, which disconnects the ruler from their populace and local accountability. The poor are then often treated like sheep who need to be told what to do, and can't figure out what to do with themselves, so they are the subject of government theft and general injust treatment.
I don't see how the parent comment is describing mercantilist development. My understanding is that mercantilist development implies that the subservient state is developed as an income source for the dominant state. Although traditional development may not be effective, it surely isn't meant to extract resources.
"Dumping" is a mercantilist theory; other schools of economics view the same phenomenon as a gift or subsidy (for the recipient). Bastiat wrote a famous criticism of proponents of "anti-dumping".[1]
Famous? Among whom? Other than libertarians who already agree with that point of view.
I didn't read everything Bastiat wrote, but he appears to be describing either the absolute or the comparative advantage of trade (e.g. the first few sentences of the last paragraph).
But trade is different than a gratuitous gift. Trade is part of the free market economy of mutually beneficial exchange. So trade is stimulating production in other areas and it's also allocating goods based on aggregated preferences, not the arbitrary whims of philanthropists.
I'm pretty sure Bastiat and other libertarians would agree that cash is much, much better gift than specific goods.
Finally, the jury is out on dumping. Most mainstream economists will admit there are instances where dumping should be prohibited.
Bastiat's petition is well-enough known to be included in his (lengthy) Wikipedia entry.[1]
No, the parent is not "describing either the absolute or the comparative advantage of trade", because they said:
>"If Toms shoes dumps 1,000 pairs of shoes in the city center every week, how the hell would a cobbler stay in business."
and
>"[I]f the U.S. pumps an endless supply of rice into Haiti, how could Haitian rice farmers sell their inventory."
This is basic mercantilism, as described in the 'theory' section of the 'Mercantilism' Wikipedia entry, and more specifically the following points of the theory:
>"That every little bit of a country's soil be utilized for agriculture, mining or manufacturing.
...
That a large, working population be encouraged.
...
That all imports of foreign goods be discouraged as much as possible.
...
That no importation be allowed if such goods are sufficiently and suitably supplied at home."[2]
Cash is a better gift because you get to buy whatever you want, not because 'dumping' goods is bad.
Every criticism of anti-dumping (bastiat's included) makes one or more of the same three mistakes:
A) industrial comparative advantage is built up in the short run rather than over a period of many decades.
B) that having natural resource comparative advantage is every bit as good as having industrial comparative advantage (see Russia, Saudi Arabia, Venezuela, etc. and the 'resource curse').
C) That industrial comparative advantage just appears randomly out of nowhere rather than (as is historically verified), being developed via protectionist trade policies and infrastructural development.
Basically UCT (Unconditional Cash Transfers) work well when lack of capital is the primary problem.
But often times the cycle of poverty is self-reinforcing because of deeper issues and UCTs don't fix those (such as undervaluing education). Instead CCT (Conditional Cash Transfers) can often be more corrective to enact lasting change to poverty cycles.
Ultimately, I think some sort of UCT and CCT combination would be the best and least overhead form of welfare. But that is just IMO.
Bolsa Familia[1] in Brazil was a pretty succesful program. Poor families get money as long as the children go to school and get vaccinated. Money is distributed to the female head of the household by a debit card network which helps to reduce corruption and theft.
Makes sense. I like the UCT in principle, but I can't argue with the evidence that CCT does have positive effects.
Of course, CCTs may eventually have the same problem as traditional welfare policies: self-perpetuating bureaucracies, contradictory incentives, resource misallocation, etc, etc.
I think the key difference is that UCTs and CCTs aren't (or at least don't have to be) doled out to "qualified" persons. They can just be given. I like UBI (Universal Basic Income) as it is a scaling UCT that disappears once you earn over a certain amount. So the traditional inefficiencies are no longer a concern.
CCTs could be issued in a universal sense as well, with an income threshold of some sort. But admittedly they are more complicated than UBI. But not necessarily as convoluted as current systems.
Just giving money will not work, see Saudi Arabia. They have all the money they can dream of and did not evolve. If you want it to work it needs 3 things:
1) Free Education
2) High Taxes
3) Strong Unions
Sounds leftist? It may astonish you which countries have the highest ratio of rich persons per capita live. This and a good explanation can be found in "Where in the world is it easiest to get rich? (TEDxOslo)"
I don't disagree with any of those numbered points, but this statement is completely irrelevant:
> Just giving money will not work, see Saudi Arabia. They have all the money they can dream of and did not evolve.
There are so many reasons why that's not relevant to the conversation that it's hard to know where to start. 1) You are conflating value systems with poverty. 2) You are cherry picking one particularly bad example and using it as evidence that it could NEVER work. 3) "All the money they can dream of" does not apply to all Saudi Arabians, it applies to those that have a lot of money.
The Saudi's have a recently reformed education system, complete with a freshly built full-fledged research university: King Abdullah University of Science and Technology (KAUST.)
KAUST has a more Western model of education, instruction in English, American and European faculty, partnerships with multiple Ivy League institutions. The current President of KAUST is Jean-Lou Chameau, who was previously the president of Caltech.
Perhaps most significantly, the university is granted greater freedom of speech and thought than probably anywhere else in Saudi Arabia. Saudi royalists politically protect the University, while the campus's isolated location prevents random acts of "law enforcement" by the religious police.
KAUST has an endowment of $20 Billion USD, which puts it in the same league monetarily with H/Y/P and is about twice the endowment of Oxbridge.
So the Saudis are investing in the right things in advanced education at least: alternative energy, desalinization technology, chemical engineering...
They're also building a series of new model commercial cities along the coast where they will attempt the same thing on a city-state scale. The religious rules will be less strictly enforced in these model cities, but far more importantly (for commerce), they will have independent judiciaries (still based on sharia fiqh law), but with written standardized laws of contract (uncertain contracts have put a strain on the Saudi economy.) They're also considering relaxing the onerous permitting regulations required to start a business.
It seems like the Saudis' want to have their cake, and eat it too. On the one hand, they want the benefits of Western higher education and economic systems. But on the other, they want to maintain a fundamentalist religious monarchy.
I cannot really see that being successful. The academic freedom needed to conduct meaningful research is diametrically opposed to the restrictions on thought and expression in a repressive theocracy.
What countries did evolve? Not ones that had high taxes or even strong unions. Recently, as mentioned above: Singapore, South Korea, Taiwan.
Yes, education is important. But what also matters is a working government. Strong unions and high taxes are a consequence (you have them once you can afford them), not a tool to achieve wealth.
Who has control of the money in Saudi Arabia, is it in a few hands, or broadly distributed in a stable way so people can make good consistent long term decisions?
I agree, though it seems a distinction needs to be drawn between aid that's providing goods and services that could be produced locally, vs aid that's providing medical goods and services that couldn't emerge from the local economy fast enough to help those being helped (such as perhaps the Gates Foundation does).
That doesn't solve a major problem: Who is to say what these people need? Give them the money, and they decide for themselves.
UCT fits free market theory, including market flexibility (if needs change or the first idea fails, consumers can change their spending much more quickly than donors can change their programs), and promotes democracy and empowering individuals. It also avoids common problems such as donors' bad decisions and their unanticipated consequences, corruption among those controlling distribution of the goods, and perversion of local markets.
As one example, according to a report in Foreign Affairs, the West's focus on AIDS, malaria, and TB, and their relatively enormous market power, took local medical resources away from more standard health care needs such as child birth, and might have resulted in more sickness and deaths than it prevented (IIRC the details of the article from several years go).
I came here to say just that. Aid is good, but it should be either (1) very temporary acute relief goods (food, water, shelters, sanitation, clothing) (2) very high technology services, such as MSF (Doctors without Borders) provides, or (3) capital assets for the population at large, in the form of business microloans and direct cash grants.
In brief, unless the nation is in crisis, send fishing poles, not fish.
It depends on the size and the stability of the basic income. If a bank knows a customer will get $X/year for the next 5 years, giving an upfront loan to allow that person to create a business becomes a lower risk proposition. A basic income could easily expand the number of low to medium-risk borrowers and expand the amount of savings present to use as a base for lending.
I'm not an economist so I'm sure there are variables I'm not accounting for, but here's my opinion. I think the difference is that an endless supply of money (we know it's not truly endless, but a large influx of cash) allows commerce to occur and people can buy/sell more than commodities. The mere existence of a bank doesn't improve the lives of citizens if said citizens have no money to purchase food/goods and no assets to offer as collateral to take out a loan in the first place. There needs to be some sort of economy in place before a bank will benefit a population anyway. The bank could also benefit because residents now have assets to leverage when seeking cash above and beyond their basic income since I'm assuming starting a business may cost more than donations or a basic income would provide.
> an endless supply of money (we know it's not truly endless, but a large influx of cash) allows commerce to occur and people can buy/sell more than commodities
I'm not an economist either, but I think the concepts you want to look up are 'money supply' and 'velocity of money'.
I don't think this works. Presumably cash has a lot more utility than rice or shoes, for example. These people can always use more money (i.e. bank loads in your example), but once they have x shoes or y rice, the utility of new shoes or rice is very low.
> Presumably cash has a lot more utility than rice or shoes, for example.
It has a lot more fungibility, which should also mean that the marginal utility of cash drops slower (as a function of total utility from that source) than for rice or shoes.
Also worth considering are countries where a large portion of the economy is based on family members sending remittances back from the United States (or other country). In a sense, they already have a form of basic income for the people who remain at home.
> Also worth considering are countries where a large portion of the economy is based on family members sending remittances back from the United States (or other country). In a sense, they already have a form of basic income for the people who remain at home.
Only in that some of the people that remain home have a source of income. But that doesn't make it anything like a "basic income", anymore than the fact that some people are supported by family members working in the same country means that that country already has something like basic income.
In both cases we're talking about an infusion of cash from the outside, distributed somewhat equally (as opposed to being given to banks and politicians).
This can be useful for answering questions such as:
* Will this discourage entrepreneurship?
* Will this create a culture of dependency?
* Will this boost the economy overall?
* If the economy is boosted, how sustainable is it?
These are the kinds of questions you're not going to be able to answer from a single data point, so it's worth finding similar situations to compare.
Well, you might want to qualify "it worked". There's a reason they moved to silver.
There was a point, when taxes were still assessed in rice, that the relevant official announced a large tax increase because the government just wasn't able to operate on what it was getting from existing taxes. He also started the process of reforming tax delivery, largely by making sure tax barges could make their way down the river without excessive delays. They had been arriving nearly (or completely!) empty thanks to predation by vermin.
The delivery reform was so successful that the tax increase was canceled. There were no (significantly problematic) issues with taxes not getting paid; expenditures were well within tax revenues; but... using rice as a currency meant that just because somebody paid you money didn't mean you actually received any.
Giving people money isn't giving them an economy either, it's giving them currency. The economy comes when they trade, it doesn't really matter if it's dollars, gold, rice, or bitcoin, people just have to agree on it's value.
Just the other week I was talking to the director of Poverty, Inc, Mark R. Weber, about UCTs. He's skeptical of cash transfers, for most of the same reasons that he's skeptical of goods transfers.
While I find UBI to be a fascinating idea worthy of consideration, I vehemently disagree with running this experiment in East Africa. The proposal seems to either be blind-to or minimizing the potential for unintended consequences. Decades of trying to alleviate poverty in Africa have taught us, more than anything else, that the road to hell is paved with good intentions. Giving food tends to act as “dumping” and weaken the agricultural industry. Providing foreign aid tends to empower corrupt governments. These consequences only became clear after years of hindsight. Who knows what unintended side effects of UBI will be?
If we are going to try UBI, a fundamentally Western idea, it’s only right that it should be tried in the West. I’m not saying it won’t work - just that we don’t really know what will happen. East Africa has suffered enough from our neo-colonial experiments.
There is quite a bit of anger and little fact in this comment. GiveDirectly has been running UBI programs in East Africa for years now. They have an all-star cast of economists examining their performance. Their pilot programs were very successful, which is why they are scaling out further.
East Africa, and Kenya in particular, was carefully chosen for two reasons. First, Kenya has a mobile phone network that makes it easy to transfer funds electronically to individuals and then for those individuals to get cash from the funds at local stores. I wish we had this in the West, but we don't because of banking regulations. Second, poorer households in certain communities tend to use natural roofing materials rather than aluminum, which makes it easy to target funding by satellite.
The UBI is a political football in the West. The Mincome experiment was cancelled because of a change in government.
The potential utility benefits from a UBI are so great that it would be a shame to think that we have to wait for it to be politically palatable in the West before we can get any data on its effectiveness. Also, as far as poverty relief is concerned, money really does help.
> GiveDirectly has been running UBI programs in East Africa for years now. They have an all-star cast of economists examining their performance. Their pilot programs were very successful, which is why they are scaling out further.
Possibly the most important detail here is one they call out explicitly in the article: this is the first time anybody's run a large scale experiment of this form which was not based on selecting candidates who were likely to benefit highly from receiving the extra money.
I am completely convinced that giving people extra money can cause a permanent, substantial increase in their income and living standards, if I get to pick the tiny fraction of the population who receive it. That's well-established and easy, and also not viable as a long term solution.
I really want to see if it works the same way when you aren't selecting the best candidates, but just distribute the money blindly. No matter what the answer is, this is really important research that will drive economic policy decisions. We're about to get the answer to one of the biggest economic policy questions of our time, and that's awesome.
You seem to know a lot of the detail. How are you affiliated with GiveDirectly?
Also, this post also has little fact when the emotive aspects of it contain phrases like "all star cast", "very successful", "political football", "benefits so great", "would be a shame."
GiveDirectly's intervention has been tested by multiple randomized controlled trial, including a large-scale one. (See the GiveWell write up for details.) In general, the case of them seems much stronger than most charitable interventions.
(I have no affiliation with GiveDirectly, though I'm close friends with many GiveWell staff.)
Unconditional cash transfers (what is being proposed here) have proven to be more effective than the "dumping" of material aid you're protesting. If you give a village shipments of rice their rice farmers go bankrupt, if you give them cash they can spend it at local businesses or start businesses of their own or import things they couldn't get otherwise. It's also hard to give too much cash (as long as you are distributing it equitably), because if there is excess capital in one place that will only encourage trade.
When people in Haiti receive bags of USAID Rice (grown elsewhere) for free, there no longer is a need for Haitian Grown Rice and it hurts local farmers. I'm not sure this translates to direct injections of cash however. I've spent time in East Africa and everyone always asks, what does Africa 'need.' I typically say: money. There are lots of great ideas and lots of enterprising people at all social levels of the region, but the one thing between everyone and further development is personal income. There are roads being built by China, Water is the next big infrastructure requirement, but as for the average person in East Africa, an injection of steady cash is world changing. The only way the plan becomes toxic is if the guaranteed income ever goes away, which is an admittedly massive qualifier, but if a plan can be devised to incorporate money management resources and nationwide healthy spending mindsets, and the plan can be supported indefinitely, it has the potential to radically change the day to day experience of many people in the region.
I regularly do low-interest loans to African entrepreneurs via Zidisha -- that's money that's helpful in a concentrated way, vs. bulk money that I'm skeptical won't have negative consequences.
"it was mainly funded by a German Protestant church, by individual contributions of German and Namibian citizens and by contributions of the German Ministry for Cooperation. The amount paid out per head was N$100 (around US$12)."
So, we do all the colonial stuff you mentioned (and plenty more you could have mentioned), and then when someone suggests we provide Universal Basic Income in that same region, we suddenly get a "conscience" about it and say no way, it might go wrong? I'd have to say, that sounds a little off, to me.
China used to "donate" underpriced solar panels to Americans. When Americans found out, they said go away! [1] They'd rather pay more than receive government aid from another country. They even have a negative sounding a name for this charity - they call it "dumping" and don't allow other countries to do it to them. So if you're like an American, it's quite possible you won't take their money.
Really, throughout the literature it's not that controversial. Doing any amount of research on aid in SSA you see nearly 100% of efforts go poorly in the long term. Most arguments in the other direction have very 'interesting' definitions of success or argue a moral imperative.
It could certainly spell doom for future UBI proposals if the first prominent implementation goes badly, and it could be that it went badly due to factors that are simply not as prevalent in the West.
How about Eastern Europe? There are some extremely poor, yet relatively educated countries, and due to the Soviet legacy, the majority owns the places they live in.
On a scale of economic harms done by intervention in East Africa, I don't think the worst conceivable side effects of this (localised inflation and a bit of resentment from surrounding communities, basically) really compare with the harmful side effects of the everyday trade that East African countries need to participate in to grow economically, and Kenya's economy is very far from an economy untouched by NGO projects as is. On the other hand, the scheme gives a whole bunch of mostly very poor people get to eat a bit better or buy a motorbike without repaying it - probably to an aid-backed MFI - at 60% APR
(and I say that even as someone who's largely unconvinced of a case for UBI in the West, wholly unconvinced this experiment will tell us anything at all about the likely effects of UBI in the West and - from the RCT papers I've read - think the benefits of cash transfers in developing countries are overstated by their most enthusiastic advocates.)
Increases in the prices of goods in a 1:1 fashion with income, especially staples? Creating a dominate telco market where having a phone is necessary (and therefore phone prices will be disproportionately higher?)? These are just some reasonable non-catastrophist concerns, which I'm sure there are a number of.
> Increases in the prices of goods in a 1:1 fashion with income
For locally produced goods should be fine because producers are poor too.
For imported goods it might be harmful because UBI cash could get sucked back out of the poor region really quickly. What I'm hoping is that sucking cash out with imports will correlate with increased volume (that it won't be 1:1 exactly) of imports of useful equipment that is not manufactured locally.
> Creating a dominate telco market where having a phone is necessary (and therefore phone prices will be disproportionately higher?)?
Don't they already use phones for small banking like money transfers?
> Targeting: All full-time residents of treatment villages. Payments continue if subjects migrate out and are not delivered to new subjects who migrate in.
Unintended consequences for sure, makes me think of https://en.wikipedia.org/wiki/Dambisa_Moyo#Dead_Aid. I'm starting to give hearing to the common criticism I've heard Ramesh Ponnuru say a lot which is something along the lines of policies not "generating wealth"
>Giving food tends to act as “dumping” and weaken the agricultural industry.
What the fuck? Are you not aware of the MASSIVE subsidies that are given all throughout agriculture to give away basically billions of tons of food to animals?
Why not do the same for ensuring that the food is consumed by people...
Interesting concept. I'll be interested to see if it works.
I worked with a company building AC mini grids in East Africa. They connected around 130 households in each village to a 220V grid.
The expectation was that people would use the electricity for basic needs (e.g. light, cell phone charging) but also for productive uses (e.g. grinding grain to flour, air compressors, saws, etc).
The expectation was that as people entered the second phase of energy use (after basic necessities) their consumption would increase as their income increased.
What this company found though, was that very few customers followed this pattern. If people bought anything that increased their consumption, it was almost always a TV. This obviously didn't improve their income, so often their use would actually decrease because they can't afford the increased consumption.
Last I heard, they were having serious problems getting people in these villages to use more power.
Through some pricing campaigns, they discovered that people's energy use was almost directly correlated to the price. If you made the price similar to other well developed countries ($0.10-$0.30 kWh) people would use lots of energy, but the amount they paid was still relatively small. If you raise the energy price, people use much less, but end up paying almost the same amount per month. So if it costs $0.25 per kWh people will use 4kWh, but if it costs $1 per kWh they'll only use 1 kWh.
Since their model included batteries to cover the night load, they couldn't afford to sell the energy this inexpensively. Hence their wish to increase day time energy use among the villagers through equipment use (e.g. welding, grinding).
My expectation from this program: some small percentage of people will use the money to invest in tools and means to improve their economic situation. The vast majority though will waste the money on things which benefit them in the short term, but provide no long term economic benefit to them (e.g. better cell phone, television, or maybe a solar home system)
Also from hearing the horror stories of doing business in East Africa (draconian regulations + corruption) I'm sceptical if anywhere close to 90% can make it into the hands of normal people. Hopefully this isn't the reality...
Not sure why I'm getting down votes. I've worked with a company actually working in East Africa and I don't see people using the opportunity of energy to improve their economic situation. After basic necessities they seem to use it for leisure.
Your analysis seems largely as expected but this part to me seemed a bit wrong-headed:
>The vast majority though will waste the money on things which benefit them in the short term, but provide no long term economic benefit //
Things like having a TV? Do you have a TV, is it a _waste_ of money too? Would you say most of the people who own TVs would describe them as a waste of money? After you've got a bed, clean water and food, some sort of diversion from the humdrum is probably the next "need" that most people would address. TV can be a benefit, an inspiration, it's just not an obvious direct economic benefit (unless you're running the local TV shop, electrician or repairer).
Part of the problem with providing utilities with an expectation of them being used to create economic benefit is surely that people don't know how to use them for such purposes? Did you address that with your projects - like if you bought this apparatus for this amount you could process millet and run a company earning this amount.
Couple of questions about your electrical mini-grids - was there any cooperative buying, like setting up a TV in a communal building? How was the power being generated?
Yes I do, and yes, since it brings me no economic benefit and I could easily live without it, it is a waste of money.
By comparison, my smartphone allows me to send emails, make phone calls, and generally communicate with my colleagues. This creates value. Watching TV or Netflix creates no economic value.
It might create social value, but the OP is about creating economic value.
> Did you address that with your projects - like if you bought this apparatus for this amount you could process millet and run a company earning this amount.
Yes! Of course they realized that people might not have the ideal or the capital to go and buy one of these machines. They worked on a hire to own scheme with local partners, and offered a lower energy price to those who wanted to buy one.
Again, only a tiny percentage of people were interested in doing this.
> setting up a TV in a communal building
This is quite difficult to achieve. You cannot be seen as picking favourites, it's really not something that works from a business perspective in these communities. People get envious really quickly.
So, communal buildings. Well, there aren't any. The government has basically no presence in these places, and asking them to build a building would probably take 5 years, if it happened at all.
The only buildings that really exist are businesses, and if you set up a TV there, the guy running it will charge people to watch it. You're playing favourites!
You could give every business a TV, but then everyone will rush to set up a "business" so they can benefit from the scheme as well.
This company itself cannot set up a TV or build a community structure because quite frankly, it will be vandalized for parts. Also the legal situation in these countries w.r.t. copyright and statements against the governments is appalling. So there is a huge liability toward providing services to the community (e.g. internet, distributing content on SD cards)
> How was the power being generated?
Small scale PV array built in the village with supporting equipment housed in a structure. The scale of these projects was <20kWp.
Look. I'm not trying to sound negative. I want Africa to develop. They absolutely have the chance to be the next China and become an economic power house.
Unfortunately, I don't see that happening with the current political and regulatory environment there.
Thanks for fleshing things out. If you don't mind one last question - you mentioned about communality not really working [for TV ownership at least], who then owns the PV array - is it your company that owns it, does the community acquire ownership over time. Who is responsible for repair and the costs of that?
The company owns it, and they handle operating costs and maintenance.
At this time, there are no plans to transfer ownership to the community.
Ownership transfer has been done before, notably by some NGOs, and to my knowledge it has always ended up with the system failing due to lack of maintenance (either due to skills or funds) and being parted out.
Yeah, I don't think you deserve downvotes either. Your skepticism is perfectly reasonable, and you explained it well.
I've never been to Kenya, but I have spent a lot of time in countries with roughly similar levels of development. I'm skeptical too. But I would love to be wrong. And I think it is awesome to run this experiment.
The reason that I'm a little skeptical is that a lot of the big obstacles to entrepreneurship and investing in long-term social improvements come from big structural challenges that having more money in your pocket doesn't necessarily fix. For example, government corruption, lack of a good justice system to enforce contracts, lack of physical infrastructure to allow people and goods and people to move around the country, lack of access to banking resources. Those problems kind of need to be tackled at a higher level, and giving random individuals either money or goods doesn't really solve them. UBI seems like it could be much more effective in countries that don't face as many of those structural problems.
The pareto principle is everywhere. 90% of the productive activity will come from 10% of the people in a situation like that - if not more heavily slanted.
So is there a better way of finding that 10% and investing in them directly, without ridiculously wasteful organizations?? Do you force them to make ROI?
You are being downvoted because your real world experience violates the increasingly liberal tenets amongst HN readers lately. Free money for everyone means that I get to work on my killer app idea during the day, so free money for everyone is clearly a Good Thing(TM), right?
> So is there a better way of finding that 10% and investing in them directly, without ridiculously wasteful organizations??
Probably not.
> Do you force them to make ROI?
No, because first you would have to teach them what an ROI is, and secondly because the local economy is so variable, any estimates would probably differ wildly from reality.
If I remember correctly, this charity already does monetary donations to people using the local mobile pay system (I think it's Mpesa?). If this is that organization, there is a Planet Money episode about the founders and why they went this way.
That's probably the most efficient way to distribute the money.
Unfortunately it means fat margins for the MPESA provider (typical transaction fees range from 3-10%, depending on the size of the transaction).
Also it's probably going to turn into a tax nightmare for the company handling the payments. I could go on for a while about how ridiculous VAT rules are in these countries. Processing a transaction worth ~$0.005 for VAT purposes...
If anyone wants to talk to the company building these microgrids in East Africa, because you would like to work with them, or even for investment, feel free to drop me an email:
GiveDirectly's previous work involves finding the poorest communities in the world and targeting the poorest members with direct cash transfers. I was turned on to them a few years ago by GiveWell (unrelated), which attempts to evaluate charities based on cost effectiveness and capacity for more funds.
In addition to the GiveWell reports, GiveDirectly also document and publish their work and research. It's exciting to see the impact that they are having (and how minimal the systemic abuse of the money is):
I like this. Everything I've learned about charity seems to indicate that in most cases, giving people who need money, money... is the way to go. Being able to examine the impact of a basic income in my view, is an additional benefit.
Yeah, an exogenous UBI is a fundamentally different kind of thing than an endogenous UBI. (Also, an openly close-ended trial is different than an open-ended program in the way that it affects behavior.)
Put differently, people train their work ethic in an environment that does not include UBI. It will take 2 generations after UBI is implemented for this bias to mostly disappear (although there might still be a few lingering effects that converge to 0 as time goes on).
FYI the April 13 show of the Freakonomics Podcast takes on the question "Is the World Ready for a Guaranteed Basic Income?" and mentions some of the prior studies noted in this article.
Overall the basic income idea... I don't like it in a lot of ways, I just can't see it resulting in a productive society personally. But that's just my gut reaction and I could be wrong, so far the data I've seen is a pretty mixed bag.
I think things like this are a great way to experiment with it though (and without tax payer money). I might change my mind if there's more good data.
Basic income could just as likely increase productivity. Without the need to work, there is a greater incentive to automate jobs. People don't work crap jobs because they like to, they do it because they have to. Anyone who wants a higher standard of living than the basic income minimum can improve their skills while they're sustained by their safety net. Meanwhile, basic income puts more money in the pockets of consumers, creating more market opportunities, especially for the low-cost goods and services those consumers used to work to make.
Or maybe everything I've said is bullshit. Who knows? Only one thing is for sure: without experimentation, we only hurt ourselves in the long run.
> Meanwhile, basic income puts more money in the pockets of consumers, creating more market opportunities
I worry that it would be a lot worse than that - that we could create a class of non-workers and workers. Some products would only be affordable to workers and if, like you're saying, those workers are only those working high paying jobs, this is probably how it'd work out. It could perpetually shrink the labor force while forcing those people who aren't working into a lower class in society and overall dropping our productivity at large - setting back the kinds of automation that such a society could require.
Personally I'd almost immediately attempt to drop out of the workforce. And well, software developers are often pretty heavily involved in this sort of automation. So maybe I'm just speaking to my own situation here more than anything.
Of course, this is only speculation, and probably one of the worst possible outcomes I can envision for such a program.
I definitely agree with you about experimentation though, and if the main funds for it are coming from donors voluntarily and not out of the tax payer's pockets then that's all the better. It would be great to have both private and public researchers in on this though, I'll take as many eyes as we can get on the data.
> I worry that it would be a lot worse than that - that we could create a class of non-workers and workers.
UBI is intended to alleviate the problem with means-tested social welfare programs in doing that by reducing the disincentive to taking action which would produce additional income faced by those on means-tested benefits where any additional income results in substantial (sometimes even dollar-for-dollar or greater) reduction in value of benefits received.
And, in any case, economically its somewhat self-limiting (unless you explicitly inflation index the benefit, in which case you are just asking for disaster if you set it wrong initially -- which is why I prefer tying benefits to a defined revenue stream, rather than a set benefit level): if too many people drop out of the work force because the benefit level is too generous given the current level of productivity, it will accelerate inflation, reducing the real level of the benefit, leading more people back into the workforce.
> unless you explicitly inflation index the benefit
You can be 100% sure that unless this is specified you'll have people lobbying for it every year. Or just flat rate increasing the UBI, etc. I can envision a strong push from some political groups for this already.
> if too many people drop out of the work force because the benefit level is too generous given the current level of productivity, it will accelerate inflation, reducing the real level of the benefit, leading more people back into the workforce.
This is a good point, but in this case, everyone essentially loses value from savings to pay the UBI. Definitely not a hit I'm interested in taking.
I actually agree with a lot of what you say, which is why I prefer to start a UBI very low (not directly displacing existing programs, but since the income from it counts as income, gradually reducing eligibility for them), tied to a dedicated revenue stream that is expected to grow with productivity (which, unless something else is wrong, should over the long run grow substantially faster than inflation), rather than using a benefit-first calculation.
I'd really prefer to take strong steps to eliminate the risk of overshooting a sustainable benefit level, but -- while there are certainly costs to that -- the "mass exodus from the work force because benefits are too generous" problem is self-limiting.
Yeah, that's a fair assessment. I think more research needs to be done in this direction, there's got to be a good way to determine initial parameters for this sort of thing.
But I can't help but think that it'll be too politically charged to follow any sort of logical regime that might result from research, which makes it sort of scary to approach. You'd basically need the public to agree on the terms and limits of a well-defined system without turning it into a partisan mess. Unfortunately I can't think of many examples of this currently in existence.
Indexing UBI to a revenue stream is a bad idea because the revenue will tend to swing up and down in sync with economic cycles, making bubbles frothier and recessions worse. Constant spending by contrast acts more like an automatic stabilizer. https://en.wikipedia.org/wiki/Automatic_stabilizer
Indexing to revenue is a bit of a simplification. what I really think is the revenue stream should be split between current benefits and a reserve fund, with the reserve fund drawn from to avoid decreases in cyclical downturns. The idea is that the long-term effect should be increasing benefit with productivity, while avoiding short-term benefit drops.
And the effect you describe is really one of overall domestic spending, not one program in isolation.
> Why wouldn't I just let someone else figure out how to automate jobs? I've got my income.
Empirically, people often expend effort to increase their income when there are opportunities available, even if their current income meets basic survival needs. I don't see why that wouldn't continue to be the case with basic income. What, people are going to stop wanting luxuries?
> What, people are going to stop wanting luxuries?
Not sure about you, but most of the luxuries I own, I've basically only bought because I had money for them. If I didn't have money to blow on them, they really don't bring me that much joy, relatively basic items would suffice.
So many things I think of as the real luxuries these days are free or basically free. I can spend hours watching youtube or playing games for extremely little cost.
I would not exert extra effort to buy better phone or a 4k monitor and a 980ti instead of settling for a weaker setup. Instead I only have these things because the money was there already and I had nothing better to do with it.
Basically, I'd drop out of the workforce in a heartbeat if I could afford living and a few minimal luxuries. $15-20k/year would do the job to split a cheap apartment with a friend and keep the rest under control. This is half of what some people have proposed as a UBI.
You might accurately describe what you would do, but I think the evidence from the world around us is that most people in the US do see sufficient marginal utility in things beyond what it takes $15K-$20K -- or even $30K-$40K -- to afford to exert additional effort to earn beyond that level given the opportunity. So even if we could somehow establish a UBI that would (after accounting for whatever inflationary effect the UBI itself had) provide a standard of living comparable to $30K-$40K in current dollars (which I don't think we can come anywhere close to today), I don't think you'd see a whole lot of people who were had job prospects not working.
> I think the evidence from the world around us is that most people in the US do see sufficient marginal utility in things beyond what it takes $15K-$20K -- or even $30K-$40K
Do we actually have evidence for this? If you're comparing working a skilled vs unskilled labor I think there's a lot more difference than just pay there that must be considered. In a lot of ways the skilled job is lower effort, even if the up front effort requirement was higher, the daily effort requirement is often lower.
You also have to consider than even a relatively low effort job 8 hours a day is a massive effort difference from zero, which is the alternative you're actually comparing to. Basically, if you need to exert several hours a day worth of effort to get by, you better optimize the value you get back from them. But if you don't need to exert any at all to get by, that's a very different situation.
But maybe I'm just an uncommonly lazy turd. It's possible. I just don't have evidence to say it for certain.
> Basically, I'd drop out of the workforce in a heartbeat if I could afford living and a few minimal luxuries. $15-20k/year would do the job to split a cheap apartment with a friend and keep the rest under control. This is half of what some people have proposed as a UBI.
By the way this might be very doable for you on a short timescale, if you pull in the kind of salary most people do on HN. Studies show that if you retire and pull only <4% of your starting balance each year to live off, you can live off it for 30+ years, if not indefinitely. If you were earning $120k, but only spending $20k/yr, you'd have enough wealth to live off after only 7.5 years.
Wanting to be financially independent doesn't necessarily mean you want to completely stop working. It just means you want to choose how you spend your time.
The point is if you sum up what people would want to do with their time, there's no reason to expect that in any way corresponds with what the allocation of resources should be to keep the engines of the economy moving / achieve maximal societal benefit / whatever. It's a classic tragedy of the commons situation.
Without the need to work, there is a greater incentive to automate jobs.
How do you figure? If that were true then that means companies are currently thinking "I could automate all these human jobs, but these guys need work so I won't"?
Not sure I've ever heard a business make that decision.
I think the idea is that a UBI would increase the cost of labor by removing some people and some motivations from the work force and thus forcing a higher level of competition between employers.
Increasing the cost of labor increases the incentive for automation to remove the need for the labor.
> I think the idea is that a UBI would increase the cost of labor
Different UBI proponents (which come from across the left-right spectrum) have different ideas, but none of them that I've heard from has favored UBI for the purpose of increasing the cost of labor generally. Especially on the right, but also usually on the left as well, reducing the disincentive to work inherent in means-tested social benefit programs, and avoiding the same problems that minimum wages seek to address while not limiting the minimum economic value a job can produce and be worth offering are frequently cited motivations.
> favored UBI for the purpose of increasing the cost of labor generally
But is this still an effect which needs to be considered? I can only see it increasing the cost of labor if people are only willing to work for the luxuries they desire and no longer for the basic living expenses.
By what other means would it encourage automation at all? Or is that not an intention or benefit at all?
> By what other means would it encourage automation at all? Or is that not an intention or benefit at all?
Its not really intended to encourage automation, from what I've seen from most proponents; the relation to automation is that automation is happening now, and expected to continue with or without UBI. Proponents of UBI (particularly on the left) see this trend as a significant contributor to declining real wages for most workers, with the gains from the growth of the economy going to a relatively narrow set of elite workers and, even moreso, a much narrower set of capitalists. They see UBI as a means of compensating for the harm most workers experience in this, redistributing some of the net gain so that the aggregate gain that these changes contribute to benefits everyone. Productivity increases don't need to be encouraged, they inherently produce their own reward.
Wages have been lower relative to inflation, real estate etc because demand for human labor has been dropping. Consumer goods come down in price but real estate, gold and other limited resources are a reference for how low demand for human labor is falling.
Technology enabled outsoucing, and automation, to erode the demand for human labor. Luddites were 150 years too early. The capabilities of computers are only growing.
The next will be self driving cars, kiosks at mcdonalds and drone delivery. That will put a lot of people out of work.
Relying on wages to trickle money down only works when employers value their employees. These days we are in the intermediate period with a growing unemployed class, part time temp work, two year stints at companies, and stagnant wages for the average profession including developers.
There is no reason not to tax the productivity gains made by corporations by R&D and automation, and redistribute that to everyone. Alaska has been doing unconditional basic income from a tax on using its natural resources.
Most people will be 90% consumers and only 10% producers. Already, most full time jobs are just make-work. Conditional welfare and fulltime jobs make people afraid they'll lose their check if they work on what they are passionate about. That's an infantile mentality that holds many back from living productive lives. They instead pretend to work or pretend to be poor, to keep getting that conditional check. It's time to let the humanity at large grow up, stop wasting time and tap their potential.
Letting markets function has helped poor countries like India, China and even North Korea. Making decisions on behalf of poor people has hurt poor even in the richest countries like USA. Common sense to me.
There is always an issue of law and order though. If theft is a common problem then this may not work.
Can someone point me to any unbiased research on the micro/macro effects of basic income vs raising minimum wage? I've been struggling to find non-hyperbolic politically laden information on the subject.
FWIW, this isn't really testing a what "Basic Income" is usually defined as in any area, since the benefit will be given to people in the target area when it starts, and follow them if they leave (and not be given to new residents of the target area that arrive during the trial). And also may include different levels in the target area. So its an experiment about giving free money to individuals, in an arrangement substantially different than a Basic Income.
Let us jump in with our opinion (We are a startup from Kenya),
This has the potential to do great good, and at the same time, great harm. As someone from this region, my first thought like mwambua, is the instant abuse by corrupt individuals as a get rich quickly mechanism, and thats my biggest worry, will this project be able to ensure that needy people actually get this, or who decides who gets it?
More or less this is the only thing i would have a problem with, as integrity issues down here have and continue to ruin everything, if this program can by some means manage to rise beyond that, then for sure, this will be great, and i would definitely look forward to the results.
This is my take, if you can get it done transparently and with proper selection (weed out perennial NGO dependents),
this may very well be the best social/political science experiment out there.
As a tangential observation, one of the reasons corrupt politicians get power down here, is that they have the means(through dubious sources, usually stolen from the taxman) to dole out cash bribes/handouts to young otherwise destitute/jobless guys. Should this experiment change the economic circumstances on the ground, the politics will also have to change, which may be quite frightening for politicians, have you guys thought of what sort of reaction you will get from influential individuals with a stake in the status quo?
That said, viva la basic income, bring it ;), we are all for it, after all, whats the worst that could happen?
Should some of the concerns we've raise be addressed, this will definately sidestep the problems mentioned in haiti and other areas on this thread.
"It is provided to everyone, regardless of need, forever."
How long will the experiment last? I feel like the recipients knowing they are guaranteed a payout for at least a decade will result in very different behavior than only knowing you have it this year and maybe next year, even if you do for it a decade.
I'm looking forward to the day when the other half of the world gets "on the grid" so to speak. The rise of other economies will greatly benefit humanity as a whole.
Great experiment. Very excited to see where this goes.
While initially in favor of basic income due to the income trap created by the traditional approch, I have come to oppose it due to a better understanding I now have of the nature of money. Consider that basic income works when you think of money in the micro context as a means of exchange for goods and services, but not when you think of it in the macro context as a reflection of the wealth of a society. Simply transferring money from one group to another does not make the second group wealthier.
In the longer & broader view, it may well not, I think that's the OP's point. This could be due to second-order effects such as the wealthy (= productive) people losing incentive (due to taxation) to work as hard, or inflation.
Money is not wealth - it is debt. That's what the fundamental purpose of money is: instead of trading your stuff for other things, you trade it for a certain value of things at an unspecified later time.
With this perspective, there's no distinction between micro and macro contexts for money. It's all a unit of account for how the economic output of a society gets distributed. Transferring money from one group to another is the exact same thing as transferring real goods and services, except that the recipient gets to choose what slice of the economic pie to receive (by paying for it).
So let's say you give 1 bar of gold each to a group of 50 year olds, and 1 gold bar each to a group of 12 year olds. Each group is now equally wealthy and could each produce a cathedral of the same quality?
No, because money is not wealth. Owning money is equivalent to being considered to be owed something by society at large. Each group is roughly equally capable of trading that debt for the real goods and services they wish to receive in order to consider society's obligation satisfied. They're going to get different things, of course, but that's a side issue.
In that case, wouldn't you say though that if you receive money without working for it, you aren't really owed anything by society at large? Is it possible to transfer the "having done work" from one person to another? And no, investing does not fall into this category.
No? There's no distinction in my mind between having money and being owed the value of that money in real goods and services.
Like, it's not a moral matter, more like an accounting identity. People who have money are owed things, and the debt can be resolved by exchanging said money for the things the money-owners want. This works not because people who own money "deserve" to get things, but because this is how society has decided to keep track of who should get things - that is, by paying for those things.
> In that case, wouldn't you say though that if you receive money without working for it, you aren't really owed anything by society at large?
One perspective on UBI is that it is compensatory payment to those harmed by factors which enable greater aggregate economic performance at the result of concentrating returns in a narrower group and driving down real wages for the masses.
Basic income isn't designed to make the recipients wealthier directly (OTOH, access to greater goods and services produces more opportunities to become wealthier over time, which is more the point.)
This implies that they're not wealthy because they don't have access, would you agree? Is it possible they're not wealthy because of some other reason?
I find it hard to imagine that if you're struggling to attain your own bare necessities you're going to have the energy or wiggle room to generate more wealth (e.g. to start a business)
Good point. They're struggling due to having unmet basic needs. Since money provides almost no nutritional value I can't see how it would help them. You've enlightened me; I'm now a social darwinist. /s
> This implies that they're not wealthy because they don't have access, would you agree? Is it possible they're not wealthy because of some other reason?
Two things:
(1) opportunity for wealth building is only one, of many, reasons for BI, and
(2) It is certain that for some portion of the population, additional income will not be sufficient for notably better wealth building. But its equally certain that some portion of the population that would net benefit from BI is held back solely by short-term resources.
Why doesn't transferring money from you to me make me wealthier? It allows me greater access to goods and services, which seems to me to be almost the definition of greater wealth.
The wealth of a society is a reflection of the quality of the people in the society. 10 million in my hands isn't worth as much as 10 million in the hands of warren buffet.
You're making a good point, and I'm sad that you're being downvoted.
People who win a fortune by the lottery often lose all their money shortly afterwards, even those people who intend to save and invest it. The reality is that some people are better than others at turning capital into gains through investment. There's definitely luck involved too, but Buffet knows how to buy a business, be its steward, and generate growth, not just for his business but for the economy in which it resides too. Simply investment in diversified mutual funds is not the same thing.
If you pick a typical poor person and give them $10m, they probably won't have the education or discipline even (to know how to) live off investment proceeds, much less grow the amount substantially. (See the outcome of most lottery winners)
That being said, basic income is talking about something different entirely, which is giving a lot of people a little bit of money. I think that could have a positive effect, although for all we know it may be transitive and only lasts as long as the money is being supplied. I think the question is whether the money helps people lift themselves out of poverty, and educate themselves or their children so as to enter the middle or upper class.
I think you could have expressed your first post more clearly -- I assume your point is that transferring wealth from one person to another in a particular society does not make that society as a whole better off. On a micro scale this is correct, but it may in fact make society more wealth if it leads to a more productive population in the long term. But it could just as equally lead to a less productive population. We'll have to see.
If you're going to define the wealth of a society to be the sum (or the average) of the wealths of its members, then you're probably correct that, in general, UBI or other redistribution of wealth does not lead to a wealthier society.
But total global wealth is probably not what the aid-givers are trying to maximize here. In fact, I think pretty much nobody is ever trying to maximize that.
Actually it does due to the very fundamental principle of economy: the same goods will have different utilities, and hence different values to each individual human being (and why trading IS creating value).
2000 calories to a starving person helps them alive, which translate to more wealth they can generate later on. 2000 calories to fat people is worth much less, if not harmful. Capital is just an abstraction of goods, and certainly their usage will have vastly different effectiveness depending on situation.
1. The donations will likely be in local currency (via mobile phone payments), but the charity needs to exchange dollars for local currency. So it helps somewhat with the exchange rate if the country is short on foreign currency, but I'd guess the scale is not nearly enough to have any significant effect.
2. It doesn't increase the amount of currency in the country as a whole. Locally, if the economy is doing better, perhaps people will charge more for jobs, but they also trade with other parts of the country so that would tend to keep prices stable (if not too isolated).
I don't understand your responses here: this is a western charity putting in 10 million USD and soliciting (and not exclusively soliciting in the target country, which hasn't even been identified) another 20 million USD for the effort. Where do you get the idea that the donations would "likely be in local currency"?
I don't know, but I've been watching GiveDirectly for a while and assume they'll handle this similarly to how they have before. This basic income experiment looks like a minor variation on what they already do.
Okay, I think the miscommunication is on the word "donation"; you're referring to the payments to beneficiaries it sounds like, I took "donations" as the money going in to GiveDirectly.
It's a western charity, not a government. They don't print the money.
More generally, many countries need to make sure they have enough foreign currency to buy imports. Poor countries especially need to worry about this. Printing money to give away doesn't make sense when you can exchange it for something valuable.
Right - it's a Western charity, but I'm asking - is it just solving a liquidity issue by pumping in the money? And if so, is the effect that different than if a central bank had done this?
I buy the "You need foreign currency as a country to purchase imports" point, but if we are talking about local money to support local demand, how is sending $30mm in, and exchanging it for local currency for local projects that different than the government just printing that same amount of local money?
There are inflationary effects of printing large amounts of money, but wouldn't this exist if you imported the same amount of money?
I recently reread the babysitting co-op story [0] and it got me thinking about these monetary implications.
Please note that I do agree that "giving people general support, and let them figure out what to do with it" is largely better than "I know what you need, so let me provide it for you" aid. II'm just working through the mechanics of this.
While it's noble to give away $30M, it won't necessarily give strong support for universal basic income. In order to have an effective experiment, you need to also tax those people $30M and redistribute it. That's missing from their checklist.
Of course free money is better than no free money! That's all this will prove and few will debate that. The real questions are: 1) is it worth the cost, and 2) is it better than alternatives?
I would personally donate to a large-scale A/B experiment where you give one group cash and the other group food, housing and education worth an equal amount and see which works better.
I worry that the recipients are going to be better off (because you just gave them $30M) and then everyone is going to want to implement a huge, risky (and fundamentally different) program in the US.
Note to avoid excessive downvotes: I like the idea of UBI in theory and I will support it one day but I think we're not there yet. I think we need more automation and more overall wealth before it makes economic sense - before benefits > costs.
> Of course free money is better than no free money! That's all this will prove and few will debate that. The real questions are: 1) is it worth the cost, and 2) is it better than alternatives?
I think the majority of dissent in the United States would actually argue that free money is worse than no free money. (If this surprises you, you may also have been surprised that Trump is going to be the GOP nominee.)
I wonder what is the control group here? I mean I'm sure that giving away free money helps, but shouldn't the question be 'Is this the most effective way to help'?
sounds like another 319 scam waiting to happen. bye bye money. all you have to do is read the thousands of stories about different governments or NGO's attempting to "help", or "fund", or "develop" projects in that part of the world and all the people have done was squander the money. History repeats itself if you don't learn from its mistakes. I think a better place to flush money down the toilet is to use an actual toilet, at least you know where its going.
I pay 30% tax as a lower-middle income worker but I see very little of this used productively. The majority of voters don't pay taxes and rely on aid for everything from farm inputs to school fees. As a tax-payer who understands what taxes should do for me... I live with very poor infrastructure and amenities while the government squanders away money. If developed countries keep propping up our poor majority, they'll never learn to find innovative solutions to their problems and elect governments that will create sustainable wealth.
- Frustated Kenyan