How Finland's Basic Income Experiment Will Work

http://www.fastcoexist.com/3052595/how-finlands-exciting-basic-income-experiment-will-work-and-what-we-can-learn-from-it

by nkurz • 11 years ago

99 81 11 years ago

fastcoexist.com

dang• 11 years ago

This story already had a major discussion (https://news.ycombinator.com/item?id=10688207), but the current article contains more information about what is actually planned.

Instead of treating this as a dupe like we normally would, let's try leaving it up with the request that people discuss the specifics of this experiment, and perhaps what other sorts of experiments could be run and how one might evaluate them—and leave the more generic for-and-against basic income stuff to the other thread.

pegas1• 11 years ago

The minimal income shall be given in exchange for voting rights. Pick one or the other.

guard-of-terra• 11 years ago

I'm not sure you're right but also not sure that you're wrong.

We don't know how many people are going to rely on basic income as main mode of income and why.

mrec• 11 years ago

I'm sure he's wrong with that particular phrasing.

If a real problem does arise with a non-working majority perpetually voting to increase their BI, a more flexible answer would be to make the vote conditional on having paid a certain amount of tax, either in that year or over their lifetime to date or some combination of the two. But let's not roll back the clock a few decades on universal suffrage until we're absolutely sure we need to.

EDIT TO ADD: a core principle behind BI is that paid employment is not the only socially valuable form of activity. I believe that. Taking away the vote from people who aren't making a contribution in $$$ form would fly in the face of it.

vkou• 11 years ago

Why not just auction off voting rights?

distances• 11 years ago

There's nothing concrete decided yet for this, only a preliminary study has been started [0]. According to this press release, the next steps in the plan are

1. The preliminary study was launched at the end of October 2015.

2. A review of existing information and experiences [...] will be presented [...] in spring 2016.

3. Following on from this, an analysis [...] will be produced in the second half of 2016.

4. The universal basic income experiment is planned to be launched in 2017.

[0] http://www.kela.fi/web/en/news-archive/-/asset_publisher/lN0...

DIVx0• 11 years ago

I really like the simplicity and efficiency of Guaranteed Income. Social welfare is one of the 'costs of doing business' in a modern civilization. Cut the crap and just give everyone basic resources without reservations.

The way I see it if someone really does not want to work, they'll go to great lengths to cheat the system and the government will spend a great deal combating these people. Just giving the bum money will be cheaper for everyone.

More importantly a basic income will free up people who will take jobs just because they have to. This will actually open up jobs for people who want to work hard to rise above the basic level. It will give people freedom to explore things that would not be feasible otherwise. This will generate more art, more music, new science and philosophies.

Perhaps my thoughts are too idealistic but I think its more reasonable than trying to police welfare or telling everyone to just be more bootstrappy.

notahacker5• 11 years ago

There are many people here who spend their day job writing algorithms to monitor people's responses to certain stimuli -even down to the individual level - in order profile users and tailor services to ensure that a few advertising cents per person are spent efficiently.

I'm genuinely unable to fathom why when it comes to solving the diverse, expensive and very real problems a social safety net is designed to capture, that "give everyone a fixed large chunk of cash each year" is so widely perceived as the "most efficient" solution on here.

The separate ideal world argument that BI would ensure that people don't "have to" work (unless they're foreign, obviously) obviously flies a little in the face of the efficiency argument too.

patmcc2• 11 years ago

>I'm genuinely unable to fathom why when it comes to solving the diverse, expensive and very real problems a social safety net is designed to capture, that "give everyone a fixed large chunk of cash each year" is so widely perceived as the "most efficient" solution on here.

I don't know if it's the absolute most efficient, but I suspect it's a lot more efficient than the current collection of social safety nets - especially assuming the tax agency is already decent at doing it's job, giving everyone a few hundred dollars a week is pretty easy to administer, and can be taxed back from higher earners easily. If instead you have multiple decision trees about who gets particular benefits and who doesn't, you suddenly need a bureaucracy, and those are always expensive.

Fundamentally I want my society to feed, clothe, and house people who can't manage to do it themselves for whatever reason. At that level it's not that diverse; does it matter if someone is disabled, drug addicted, chronically unemployable, a single mother with no support, a refugee, whatever? They can't come up with rent and food money, let's give it to them.

icebraining• 11 years ago

I'm not sure all those advertising cents per person are really effectively spent, either. I'd say the expertise is mostly into getting the advertisers to spend that money.

http://www.theatlantic.com/business/archive/2014/06/a-danger...

oldmanjay2• 11 years ago

It's most efficient under the constraint that we probably don't want to force citizens to submit to advertising-style pervasive monitoring by the government welfare authorities just to eat.

DiThi• 11 years ago

Look at the welfare cliff http://www.zerohedge.com/news/2012-11-27/when-work-punished-...

The situation is worse in my home country (Spain): I know too many people that doesn't want to work because they would lose benefits.

It's not about giving away more, but giving it equally. Income taxes can "take back" money from people that don't need it.

cheald• 11 years ago

I'm genuinely unable to fathom why when it comes to solving the diverse, expensive and very real problems a social safety net is designed to capture, that "give everyone a fixed large chunk of cash each year" is so widely perceived as the "most efficient" solution on here.

Economists widely agree that cash transfers are more efficient at improving welfare for the poor than transfers-in-kind. It's one of the less controversial statements in the field. "Give everyone a chunk of cash once a year" is probably not the most efficient manifestation of the concept just because peoples' behaviors tend to be different if they receive regular reliable income vs irregular income (see the permanent income hypothesis), but when it comes to the choice of giving the poor cash or services, just giving them cash is widely preferred.

marcosdumay• 11 years ago

Oh, that's the easy question. It's the most efficient solution because of politics. Anything with complex rules will be (or better: is) gamed and the money will disappear (to varying degrees, depending on the host country).

mtdewcmu• 11 years ago

If someone really doesn't want to work, then they're probably not going to make a very good worker. Why force them to get a job if they're going to be a drag? I think the vast majority of people want to work just to keep busy and make their lives interesting. At least, that's what people tell me.

agumonkey2• 11 years ago

I'm infinitely curious about these kind of projects. As you and other said, current systems are so full of waste and people investing so much efforts into tricking it. I can envision a lot of good outcomes. That said I really don't know how the culture will align. So much in human history was defined by your role, your work etc etc. Now if you're not contributing to others in a market will you be seen as valuable ? how will people relate to each others now that there will be less "classes". I also believe survival pressure is mostly needed for people to exist fully; todays system pressure is too chaotic and suboptimal, but removing too much pressure may lead to muddy waters.

ci5er4• 11 years ago

now that there will be less "classes"

How do you think that this would translate to less "classes"? I know some number of humans, and based on this limited experience, I'd be surprised if there wasn't some sort of "makers" and "takers" class dynamics emerge.

fweespeech4• 11 years ago

I really like the simplicity and efficiency of Guaranteed Income. Social welfare is one of the 'costs of doing business' in a modern civilization. Cut the crap and just give everyone basic resources without reservations.

The problem is it simply is not possible or feasible.

https://aspe.hhs.gov/2015-poverty-guidelines

Poverty line is $11,770.

I'm pretty sure any reasonable person doesn't want to live on that amount of money because it would suck!

So how much does it cost to, say, give everyone $10k/year and thereby guaranteeing everyone who can work would want to?

http://quickfacts.census.gov/qfd/states/00000.html

23.1% of the population is under 18.

So .769 is 18+.

318,857,056 is the total population of the US.

(318,857,056.769$11700) = ~2.9 trillion US$

https://www.nationalpriorities.org/budget-basics/federal-bud...

We have about $3.8 trillion in federal revenue.

$985.74 is the cost of Medicare.

$985.74 billion + $2.9 trillion = ~$3.9 trillion

This leaves a $0 budget for literally anything else. To be reasonable, we'd probably need to raise another ~$1 trillion in taxes to sustain something vaguely resembling current government functions [remember, the existing expenditure is already over $3.8 trillion]. Even then, it'd be really iffy.

danieltillett5• 11 years ago

You would just need to increase the tax rates to pay for it. The us economy is ~$18 trillion so even if you need to raise an extra $2.9 trillion it would be possible. Of course I think it has zero chance of ever being implemented because of politics.

s_q_b• 11 years ago

The studies in this area are very clear. The most efficient way to help the poor is direct cash grants.

However anathema to our national ethic, this is what works, and form must follow functionality.

notahacker5• 11 years ago

I'm going to go out on a limb and suggest that studies of direct cash grants to the extreme poor in developing countries have essentially zero applicability to a welfare/welfare replacement system in Finland...

paulddraper2• 11 years ago

References?

akvadrako• 11 years ago

https://en.wikipedia.org/wiki/Mincome

Mincome was an experimental Canadian basic income project that was held in Dauphin, Manitoba, during the 1970s. It was only half "unconditional", the rest income-dependant, but it did seem to have good effects.

BBopUndRawkS• 11 years ago

All three of the photos in the article are taken within a block of each other, and I know the woman in the pea-coat walking away from the train.

Finland is a really small place.

soperj• 11 years ago

That's kind of funny, but it's not really that small. I haven't been all over finland (but a bit of it, helsinki & area, turku, lahti, tampere, and up to oulu.) Still haven't seen the Northern Half of the country. New Zealand is definitely smaller, but it feels easier to visit both islands than the northern half of finland.

PlzSnow• 11 years ago

This story is so vague, it is basically meaningless. The limited experiment may or may not happen in x years.

I understand that people here WANT it to happen and therefore discuss it as if it WILL happen. Unfortunately reality is going to get in the way.

_rpd7• 11 years ago

I think it's hard for these experiments to yield answers to important questions about basic income because of the fact that participants know it is an experiment.

With a 2 year length, people aren't going to adjust their long term plans regarding the expectation of how much they will have to work. The extra cash is just a windfall. Reaction to a long term political commitment will be different - once people trust that the basic income will "always be there."

Similarly, some local landlords and businesses may raise prices to soak up the extra disposable income, but they know that their actions will be scrutinized and publicized. Is 2 years of marginal extra profit worth the loss of good will? Again, I think the answer is different once there is a long term political commitment.

The answer to this last question is important, because it likely leads to the basic income being adjusted for price inflation, and then an inflationary spiral or price controls. To me, this is the central problem with basic income (I think the "motivation to work" issue is a red herring), and I don't see how basic income experiments can shed light on it.

Retric2• 11 years ago

A huge benefit to BI in the long term is it allows people to move to cheaper areas. Subsidized housing on the other hand creates lot's of perverse incentives. So, ideally you don't want to adjust for regional cost of living.

Remember, if a store in NYC can't find anyone willing to work at X$/hour they must raise wages and prices. This sends really important signals up and down the economy.

ci5er4• 11 years ago

A huge benefit to BI in the long term is it allows people to move to cheaper areas.

And do what? Abide?

One thing that people want to test is whether this would disincentivize work. People choosing to move to where there may well be no jobs sounds as if it is disincentivizing work.

jsweojtj• 11 years ago

I completely agree that regional adjustments should not be made. A single and uniform monetary amount should be given to all. Otherwise a runaway effect is bound to happen. The places people most want to live (say Hawaii), are more expensive-- if you get to live there AND get more $$ to do it, you will get more people there. Of course then, it gets even more expensive and so on.

scarmig3• 11 years ago

It's still a worthwhile endeavor, though: an experiment doesn't have to answer all possible questions about a subject in order to provide value.

Right now there are some huge basic unknowns about a basic income. For instance, one prediction is that everyone who receives a basic income will drop out of the working population (not a view I'm ascribing to you, to be clear, but not a straw man either--it's something I've seen explicitly stated here on HN and elsewhere). This experiment will give a rough estimate of the sign and magnitude of any disemployment effect: will it cause some people to drop out of the work force? Or everyone? Or will it cause people to join the workforce?

Seeing how people react to basic incomes offered over different time spans is going to be important, but before the shape of that curve can be characterized (in what's ultimately an empirical question) we've got to get at least some basic information. Before Newton could come up with a solid theory about gravitation, he had access to plenty of information; but as far as a basic income goes, right now it's like we don't know whether gravity pushes or pulls.

And your point about inflation is my biggest area of concern about the basic income as well, but focusing on second order price level effects when people are still in dispute about the basic first order effects is putting the cart before the horse.

FreakyT• 11 years ago

This experiment will give a rough estimate of the sign and magnitude of any disemployment effect: will it cause some people to drop out of the work force? Or everyone? Or will it cause people to join the workforce?

I think the parent's comment is mainly asserting that, because of its experimental nature, the experiment will not be able to actually answer that question. If participants do not drastically alter their work behavior like in previous basic income experiments such as MINCOME[1], that would not necessarily predict how people would act if given a promise of indefinite basic income.

[1] https://en.wikipedia.org/wiki/MINCOME

gozur884• 11 years ago

Reaction to a long term political commitment will be different - once people trust that the basic income will "always be there."

That might take a generation or two. I don't think I'd ever allow myself to be in a position of depending on an income stream that itself depended on the whims of legislators and their ability to budget. But I can see someone who grew up never knowing life without a basic income scheme might make the assumption he didn't have to worry about developing and maintaining a career.

xrange• 11 years ago

Yes, speaking of experiments, I don't see why the U.S. doesn't run a large scale experiment to see what the effects of a basic income are. Select a small but not insignificant demographic. Pay them a not-means-tested monthly stipend. Since this is only a test, you should be able to pay for it with a modest tax on paychecks for the rest of the citizens. Then wait a while, and see what happens. We would want to make sure it cuts across a broad swath of society, so that special interests don't wreck havoc when interpreting the results. So we'd want rich and poor, of all races, etc.. We should then be able to look at the recipients, and tell if they were more likely or less likely to be employed. And we should be able to see if they spending their time creating cutting-edge art, and new innovative music, while writing inspiring novels, and discovering new scientific facts and mathematical theorems. To be doubly sure that we aren't merely papering over any medical insurance issues (what with medical inflation and all), we might also create a separate medical payment system to cover their medical expenses. Of course, this should be a long running experiment, so that any short term economic and societal effects will have time to average out. Let's propose to run this experiment, for, I don't know, maybe 80 years.

_rpd7• 11 years ago

I wonder if data from lottery winners with "lifetime" stipends in the right range could be useful? Or perhaps a basic income experiment lottery could be sanctioned to gather the data. It might even be self-funding.

danieltillett5• 11 years ago

A very good idea. It would even be easy to implement at profit :)

adventured3• 11 years ago

In a country as rich as the US, with wealth so heavily stacked to the top 1/3, I'd have to argue in favor of dropping the rich out of any basic income testing or implementation. For the same reason that they shouldn't be participating in any other traditional welfare programs currently. The only way a full implementation of a basic income can work - and be enough to matter - in a country with as large of a population as the US, is by dropping the top economic tiers out of it; make over $X, you don't qualify.

The US could afford to give the poorest 50 million adults a $2,000 per month basic income. Federal + State + Local welfare spending total, is a bit over $1 trillion annually (including Medicaid). You could parse that $2k down to $1k across 100 million adults, but at that level it won't be enough to replace all the benefits people are deriving from welfare today (the health coverage alone would severely drain that $1k level).

The downside is, giving the bottom 50 million adults a $2,000 check every month, would enrage the middle class. One of the benefits of current welfare programs, is you don't see it the way you do cash being spent, and I believe most people think of cash payments entirely differently than they do eg free healthcare.

Want to give all adults enough money? You can't do it. There is no math that will ever get you there, unless you plan to abolish the US military, part of Social Security and Medicare, and raise taxes simultaneously. 230 million adults * $1,000 per month = $2.76 trillion per year (almost the whole federal budget), it's obviously laughable.

delecti2• 11 years ago

The problem with a hard cutoff is that people just below the limit end up better off than those just above it. One problem with a soft cutoff is how often/when you adjust for changes.

Basic Income is only a simple solution if it's universal.

Additionally, part of the benefit of a universal basic income is that it covers the ground of programs like Social Security, so at least in theory you can get rid of it. (though I sure wouldn't want to be responsible for orchestrating the transition)

dragonwriter2• 11 years ago

If you have a hard cutoff, its not a BI.

If BI is treated as income, this (through taxes) limits the net cost of benefits to the rich (or even middle class), while avoiding the perverse incentives that come with a hard cutoff, or even a dollar-for-dollar phase-out of benefits at some point.

cpursley• 11 years ago

I'm all for this experiment, but please, can we get rid of the Basic 'Income' _doublespeak_? Income is earned. Call it Basic ['benifits', 'welfare', 'necessities', 'coverage'].sample. Anything but the Income misnomer.

danieltillett5• 11 years ago

Better tell the rentiers this [1].

1. https://en.m.wikipedia.org/wiki/Unearned_income

paulddraper2• 11 years ago

You're think of earned income.

Income is anything that...well...comes in.

murbard2• 11 years ago

There are two big issues with basic income:

1) Even if you spent the entire $2T annual federal budget on a basic income, it would come to about $500 per person per month. The cost is simply gargantuan.

2) It would not replace welfare, it would come on top of it. This is because welfare isn't about helping the poor, it's about giving political power to the lawmakers. This power comes in the form of large administrative bodies, where political allies can be given cushy jobs, and in the form of an electoral clientele. Basic income doesn't have these two features, so from a public choice theory, it will not replace the welfare state. Case in point, when the Reagan administration tried to apply Milton Friedman's negative income tax, he distanced himself from it as they wanted to do it on top of other welfare programs. This is exactly what public choice theory dictates.

ahallock• 11 years ago

There is another social factor to basic income, and State-based welfare, that I'm not sure is being mentioned: it allows people to become more isolated because they can be less dependent on friends, family, and neighbors. I'm not sure if that's a positive for society in the long run.

osmala• 11 years ago

Lets start with simple facts, current government is formed by rightwing parties. [Not so rightwing by american standards].

~1000€ is what ultra leftwing party's youth group proposes. ~600€ is what the Green leftist party proposes

The right wing parties talks about creating motivation for people to get to work with the basic income. A newspaper supporting prime minister party's talk about either partial basic income of 550€ with it replacing most benefits or full basic income of 800€ with absolute cutting of other benefits.

What I'd like to see most is basic income combined with true flat tax. No tax deductions, minimal bureaucracy. If we are going to pay certain minimal support to everyone to keep them from going too desperate, we could as well pay it to everyone and then start taxing from first euro earned with the flat percentage.

Instead of current system in which people send lots of separate applications for different benefits and then people paid by government has to work. And when you get raise you probably need to get new tax form from tax office to give your employer.

What well made basic income should give is instead of having long plateau after the minimum everyone is guaranteed to get one way or other, is a way for everyone to get that minimal guaranteed all the time and any marginal employment would increase income over that. And most of the cost would be got from reducing number of government employees required to handle it. Everyone doing the math should consider that only real cost of basic income is when someone earns less than (1/taxrate)*basic income and more than what government currently gives to poor. And it eliminates cost of MANY government jobs handling papers for benefits, and makes easier to take a job for a day or two or week or two because you cannot loose benefits for it. Or loose benefits for starting your own business.

How Finland's Basic Income Experiment Will Work

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