What Would Happen If We Just Gave People Money?

http://fivethirtyeight.com/features/universal-basic-income/

by bkurtz13 • 10 years ago

33 25 10 years ago

exacube• 10 years ago

How do the economics of providing Basic Income work?

I guess you would have increase taxes or provide lesser services? e.g., expect that basic income will cover some parts of the medical costs and provide a lesser health care for the average person. I'm guessing an implementation will be somewhere in between.

Money has gotta come from somewhere.

larubbio• 10 years ago

The article discusses this. Basically you take the current set of services, and by removing the means testing and eliminating all the separate departments that facilitate them you save money and repurpose it towards this single program.

Sir_Substance2• 10 years ago

In addition, most western countries are sitting on a sea of wasted talent. About 40% of graduates in the USA never get jobs in their field[1], and it's similar world-wide. It's lower in the engineering fields, but that still leaves a lot of smart people with formal education experience doing things like staffing the reception counter at the local gym.

Graduates take these jobs because the alternative is the hell that is student debt collection, but these are jobs that could easily be done by less educated people. The more educated people have the capacity to explore the kind of home-grown science, arts and social projects that brought us to discover electricity, progress to giving women the vote.

We're sitting on top of a new renaissance because of short sightedness, but the potential boon of having that much home grown R&D could dramatically increase global wealth.

[1] http://www.mlive.com/jobs/index.ssf/2011/05/40_percent_of_co... or just google that phrase, it makes for depressing reading

gshulegaard• 10 years ago

Money has gotta come from somewhere.

Well yes and no. The issues are complex and my economic schooling is woefully limited (merely Bachelor's level), but I recall the idea of a money multiplier [https://en.wikipedia.org/wiki/Money_multiplier] derived by MPC (Marginal Propensity to Consume) and MPS (Marginal Propensity to Save).

Take the following relatively contrived example. You insert a $1 into a vending machine and get a soda. The vending machine company takes that dollar and uses some to pay the soda company to replace the soda. The soda company uses the money to pay it's factory workers to make more soda. The factory workers use that money to buy other goods.

So you can see that on a whole, the $1 dollar you chose to spend actually had an impact on the economy of more than a dollar.

You can also see that depending on each what the "leakage" is at every level (or how much each entity, vending company, soda company, etc. choose to save instead of pass on) can drastically reduce the money multiplier effect leading to undesirable market outcomes (such as stagflation).

Perhaps this professor does a better job illustrating: http://aces.nmsu.edu/pubs/_z/Z108.pdf

Bottom line (I think is), empowering the impoverished to be able to consume should drive market growth. So the initial investment of a basic income should pay for itself many times over.

Anyway there is more to this obviously, and this same interaction has implications regarding income-inequality, but I'll just leave this here as FFT.

bko• 10 years ago

I was thinking about this issue when I attended a meet up for independent game developers. I was shocked at the number of people I had met that just develop games full time. I met an entire team of 4 people that have been working full time over the last year designing and developing a mobile game. They have a playable prototype and it's fairly entertaining but nothing ground-breaking in my opinion. Running the numbers in my head, I thought that this game would have to clear over a million dollars for it to even be considered a break-even for 4 well educated, hard working young people working over a year on the venture. I didn't know their personal financial situations, but I couldn't help but be both envious and terrified.

I met another person who worked on indie game development for two years and now works for a company designs games for others for money up front. He told me he hadn't made any money in the years working for himself.

It's incredible how many young people devote their time to passion projects with the very limited social safety net of the US. Surely a basic income will increase the allure. The question is, does the world need more indie mobile game developers?

ksenzee• 10 years ago

Young people who are middle- and upper-class have the mom and dad safety net. That's often why they can afford the kind of passion project you're talking about. It would be very interesting to see what people of other ages and classes could come up with, given the chance. I bet it wouldn't all be indie games.

Sir_Substance2• 10 years ago

The question is, does the world need more indie mobile game developers?

What's wrong with having more artists, be it indie developers or semi-pro bands or hobbyist sculptors, if we can, as a society, afford it?

jjn20094• 10 years ago

These people are the exception not the rule, for every person like this there are many times more of those who would take the dole and do nothing with themselves. Basic income might increase the allure of risky proposition, I think in most cases these groups of people estimated some risk/reward function of their endeavours, considering the reward more so than the risk, but there is a healthy combination of the carrot and the stick. Basic income is to do away with the stick, most people need the stick to get out of bed in the morning, admittedly myself included, at least to some extent.

ahlatimer• 10 years ago

Depending on the level of basic income, you keep the stick. You just don't beat people to death with it. I don't know about you, but (let's say) $20k/yr wouldn't keep me sitting on the couch. I'd continue to get out bed. That amount, however, might allow someone otherwise unable to do so to go to school, to pursue other interests, to spend more time with their family, and so on. All things that could be long-term more positive than languishing in poverty.

notduncansmith2• 10 years ago

I don't think policies designed to incentivize creative/productive activities (combination of propaganda, training/education, and subsidies) would be prohibitively expensive in a nation that has already agreed to try BI. Much or all of that, I imagine, could be done by volunteers and donors.

lawpoop2• 10 years ago

I personally doubt it, but that remains to be seen. I'm open to being convinced otherwise. I think more people would take a "staycation" for a while, then get bored, and go into new endeavors, like starting a new business, writing a novel, becoming seriously involved in volunteering, continue working in their degree field, etc.

If people were only motivated by the stick, no one would seek a raise or change jobs for a pay increase. But nonetheless, people still seek to move upwards.

Joof• 10 years ago

Open source developers are similar, but they end up getting paid these days. Unless it's certain infrastructure stuff...

jakeogh• 10 years ago

I bet China does it first. The opportunity to control the population by putting everyone on the take is very attractive to power structures.

Also it furthers the long-term social engineering regarding "if the gov does it (theft in this case) then it's OK".

glasz• 10 years ago

it would loosen the chains of capitalism for the 90% who haven't, aren't and won't get lucky. that's even most of us around here.

"we" can afford it. wall street is creating money every second. with a proper tax structure there'll be no problem. but that's politics-land and shit will happen until sheep are casting apt votes.

long story short: things will stay the way they are.

flashman• 10 years ago

I'm less worried about the economic aspects (western countries can afford this) than the social ones, namely the new forms of resentment this will encourage when taxpayers see all the things 'their' money is buying people.

notduncansmith2• 10 years ago

The key is to culturally shift from a scarcity-rooted value system to an abundance-roots one. Call it "The New American Dream".

caseywoolley2• 10 years ago

As long as there are greedy people and a limited supply of earth and its resources there will always need to be an accounting system for it. But that's not to say the system can't be improved. A full land-value tax would give the inherent value of land and natural resources back to the public and compensate those who use less of our limited resources from those who use too much.

boznz• 10 years ago

A great idea, however I doubt in practice it would work as well as everyone thinks.

What may work for a school leaver may not work for a guy with a family of 6/debts/drug or alcohol problems/medical needs/etc. that person may be much better off with housing benefits/family benefits/medicare etc than an equal slice of the pie.

Anyway I dont know but I am in favour of doing the experiment and hope it works, but I seriously doubt it will be as cut and dried as people think.

jmh422• 10 years ago

I've spent some time thinking about basic income. At times arguing for it, other times arguing against it.

Unfortunately we cannot resolve the scarcity problem, particularly when it comes to real estate, i.e. the location one chooses to reside. There is a simple physical constraint: only one thing can occupy a specific space at a time. Cities in general are popular places to live because of their proximity to "things", the Arts and that interesting stuff happens where more people can collaborate in the real world. (Consider the demand to be close to your child's school or near a dog park.)

Given this (assumption if you will), let's consider a few rounds of economic cause/effect. Round 1: if everyone were given a basic income, many more people will be able to afford to live in a city. Round 2: not all people, but some, will seek housing (rent or buy) in this city. Round 3: owners will need to choose between [1] renting/selling at current price for which there is suddenly higher demand or [2] increasing their price until there is less demand. Round 4: most owners choose option [2] and excess income begins to be sucked up by higher and higher prices.

The issue is basic income increases the demand (perhaps good for today's global economic ailments) while supply of goods/housing will take time to adjust. Of course, given the opportunity to sell apartments in a city at higher margins will cause developers to build new supply, but this takes years.

One way to deal with the supply/demand issue is having a basic income that starts low ($100 a month?) and increases to a basic living wage over the course of 5 years. This way, investments can be planned ahead of time so supply increases with demand.

caseywoolley2• 10 years ago

This is the basic flaw that everyone seems to be missing. Cost of living will just rise to meet the increase in demand resulting in no one except private landowners being any better off. Henry George identified the solution over 100 years ago. Basic income requires something like the Henry George land-value tax to be successful. At the same time, a land-value tax would also be the best way to raise funds for a universal basic income.

jmh422• 10 years ago

I had not heard of Henry James and his book "Progress & Poverty" (1879). More info for anyone interested [0]

[0] https://en.wikipedia.org/wiki/Progress_and_Poverty

What Would Happen If We Just Gave People Money?

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