GiveDirectly Planning to Give $30M in Basic Income to East Africa

by deegles • 10 years ago

274 213 10 years ago

deegles• 10 years ago

TL;DR: "With your help, we will run a long-term, universal basic income and study it rigorously to find out.

We think the whole thing will cost roughly $30M, of which around 90% of the funds will go directly to very poor households."

geekfactor• 10 years ago

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.

[1] http://freakonomics.com/podcast/mincome/

ultramancool8• 10 years ago

A few more good podcast links here, 2 episodes of NPR's Planet Money about GiveDirectly's results:

http://www.npr.org/sections/money/2013/11/08/243967328/episo...

http://www.npr.org/sections/money/2013/08/16/212645252/episo...

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.

rm_-rf_slash• 10 years ago

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.

troycarlson2• 10 years ago

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.

[0] http://www.povertyinc.org/

ktRolster3• 10 years ago

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.

dragonwriter20• 10 years ago

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.

nicksellen• 10 years ago

You can extend this argument to banking though:

If the U.S. pumps an endless supply of money into Haiti, how could Haitian banks hope to compete with their loan offers?

cowsandmilk• 10 years ago

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.

blairbeckwith• 10 years ago

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.

JamilD• 10 years ago

Banks generally do better when people have more money, not less. They'll get more deposits, and hopefully more loans that can actually be paid back.

troycarlson2• 10 years ago

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.

I would love to hear others' opinions on this.

nickff3• 10 years ago

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.

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

[2] https://en.wikipedia.org/wiki/The_Elusive_Quest_for_Growth

seizethecheese• 10 years ago

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.

zardo2• 10 years ago

Economies don't spring up out of a pile of free rice.

Rice is a viable basis for a currency, it worked for China for a thousand years. Maybe the free rice piles just aren't big enough.

namenotrequired• 10 years ago

There's a big difference between an economy and a currency.

thaumasiotes2• 10 years ago

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.

LanguageGamer• 10 years ago

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).

s_q_b2• 10 years ago

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.

hackuser2• 10 years ago

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).

okket• 10 years ago

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)"

https://www.youtube.com/watch?v=A9UmdY0E8hU

Just giving money may help in short term anyway, but I doubt it is one solution for everything.

fche3• 10 years ago

"It may astonish you which countries have the highest ratio of rich persons per capita live."

I hear Hugo Chavez' daughter has billions.

peeters• 10 years ago

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.

refurb2• 10 years ago

Just giving money will not work, see Saudi Arabia. They have all the money they can dream of and did not evolve.

What do you mean didn't evolve?

My understanding is a lot of stuff is free in Saudi Arabia. Oil money is used to fund education and cash is given to citizens.

Not sure I understand your point.

dv_dt• 10 years ago

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?

jrochkind12• 10 years ago

what sort of 'evolution' are you looking for, what does that mean to you?

I'm not sure the OP program is meant to lead to any kind of 'evolution'. It's meant to lead to fewer poor people.

s_q_b2• 10 years ago

1) Free Education

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.

ptaipale4• 10 years ago

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.

gshulegaard2• 10 years ago

Article you may be interested in from 2013: http://www.economist.com/news/international/21588385-giving-...

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.

tryitnow2• 10 years ago

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.

narrator• 10 years ago

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.

[1] https://en.wikipedia.org/wiki/Bolsa_Fam%C3%ADlia

nilstycho• 10 years ago

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.

awt7• 10 years ago

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.

dragonwriter20• 10 years ago

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.)

awt7• 10 years ago

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?

maaku5• 10 years ago

Having sufficient passive income so as to not have to work is wealth.

NhanH• 10 years ago

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.

ThrustVectoring3• 10 years ago

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).

awt7• 10 years ago

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?

mac010212• 10 years ago

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.

awt7• 10 years ago

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.

BurningFrog2• 10 years ago

Please transfer all your money to me. As you say, it will not make you less wealthy.

fche3• 10 years ago

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.

Aelinsaar• 10 years ago

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.

tn13• 10 years ago

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.

abannin• 10 years ago

If people choose to donate, isn't that just the market working?

mathattack3• 10 years ago

Seems like a great experiment. I think this will do wonders for both the people, and our knowledge of how to best provide aid.

2 things I'm interested in seeing:

1 - Does it make a difference if it's USD sent over, versus local currency? (Is it a cash shortage, or a foreign cash shortage?)

2 - How much inflation will occur?

skybrian4• 10 years ago

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).

mathattack3• 10 years ago

So to be the devils advocate, why wouldn't the country print more money rather than rely on money from abroad?

dragonwriter20• 10 years ago

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"?

fche3• 10 years ago

"With this pilot, we want to provide a true test of a universal basic income."

... except for the part where taxes are collected from the population to pay for said universal basic income.

dragonwriter20• 10 years ago

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.)

kogepathic6• 10 years ago

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.

MicroBerto• 10 years ago

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?

kogepathic6• 10 years ago

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.

skewart• 10 years ago

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.

pbhjpbhj2• 10 years ago

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?

kogepathic6• 10 years ago

Do you have a TV, is it a _waste_ of money too.

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.

jonlucc• 10 years ago

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.

kogepathic6• 10 years ago

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...

jjawssd3• 10 years ago

You are being downvoted because your real world experience does not align with the idealism of the HN readers in question.

kogepathic6• 10 years ago

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:

HN username @ gmail.com

I'll put you in touch with these guys.

EGreg2• 10 years ago

Basic income is inevitable.

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.

jjawssd3• 10 years ago

Already, most full time jobs are just make-work.

Wow this is quite a bold statement! How can you be so sure and generalize so much?

EGreg2• 10 years ago

Because I choose to be bold.

And I like to focus on the main factors in a situation if I can find them.

brianbreslin• 10 years ago

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.

choward• 10 years ago

In my perfect world, most human work is automated away. What's the point of minimum wage if there are no jobs to do?

thedevil• 10 years ago

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.

noahlt• 10 years ago

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.)

larrik• 10 years ago

"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.

agrona• 10 years ago

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):

https://givedirectly.org/research-at-give-directly

https://givedirectly.org/research-on-cash-transfers

scottrogowski• 10 years ago

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.

oconnor663• 10 years ago

This seems to be an argument against operating any charities at all in East Africa. That must be controversial?

flatline• 10 years ago

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.

nostrebored3• 10 years ago

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.

Apocryphon• 10 years ago

I don't know how much worse East Africa is compared to other parts of sub-Saharan Africa, but Namibia has enacted basic income before with positive results. https://en.wikipedia.org/wiki/Basic_income_around_the_world#...

But then again, it was the country's own government, not some outside NGO.

tosseraccount• 10 years ago

"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)."

-from your link

samstave• 10 years ago

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...

rossdavidh• 10 years ago

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.

nostrebored3• 10 years ago

Right, because using Africans as a guinea pig for an unproven economic system isn't colonialist at all.

thescriptkiddie• 10 years ago

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.

http://www.poverty-action.org/study/impact-unconditional-cas...

scotty794• 10 years ago

Who knows what unintended side effects of UBI will be?

Care to make a guess?

cpeterso• 10 years ago

Perhaps people from neighbor countries will emigrate, seeking UBI?

nostrebored3• 10 years ago

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.

ppereira• 10 years ago

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.

alttab2• 10 years ago

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."

Where's the facts?

asuffield• 10 years ago

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.

jefe_• 10 years ago

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.

rewrew2• 10 years ago

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.

jxramos• 10 years ago

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"

notahacker• 10 years ago

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.)

jrbapna• 10 years ago

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.

dragonwriter20• 10 years ago

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.

aab0• 10 years ago

I'm very interested in the outcome of this trial, and have donated $800 recently (using Bitcoin).

mwambua3• 10 years ago

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.

- Frustated Kenyan

dluan• 10 years ago

Curious what you think about more independent schemes like microfinance or loans for education. Have you noticed any difference between that and outright aid?

mwambua3• 10 years ago

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.

skunkworks• 10 years ago

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?

rayiner• 10 years ago

Most of the western world?

thaumasiotes2• 10 years ago

Singapore, South Korea, and Taiwan.

wcummings• 10 years ago

Loads of examples, as a result of international trade

jlg23• 10 years ago

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 :(

mwambua3• 10 years ago

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.

https://www.youtube.com/watch?v=L-DgV2vixSo

skybrian4• 10 years ago

Assuming they spend the money, why doesn't it help the businesses who sell things to them?

tootie• 10 years ago

This is the inverse of what NGOs do. Put money in the hands of consumers and let them drive local markets to produce what they actually want and need.

dragonwriter20• 10 years ago

It is actually an NGO doing this, and its not the only NGO that fits something closer to that description than its inverse.

TheMagicHorsey• 10 years ago

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.

chrischen• 10 years ago

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.

babayega2• 10 years ago

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.

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

MarkMc• 10 years ago

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"?

nkoren2• 10 years ago

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.

jkraker• 10 years ago

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?

sdiq3• 10 years ago

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.

flubert• 10 years ago

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).

crdoconnor5• 10 years ago

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.

amalag• 10 years ago

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/

alecdbrooks• 10 years ago

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.

[0] https://givedirectly.org/research-on-cash-transfers

[1] http://www.givewell.org/international/technical/programs/cas...

Update: Fixed formatting and added to final paragraph.

home_boi3• 10 years ago

The study won't be valid unless they wait at least 2 generations after UBI is implemented.

People born before UBI grew up with the scarcity on their minds, shaping the way they act with UBI.

People born right after UBI is implemented will be biased by parents who grew up wirh scarcity, like the children of American immigrants.

The study can only be valid when the parents of the person to be observed has UBI for their entire life.

dragonwriter20• 10 years ago

UBI doesn't eliminate scarcity, so that whole argument is grounded in a false premise.

home_boi3• 10 years ago

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).

safeharbourio• 10 years ago

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.

jijji• 10 years ago

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.

j4kp07• 10 years ago

LMAO....they need donations to "test" Basic Income. That speaks volumes people.

Vaenae• 10 years ago

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'?

GiveDirectly Planning to Give $30M in Basic Income to East Africa

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