
The evidence behind putting money directly in the pockets of the poor - hhs
http://www.ox.ac.uk/news/science-blog/evidence-behind-putting-money-directly-pockets-poor
======
mrdoops
A market's throughput is limited by the number of participating actors. If a
large percentage of the population can't participate, the market's capability
to price, evaluate and represent value is hindered.

UBI makes sense for a purpose of bringing more buyer's/actors to the game.
It's especially useful considering our dependence on jobs as the primary
activating mechanism shows strain under the troubles of scaling human
coordination and hiring. In a sort of backwards way we get more jobs when more
people can contribute to the flow of money.

However UBI doesn't solve the problem of debt still piping the cash back into
the hands of banks and other financial institutions. What are these UBI checks
going to be spent on? Rent that's too high? Student loans for indulgent
tuition prices? Without blocking the pipes from the poor to the the actors
with pipes of their own, these throughput problems aren't solved more than
delayed.

An actor is still a single actor, so if one actor has an over aggregation of
wealth and has trouble spending it effectively the potential of that wealth is
wasted when at least some actors don't have enough.

So surely trillions of dollars of UBI injected directly into the hands of the
poor will stimulate the economy. But for how long until the cash starts to
aggregate again into slower pools of cash where throughput is limited? In a
sense we almost want inflation if these "overaggregators" are so abundant, but
only if the population is maintained at a base level of wealth relative to the
inflation. Otherwise the rich, who probably got rich by being more effective
with their money respond to the market changes faster and the UBI stimulation
is only temporary.

But if UBI causes significant inflation, and the pipes going directly to every
individual have enough back pressure, it could be a great situation where the
overaggregators lose value to inflation as they struggle to spend or invest.

~~~
AnthonyMouse
> However UBI doesn't solve the problem of debt still piping the cash back
> into the hands of banks and other financial institutions.

That isn't a problem it's _expected_ to solve. It's a completely independent
problem that already happens whether you have a UBI or not.

The solutions there are likewise independent. Build more housing so it isn't
supply constrained and doesn't increase in price to consume any gains made by
the working class. Stop issuing student loans (students now have a UBI and
don't need them), because student loans inflate the cost of college relative
to other things which loans aren't available for. A UBI doesn't do that
because the money isn't only available when spend on college.

> An actor is still a single actor, so if one actor has an over aggregation of
> wealth and has trouble spending it effectively the potential of that wealth
> is wasted when at least some actors don't have enough.

That's not how money works. Money in a bank account isn't being "wasted"
because it isn't consuming resources, and if hoarding is causing currency
scarcity (i.e. deflation) then additional money can easily be printed.

> So surely trillions of dollars of UBI injected directly into the hands of
> the poor will stimulate the economy. But for how long until the cash starts
> to aggregate again into slower pools of cash where throughput is limited?

For as long as they keep getting the UBI. Where do you think the money to fund
it would come from?

~~~
emeerson
Re. Money in a bank account not contributing to scarcity: I think that logic
checks out when you observe money as a resource in isolation.

If you think of Money as a proxy for "captured value," then one way to look at
it is how much "captured value" is "captured opportunity for wealth creation,"
which has a certain distribution % chance across the entire population.

In that sense, total aggregate money at any point in time can be viewed as
zero-sum.

~~~
AnthonyMouse
Suppose the government prints a hundred trillion dollars, buries it in the
ground for 50 years and then digs it up and burns it in a furnace.

Notice how printing a hundred trillion dollars would normally be expected to
cause a lot of inflation, but doing the above doesn't do that. It wouldn't
have been any different if they had printed monopoly money instead of real
money, because it doesn't get spent.

The opportunity for wealth creation is in raw materials and labor force. We
measure those things in dollars because dollars are fungible and we want to be
able to compare them to each other but the green paper isn't the prize, it's
only a token that represents the prize. If some of the money is removed from
circulation then the rest of it is worth more. It costs fewer dollars to buy
an hour of labor, but there are still the same number of hours of labor
available to buy. This is deflation, which is bad for various reasons, but
deflation can be countered by printing money.

Not buying stuff with your money doesn't destroy the stuff, it only causes
somebody other than you to have the stuff. This is only worse if what you'd
have done with it is better than what they do with it.

~~~
chadmeister
This was such an excellent way of illustrating your point. Thank you for
sharing

------
scoopertrooper
Keep in mind this article largely restricts itself to considering direct cash
transfers to people in low-medium developed countries. I would be careful
about trying to generalise the conclusions to developed countries.

It stands to reason that unrestricted welfare would reduce hours worked in
developed countries. This would be especially true for young adults with no
dependents. Why work overtime at McDonalds when your rent is already paid up
for the month and there are so many fun video games to play?

I think we just have to accept that UBI would give people that work
undesirable/uninteresting jobs an off-ramp from the economy. The problem being
that our economy depends on these people performing such jobs. Employers would
have increase wages significantly above the UBI level in order to attract
workers, but that would either erode the UBI through inflation or cause an
inflationary spiral if the UBI were indexed.

I haven't heard a satisfactory explanation as to how UBI avoids these
pitfalls.

~~~
ntSean
You hit the nail on the head, UBI would decrease how much people are locked
into undesirable jobs. However, this is a feature, not a failure of the
system. Currently, we have under-utilised talent with low economic mobility
who have bills to pay.

There are more than enough unemployed people to fill any gaps created.

~~~
drobert
>Currently, we have under-utilised talent with low economic mobility who have
bills to pay.

Where is the proof of that?

Unless the system is highly unmeritocratic this does not happen. Say you work
at McDonald's and you're a brilliant person. You will soon be promoted and get
more options.

In those 8 eight hours you spend at work if you give your best you will be
noticed.

~~~
falcolas
Here’s one data point for you: There’s a fantastic writer out there that goes
by the penname “A Man In Black”. He’s unable to write because he’s stuck in a
medium wage job that doesn’t provide medical benefits - completely unrelated
to writing - and has to spend his money to keep himself and his mother alive
and in housing. As a result, he’s unable to even write in his limited spare
time. That, to me, is the definition of under-utlised talent with low economic
mobility.

The system is, as you say, highly unmeritocratic. It has no incentive to be
meritocratic for a vast majority of the population. Even your theoretical
brilliant McDonalds employee would find a ceiling at the management level a
raise of a mere handful of dollars over the line cooks.

~~~
lopmotr
Why doesn't he use his writing to support himself? Is it really because he
won't get paid until the future but he needs the money now, or is it that
writing won't ever earn enough to support himself and his mother? If the
latter, then it's not an under-utilized talent, it's a talent that's not worth
his time to practice. Many people are good at painting or singing or other
things that are fun for themselves but of very little value to others - less
value than working in McDonalds. If they spent their time doing what they're
good at, they'd actually be wasting their burger-flipping talents.

~~~
godtoldmetodoit
"If the market doesn't value it, it has no value"

This is a sick way of thinking about the world.

A parent doesn't get paid for the work they do raising their child. Better
flip burgers.

The lady who wants to teach under privileged youth art. Has no market value,
better to flip burgers.

The next JK Rowling wants to write, but her writing produces no immediate
market value. Best to just flip burgers.

The man who wants to help the homeless. Darn, next to no market value, better
flip burgers.

I'm sick of forcing everyone to live as a slave to the market. The market is
not perfect. The market does not solve every human problem. The market cannot
accomplish everything we want to do as a species. The market is a tool, let's
treat it as one and stop worshiping it.

~~~
lopmotr
We're specifically talking about the man who wants to write things. Not that
other stuff you listed. We have ways for writers to make money from their work
_if_ other people actually want to read it, whether it's a book or a blog or a
technical manual. It sounds like he can't make money because other people
don't want to read his writing enough to pay for it even though they will pay
for other people's writing.

Have you seen how many cheap books 2nd hand shops try to sell? Nobody wants
them. They often get dumped. Libraries continually dump books too. Some
writing is so worthless that people won't even read it for free. That's not a
value like teaching underprivileged youth art. It's a zero-value or negative
value.

------
ponker
I think you also have to take into account the political sustainability of a
policy though. It might be better for a poor person to get $2 cash than $2 of
bread. But the $2 cash handout will be perennially opposed by some voters. The
program eligibility will be slashed, the program will be a political football
at election times, etc... while the bread program will be mostly
noncontroversial and allowed to operate in peace.

~~~
marricks
There’s so many head games that goes into US politics that seems pointless.
Democrats in particular compromise with themselves so much before even
offering something to republicans before compromising even more.

Republicans pretty much never do that, it’s just boom, let’s give big tax cuts
to the rich or stop all immigration.

Left side of the US needs to boldly actually fight for things rather than step
my step planning out what “seems reasonable to republicans”, it’s just a bad
losing idea, go boldly with what’s the moral and reasonable thing.

~~~
tacitusarc
This viewpoint is often touted by those on the political left but has no
evidentiary basis that I've seen, certainly. At most the democratic party has
a strong tendency of allowing its most fringe members an out-sized voice in
the interest of inclusion, which only pushes away its much larger moderate
base. Perhaps the form of "compromise" you are referring to is just the more
extreme viewpoints being filtered out as actual reasonable policy proposals
are formed.

EDIT: Which, by the way, also happens in the Republican party. See, for
instance, the repeal vs replace movement and how those went nowhere.

~~~
marricks
Well the success of the uncompromising tea party in taking over the Republican
Party and leading the way to Trump seems pretty obvious.

I’m not sure how anyone who follows Democrats wouldn’t see the constant
compromises unless they’re center or center right. Pelosi has control of the
House but refuses to pass extremely popular ideas like pay check guarantees or
cash per month for everyone, or rent cancellation etc.

It could setup a showdown in the senate where republicans have to vote down
very popular ideas, but she refuses.

That’s just a recent example, it happens continuously...

~~~
heromal
Yeah that's why dumbass Pelosi introduced a 3 billion dollar bill that she
knew would never see the light of day.

------
JackFr
This is not an article about UBI. It’s interesting that all if the comments
are about the usefulness of UBI, while this article is merely about the
efficacy of delivering aid in kind vs in cash.

~~~
Antecedent
Most top level comments started that way then one mentioned UBI and down the
rabbit hole we jumped.

------
dvduval
Shouldn't firefighters compete to see who can spend the least amount of money
putting out fires? Shouldn't health insurance agencies compete to see who can
spend the least on healing people? Until we get these things straight why
would he want to have the government spend money or making infrastructure
stronger? After all, government spending is bad, right?

------
_Microft
Here is an article giving an example of cash-based support lifting people out
of home-less:

[https://www.washingtonpost.com/opinions/free-money-might-
be-...](https://www.washingtonpost.com/opinions/free-money-might-be-the-best-
way-to-end-poverty/2013/12/29/679c8344-5ec8-11e3-95c2-13623eb2b0e1_story.html)

~~~
luckylion
That article is weird.

> A year later, 11 of the 13 had roofs over their heads. (Some went to
> hostels; others to shelters.)

> The cost? About 50,000 pounds, including the wages of the aid workers.

No, apparently the cost is the same, at least in the cases of those at
shelters (I don't know who pays for the hostels), _plus_ 50,000 pounds.

Don't get me wrong, it might still be a good idea, even if just nudges them to
get into programs, not sleep on the street etc. But just pretending those
programs don't cost money and it's therefore cheaper sounds so close to lying
to me that I don't know how to tell the difference.

------
lolsal
What happens if people who receive UBI still need assistance? Do we ignore
them and say "should have spent your UBI better"? Do we support them with
existing or new welfare systems?

I'm genuinely curious.

~~~
boublepop
What happens to people who need assistance otherwise today? The answer depends
on where in the world you are. In third world countries and the US the answer
is: ”you should have spent your money better”, and in developed countries
other than the US it’s: “we’ve got you back” UBI isn’t supposed to change
that. It’s about making BI universal.

~~~
luckylion
> in developed countries other than the US it’s: “we’ve got you back” UBI
> isn’t supposed to change that. It’s about making BI universal.

That's going to be a problem with UBI. If the rent isn't paid directly any
longer but the money is given to the person instead and they decide they'd
rather buy fun things instead of paying rent, and we're saying "we've got your
back", we're going to pay for the exact same social programs we have today
_and_ UBI on top.

------
known
During pandemic UK is giving $3000 per month to workers; US is giving $1200;
Canada is giving $2000; And India is giving $7;
[https://archive.vn/p4EzC](https://archive.vn/p4EzC)

~~~
mydongle
The US's $1200 was a one time payment though, no?

~~~
onemoresoop
Yes and it didn't go where needed. I didn't need it for example, I'm employed.
Plus the fact that it's a one time thing it's likely to mean nothing to people
who can't pay their rents/bills.

Edit: Another batch may come soon but it still amounts to nothing for the
gravity of the situation so many are in. Some sort of weak mitigation.

~~~
GhostVII
They are also increasing the eligibility for unemployment, and increasing
payments by $600 a week.

------
cousin_it
I think this is off base, at least if we're talking about the US. The central
problem is high prices for housing, healthcare and education. The first step
to solving that problem is research: we need to figure out the right theory of
cost disease, its causes and prevention. Scott made a start here:
[https://slatestarcodex.com/2017/02/09/considerations-on-
cost...](https://slatestarcodex.com/2017/02/09/considerations-on-cost-
disease/) Once we fix it (by regulation if need be), and these goods become
appropriately cheap, poor people will have much less trouble getting by.
Whereas if you don't fix it, and instead give money to people, the mysterious
force that extracts that money into rising housing/healthcare/education costs
will just learn to extract a little more, and you're back where you started.

------
perfunctory
> Poor people spend cash grants well.

> In low and middle income country settings, cash transfers also mostly do not
> affect whether, or how much, people work.

------
tbstbstbs
That perfectly lines up with a project we currently work at
[http://basicincomemachine.com](http://basicincomemachine.com)

Our idea are vending machines for jobs. Everybody who looks for work or
medicinal assistance gets help in less than 30 seconds. The hypothesis behind
BIM is proximity: For some people, it is too complicated to follow a routine
to pick-up a job.

------
3fe9a03ccd14ca5
We have some forms of this, such as the earned income tax credit, but it
doesn’t go nearly far enough.

I like the the idea of a reverse income tax at the lower levels and wish it
was more popular, but it needs to be done in a way that it doesn’t discourage
earning more money.

~~~
smegma2
A negative income tax would only discourage earning money in the same way that
a progressive income tax does anyway, right? Or do you mean more from a
psychological perspective?

~~~
phekunde
> A negative income tax would only discourage earning money

How is that so?

------
Antecedent
There is very little real unemployment in America. Most people just think
themselves too good to cut lawns, chop meat, pick fruit, fillet fish, or work
on a factory line.

Why would we want to enable snobbery?

Let’s have UBI when there actually are no jobs. Not when there are just no fun
jobs.

~~~
alpaca128
> Most people just think themselves too good to cut lawns, chop meat, pick
> fruit, fillet fish, or work on a factory line.

Most people just think they wouldn't get paid enough for doing that. If the
job is the very opposite of fun but doesn't pay significantly more than
unemployment then that's not the fault of potential workers.

Considering how unfun and stressful jobs like package delivery are but still
get people to do it, I wonder how bad the pay and/or work conditions are for
widely unfilled positions.

~~~
luckylion
These jobs are often filled by immigrants who don't have the same options as
citizens. If being unemployed and living off of benefits is not an option, the
unfun and stressful jobs become a lot more attractive.

------
proc0
"Poor people spend cash grants well"

As in they buy things they need? What else are they gonna do, not eat and die?
If you are really poor you basically have no choice to only buy what you need.
The problem is, once they are in a slightly better situation, they probably
won't start investing that money or opening a business, because they don't
need to. The problem is psychological, and "grants" just patronize poor people
from the start, preventing them form seeing themselves as their own primary
benefactor.

~~~
_Microft
> _The problem is, once they are in a slightly better situation, they probably
> won 't start investing that money or opening a business, because they don't
> need to._

This is a claim that you will need to support by a reputable source.

~~~
luckylion
> This is a claim that you will need to support by a reputable source.

I keep saying it: Germany is a great real-life study to support this.

We have those "slightly better situations". And we have plenty of people being
stuck in it.

It's not because there's some law or some stigma stopping them, we even have
good programs and subsidies that will continue to pay your benefits for up to
two years while you're getting your business off the ground, you can get cash
subsidies on top to invest in your business (up to 5k Euros), and you will
also get vouchers for consulting and services, and your health insurance will
be paid by the government.

Yet it does not happen in large numbers. It's frustrating, and I agree, it
seems plausible that it should, but it doesn't. Sure, you may say "that's just
Germany, Germans are weird", but I believe you should make an argument why it
wouldn't be the same elsewhere under similar circumstances. And I'm somewhat
sure that other European countries have similar programs and are seeing
similar results, so you may want to make sure that Germany is the outlier.

~~~
viklove
Germany isn't a great example to use when talking about what's best for the
United States. For one, Germany is 96% white and doesn't face the same issues
the US faces with diversity and cultural variation. When the population is
homogenous, it's much easier to agree on and implement solutions.

~~~
Supermancho
Not sure why you bring up the new goalpost of "what's best for the USA" but
"Americans are too special for general human behavior to apply" is some rarely
used FUD from the 1800s.

~~~
viklove
Oh right, my mistake, I forgot that one-size-fits-all solutions are the norm
when it comes to economic and political solutions to complex problems. Yes,
carry on.

~~~
Supermancho
> I forgot that one-size-fits-all solutions are the norm when it comes to
> economic and political solutions to complex problems

That's a strawman you made up.

------
alecco
I find this extremely politically biased. It states right from the start "The
bulk of transfers are spent on food anyway", like that is a good thing. UN's
policies are antiquated. The world's poor mostly have malnutrition (not
undernourishment) and it's getting out of control. They want to apply cookie
cutter policies for both sub-Saharan Africa and poor people in the rest of the
world.

I'd support a system like this if the money was spent mostly on healthy food
and durable goods. But I fear a blunt money giveaway will exacerbate the
existing problems.

Do you ever wonder why so many evil corporations support democrats/labour/etc?
Handouts get votes, and as long as handouts get spent mostly in things these
corporations sell it's all good. Think junk food, rent (landowners), non-
durable goods (mobile, shoes, clothing), gasoline, alcohol, and tobacco. It's
a feedback loop of well meaning but lazy left wing politics and the worst of
Capitalism.

Think about it.

~~~
drapred7
I think you've had a bit to much to think, bucko.

[https://www.christianpost.com/news/fast-food-chains-lobby-
go...](https://www.christianpost.com/news/fast-food-chains-lobby-government-
to-expand-food-stamp-payment-program-55202/)

[https://cms.qz.com/wp-
content/uploads/2017/10/file-20171009-...](https://cms.qz.com/wp-
content/uploads/2017/10/file-20171009-6960-wzmn6e.png?w=450&h=267&crop=1&strip=all&quality=75)

Have fun.

~~~
alecco
What? First link is about fast food chains wanting food stamps. 1- not actual
cash handout 2. illustrates my point of pressure by fast food corporations
looking for handout money.

Second blurry link is about population growth, showing Africa expanding. That
is missing the matching curves of extreme poverty falling drastically for
those regions [1], even for sub-Saharan Africa. Further supporting my points
of outdated approach to combat poverty.

Capitalism is doing good in some ways by lifting all those people from
poverty. But they are falling into a trap of poor health and poor money
management.

[1] [https://ourworldindata.org/exports/share-of-population-
livin...](https://ourworldindata.org/exports/share-of-population-living-in-
extreme-poverty-by-world-region_v4_850x600.svg)

------
exabrial
Or... _just stop taxing them to death_ and leave the money in their pockets.
Removing 15%-35% of their income forcefully, skimming a bunch off the top,
then returning a small percentage of it isn't an efficient system. Likewise
"just print more money" devalues what little savings they have and promotes
paycheck-to-paycheck behavior, enslaving them systemically.

~~~
bubbleRefuge
Inflation is a market phenomena. Supply and demand. Printing money doesn't
necessarily cause inflation if people don't spend it. If its sits in a bank
account. And hyper-inflation needs an accelerator component such as payments
tied to CPI or something along those lines which causes a feedback loop. We
have never seen demand side inflation in this country (USA) ever.

But you are right about removing income taxes. Federal income taxes and
corporate taxes should go away. A simple Federal real estate tax would be the
easiest and fairest way to do it. Remove the brain drain that filing a 1040
is. Put intuit out of business.

------
duncan_bayne
This seems like an intuitive outcome.

Austrians have been saying for _years_ that State calculation to achieve
desired economic outcomes is doomed to failure (
[https://en.m.wikipedia.org/wiki/Economic_calculation_problem](https://en.m.wikipedia.org/wiki/Economic_calculation_problem)).
This just seems like a special case of that.

Of course, I'd personally like to see this taken further, and see a) welfare
programs in kind _in general_ replaced with cash, and then b) taxpayer funding
of same replaced by charitable giving (quite the opposite to the UBI folks,
and motivated by quite a different morality). This feels like quite a viable
transition to me.

------
thomasfl
I prefer the term freedom money rather than universal basic income. I
seriously believe that most people when given the responsibility and the
opportunities that universal basic would gives, would choose to improve both
their own lives and others. People would probably choose not to do work that
is considered harmful for the environment, like chopping down rainforests.
When introducing ubi, governments would probably at the same time encourage
people to take part in voluntary activities rather than playing videgames.

