
Y Combinator Learns Basic Income Is Not So Basic After All - rasengan
https://www.wired.com/story/y-combinator-learns-basic-income-is-not-so-basic-after-all/
======
DoreenMichele
I would much rather see people working on solving the affordable housing
shortage in the US than on basic income experiments. Because of the high cost
of housing across the US, a single childless person cannot live on $1000/month
in many places. There are cities where rent on a one bedroom apartment is
nearly $1000/month.

If you don't solve the affordable housing problem, basic income doesn't have
any hope of ending poverty. If you do, many people who are currently living
with terrible distress could make their lives work.

If you are only going to work on one of the two, affordable housing should be
the priority. If you want do both, cool. But I'm not really seeing affordable
housing given anywhere near the attention that basic income is getting.

~~~
jondubois
I used to like the idea of Basic Income, but now I think that all the money
would go into rents and property owners would absorb all the value.

the problem of affordable housing is actually very simple and the solution is
obvious; too many people are moving to big cities; so everyone ends up
competing for increasingly limited real estate (in a desperate bid to cut
their commute times to less than 2 hours per day).

One of the main reasons why so many people are moving to urban centers is
because that's where all the jobs are; it's a direct result of the
centralization of capital in the hands of corporations. Corporate HQs are in
big cities because they want to get access to the best talent and corporations
are more likely to find talent in places where there are lots of people to
choose from.

One solution would be for the government to introduce legislation to encourage
companies to hire remote workers. Another solution would be for the government
to introduce legislation to make the economy less focused on corporate growth.

Due in a large part to corporate lobbying, whenever a politician is presented
a choice between a free solution and an expensive one; they tend to pick the
expensive one.

~~~
closeparen
There are only “too many” people moving to big cities if you take as given
that most of their land area must retain its small-town character forever.

You _want_ the population clustering into big, transit-centric cities to
unwind car-dependence and avert climate change.

~~~
zhdc1
People forget that the suburbanization of American cities was a very unique
situation brought about by a mix of government policy, rural mythos, and
racism.

The current urban migration is basically a reversal to the mean and should be
beneficial in the long term.

~~~
DoreenMichele
It was a unique situation. But it was largely brought about by huge pent up
demand for housing combined with the relatively sudden the means to meet it.

Racism absolutely played a role in how it went down, as did government policy.
But the invention of the modern suburb grew directly out of the events of WW2
making it possible for the US to rapidly build large numbers of homes.

~~~
zhdc1
Except that suburbanization in tbe United States began well before WW2 and
accelerated in the 60s and 70s, long after any post-war prosperity effect.

People moved away from urban centers because they believed (correctly) that
living in dense cities detrimentally impacted their health. This later
accelerated in part because of racial reasons.

Housing demand could have easily been met (and was met in Asia and Europe) by
building denser urban structures, which is what you would expect to happen if
there was a confluence of housing demand, increased wealth, and a general
interest in living in cities. There was no interest in the latter, which is
why suburbanization took place.

~~~
closeparen
Bad for their health compared to driving all the time? Before indoor plumbing,
maybe. Now? No way.

------
asimpletune
IMHO, the real issue with basic income is centralization. Society as a whole
should share in the benefits from the advancements made in automation and
productivity. However, operating under the assumption that the government
should handle the distribution of this profit sharing is a very brittle and
potentially dangerous solution.

Imagine mandatory drug tests, ideological compliance checks, etc... in order
to receive your pay check. That may be extreme but it also may not. I have no
idea.

This begs the question of what alternatives could be? Irrespective of whether
they’re good or bad, I’m curious what others would have to share.

~~~
taurath
I'd start from the other side - its quite clear that private industry cannot
handle the distribution without charging larger and larger fees to administer
them, and lobbying governments to create more restrictions and let them keep
the savings.

> Imagine mandatory drug tests, ideological compliance checks, etc... in order
> to receive your pay check. That may be extreme but it also may not. I have
> no idea.

Have you ever worked at a retail job? They not only drug test you regularly,
they also have you take personality tests to determine your likelihood to be a
good or bad employee. For me that was 15 years ago. Now places have automated
systems checking your social networks for subversive/non-friendly talk,
cameras on you 24/7 in the workplace.

> This begs the question of what alternatives could be?

The solution to "we don't trust the government to do something the private
sector can't do" is to improve the government, which is something that we can
actually do.

~~~
baby
There is always a limit to which you can trust the government to do something
right and how corruptable it becomes over the years.

~~~
eropple
As opposed to corporate entities, which are...?

~~~
baby
The blockch... I mean it’s a difficult problem :)

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ilaksh
The problem is that this is not a test of basic income as they say it is. It's
$1000, which is well below the minimum amount required to live. $1000 might be
basic income in another country, but not in the US.

~~~
aetherson
"Basic income" does not necessarily mean, "Enough money to live a relatively
comfortable if frugal life with." It just means, "An income given to you with
few eligibility requirements."

~~~
simonsarris
The article is about YC's experiment, and the article even quotes Sam Altman
directly when explaining what the test is for:

> "Giving people enough money to live on with no strings attached"

So I think in this context we should be talking about that, and not some other
definition.

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dahdum
The YC experiment will be rather interesting, giving people guaranteed monthly
payments of ~$1k for 3-5 years makes them a very attractive population for
loan providers.

Once they are accepted into the program, you could offer to immediately buy
them out, for say, $24k in cash for signing over their rights to the monthly
payments.

If YC backs out once they've taken the buyout, they're saddled with debt and
likely forced into bankruptcy. It would leave them worse off than before.

If YC doesn't back out, the loan provider can pocket a hefty profit.

~~~
_rpd
It'll be interesting to see if YC adds language prohibiting such arrangements
to the experiment contract. It could be that $25k is all the capital needed to
start a small business. Maybe YC itself could offer it as an alternative:
larger monthly payment or smaller lump sum?

------
logfromblammo
As is usual whenever the basic income thread comes up, I have to reiterate
that I don't think just giving cash to people will work. You have to invest
that money in the production of basic goods and services, and then distribute
those evenly.

A better experiment than $X cash per month to N families would be to spend
that $X*N on corn that would otherwise be exported, and labor and transport to
distribute ration packs to the experimental group. The control group can get
some coupons for up to $3 off a 5# bag of corn meal. You can then also see how
fast the price of a 5# bag of corn meal goes up to $2.99 .

Or spend up to $X per month on the experimental group's metered utilities, in
the following order: water, electric, natgas (if available), other municipal-
owned utilities, then phone/ISP, with anything remaining distributed as
prepaid vehicle fuel cards. The power company can't exactly raise your rates
if it finds out you, specifically, got a windfall, and the landlord can't
raise your rent if you're getting paid in kWh, Mbps, gallons, and cubic yards.

I think it is very important that whatever the basic income is distributed as
not be easily convertible to the currency used to pay rents and make general
purchases of goods and services. Rent-seeking always happens wherever it is
possible.

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RestlessMind
I would not trust most of the entities promising basic income. Most of them
can go bankrupt (eg. corporate titans like GM or cities like Detroit/Stockton
or insurers like AIG). If one relies on basic income for 10-15 years and alter
their lifestyle accordingly (little savings, big gap in work experience), what
happens when the entity underwriting their basic income declares bankruptcy?

Only a handful of entities (like US federal govt) can administer a trustworthy
UBI program (and that too, only for a limited set of people).

------
monetus
Does anyone know the details of the UBI within the Cherokee reservation in
North Carolina? I don't understand why y-combinator chose the particular
methods in the article. I can see how the control groups are losing
engagement.

Not many articles, but it seems to have been relatively successful.

[https://www.demos.org/blog/1/19/14/cherokee-tribes-basic-
inc...](https://www.demos.org/blog/1/19/14/cherokee-tribes-basic-income-
success-story)

------
philwelch
So here's my basic criticism of universal basic income:

There are 325 million people in the United States. If we give each of them a
"basic income" of $1,000 per month (which is bare bones subsistence basic
income), the accumulated cost would be $12,000 per year times 325 million
people, or $3.9 trillion _per year_.

The entire US federal budget is already $4.094 trillion.
([https://en.wikipedia.org/wiki/2018_United_States_federal_bud...](https://en.wikipedia.org/wiki/2018_United_States_federal_budget)),
and once you account for things like defense, interest on the national debt,
and Medicare that we'd still have to pay for, it's still looking like we would
have to add maybe $3 trillion to the annual budget. (You can get really deep
into the weeds on this: for example, even if you replace some or all of Social
Security with UBI, some Social Security recipients receive more than $1000 per
month, so you would need to top them up to the same levels they're already
receiving because of the time-honored principle of The United States
Government Does Not Welch On Its Debts).

So here comes the other side of the argument: "you can just raise taxes on
rich people to make up for that 3 trillion dollar shortfall!". Yeah, but you
can already raise taxes on rich people.

The steelman version of that argument is more like, "even if we give away 4
trillion dollars, we can set up the tax brackets so we get some of it back, so
the total cost is less than 4 trillion". OK, cool, let's do some napkin math.
It looks like $100,000 is around the 75th percentile of income in the US
([https://en.wikipedia.org/wiki/Household_income_in_the_United...](https://en.wikipedia.org/wiki/Household_income_in_the_United_States#Distribution_of_household_income_in_2014_according_to_US_Census_data)),
and that's a big round number where people definitely shouldn't be receiving
public assistance anymore, so let's make that the break-even point where we
tax back all of the UBI we give away in the first place, which means we get to
cut our UBI budget by at least 25% (since only 75% of the population gets
any), and maybe let's throw in another 12.5% for gradually taxing back some of
the UBI for people in the 50th-75th percentiles, too. So our $4 trillion
expenditure is now $2.5 trillion, and let's assume we can write off the same
trillion dollars as before by canceling out existing welfare and entitlements,
so now you're adding a net $1.5 trillion annual expenditure.

That actually seems doable. This would also mean that providing a UBI for ten
years would cost $15 trillion. So, OK, let's accept for the sake of argument
that the federal government is going to spend $15 trillion over the course of
the next ten years to make everyone's lives better. Is this really the best
way? Or could you do something like:

* Repair and replace damaged and worn out US infrastructure: $2 trillion ([https://www.csmonitor.com/Business/2018/0118/Why-fixing-US-i...](https://www.csmonitor.com/Business/2018/0118/Why-fixing-US-infrastructure-matters-9-per-household-per-day)), much of which will create jobs and stimulate enough economic activity to pay itself off in the long run.

* A manned mission to Mars: At most, $1 trillion ([http://time.com/money/4765718/travel-mars-price-cost-tourism...](http://time.com/money/4765718/travel-mars-price-cost-tourism/)), much of which will create jobs.

* ITER, the best-funded effort to develop fusion power, costs about $20 billion ([http://www.sciencemag.org/news/2016/04/updated-panel-backs-i...](http://www.sciencemag.org/news/2016/04/updated-panel-backs-iter-fusion-project-s-new-schedule-balks-cost)). Spend $250 billion on a Apollo/Manhattan Project scale effort to develop low cost energy solutions, either from fusion or other projects. (It'll create jobs!)

* It would cost $10 billion to build a Lofstrom loop, but since the federal government is doing it and we've never done anything like that before, let's 10x that. That's another $100 billion. (And even more jobs!)

And you still have $11.5 trillion left to either spend on even more
extravagant government projects or eat a decent chunk out of the $21 trillion
national debt
([https://www.usgovernmentdebt.us/](https://www.usgovernmentdebt.us/)). And in
addition to creating more than enough jobs for everyone who needs one, we get
to potentially solve some of the most important long-term problems for human
civilization, repair all of our infrastructure, land on goddamn Mars, and
knock out half of our national debt.

~~~
jandrese
I'm not a fan of UBI, but arguing against $1,000 per person seems like a bit
of a strawman. For a 4 person family that's $4,000 take home per month, which
is well above median income for the US when you factor in taxes and benefits.
This strongly encourages people to pump out kids for the stipend.

Doesn't it make more sense to make it $1,000 per household + $100/person?

IMHO UBI fails for one basic human reason: people are lazy. Way too many
people would sit around all day watching TV if they didn't have to go to work.
There would be a labor shortage. This only works in some future where we have
robots to do literally every menial job. Even then it's still likely a bad
idea from a mental health perspective. People without a sense of purpose or
accomplishment are going to become depressed, and self starters are the
exception not the rule.

~~~
kwhitefoot
> UBI fails for one basic human reason: people are lazy.

Not true. The few real studies of basic income all demonstrate that people, on
the whole, do not stop working.

~~~
jandrese
The studies of northern European middle class families?

~~~
kwhitefoot
No, studies of Canadian and US working class towns.

------
RhysU
Thoughts on focusing on sliding-scale financing instead of UBI? That is, the
disadvantaged can finance businesses and arbitrage at cheaper rates than you
and I can? Think of the successes of micro-finance. The point being that
sliding financing incentivizes but does not eliminate risk. Because, no risk
never reward.

------
chriselles
Regardless of the outcome of the YC UBI Experiment, I applaud YC’s effort.

It’s great to see a private company trying to influence public policy through
privately funded, transparent, data driven experimentation.

Instead of traditional money driven lobbying(now called non market activity in
business school) which I abhor.

------
exabrial
I have no problem with UBI when it comes from private funding sources! I love
what is being done here, especially carefully jumping through the hope with
Tax law. I hope this helps some families in need and eventually chances their
life situation

------
ilyagr
I wonder, will this be taxed the same as lottery winnings? Or is this post-tax
$1000?

~~~
smpetrey
In the experiment, it's taxable income.

There's no shortage of frameworks and differing philosophies on the matter of
taxation of the UBI. But generally speaking, no, the $1000 would be considered
tax-free as for all intents and purposes, it's a gift from the coffers of
government's treasury.

Income generated outside of the UBI however, is taxed because well.. it's
income and not a gift.

~~~
_rpd
> But generally speaking, no, the $1000 would be considered tax-free as for
> all intents and purposes, it's a gift from the coffers of government's
> treasury.

If the income is truly universal (i.e., not means tested), then it will almost
certainly be taxed so that higher income individuals pay back a higher
percentage of the income.

------
lalos
Who funded this study and what are they to gain with this result? Research
seems to be used as a bargaining chip always when trying to influence public
opinion and regulation (Tobacco industry, dairy, etc).

------
esaym
I have a friend getting out of jail soon, how do I sign him up? (serious
question)

------
hartator
> It also took time to work with California state agencies and the IRS to make
> sure that no study participants lost existing benefits.

So, same family working for the $1,000 will have to pay more overall taxes
than the one receiving the $1,000 from the YC program? It doesn't seem really
fair.

------
s73v3r_
I mean, any one of us could have thought that there would be problems. But
without research and experimentation like this, we wouldn't really know what
those problems would be, and be able to consider fixes for those problems.

------
Simulacra
IMHO basic income runs up against two problems: 0. People are primarily self
serving and will likely not use the money as proponents intent, and 1. If you
give everyone a basic monthly income, what’s stopping everyone else who
provides services (i.e. housing) from just increasing prices by however much
the income is, thus negating the free money in the first place. What would
make more sense are price controls to bring down costs, like housing and
utilities.

~~~
nkoren
> 0\. People are primarily self serving and will likely not use the money as
> proponents intent

This is an assumption, rooted in the belief that people are poor because they
are lazy, and it is wrong. There are numerous studies which disprove this
assumption and I have yet to see a study which supports it.

> 1\. If you give everyone a basic monthly income, what’s stopping everyone
> else who provides services (i.e. housing) from just increasing prices by
> however much the income is, thus negating the free money in the first place.

While a UBI would raise the median income within an economy, if it was funded
out of income tax then it would be neutral with respect to the mean available
income, which is more what prices respond to.

> What would make more sense are price controls to bring down costs, like
> housing and utilities.

That's a really terrible idea. Free-market competition is better. Public
ownership and provision of services is also better. Price controls on private
markets, however, is genuinely the the worst of all worlds. It also does
nothing whatsoever to help people at the bottom of the economic ladder, who
don't have access to money at all.

~~~
joe_the_user
_While a UBI would raise the median income within an economy, if it was funded
out of income tax then it would be neutral with respect to the mean available
income, which is more what prices respond to._

This seems like an argument that breaks when one looks at the details of the
markets involved. A landlord who owns low-income units doesn't care about
average income. The landlord knows the income of their tenants and knows that
they suddenly are able to afford more rent and so that landlord raises the
rent to be able to take part in the windfall.

IE, your argument would only work is housing units has efficient, elastic
supply and demand like candy or something, where rising income taxes for the
wealthy would reduce their demand for low-income units in the central cites.
But we know the wealthy's demand for such units already near zero and the
demand of the poor for such units is going to be constant.

~~~
dragonwriter
> This seems like an argument that breaks when one looks at the details of the
> markets involved. A landlord who owns low-income units doesn't care about
> average income.

A compression of income distribution (raising the floor/median without
changing mean) means that low-income residents are more likely able to afford
to rent units at a tier higher if the price for value not of low-income
apartments gets worse (now, if this happens a lot in practice, it drives up
prices at the next tier, but the fact that it can itself is a constraint on
price increases in the bottom tier.)

And this can be interated at each level until you reach the tiers with net
payers, and realize that, yes, their decline in demand,even though it isn't
_directly_ the same units as the lowest tier, has enough effect on the lowest
tier, through a chain of incone tiers with overlapping markets, even though
the top tier doesn't overlap with the bottom.

~~~
joe_the_user
_A compression of income distribution (raising the floor /median without
changing mean) means that low-income residents are more likely able to afford
to rent units at a tier higher if the price for value not of low-income
apartments gets worse._

Unless each tier goes up in value by an amount proportionate to what landlords
expect the wind-fall to be. The effect of increased rent isn't just going to
be at the lowest income but will happen as each landlord acts accordingly.

Landlord don't have to play by some fair rules of economics or something.
Instead they optimize their income in the obvious fashion. Rents would rise in
unit up to the level where taxes begin reduce total incomes (those would be
mostly home and condo owners at that point I assume).

~~~
dragonwriter
> Unless each tier goes up in value by an amount proportionate to what
> landlords expect the wind-fall to be.

No, that's literally exactly what I addressed. Unless, by “the wind-fall” you
mean the amount extractable not the amount of the net benefit to their current
tenant base, in which cases yes, that's exactly what I addressed as to why it
is _not_ the full net benefit and why those who are not beneficiaries before
considering induced rent increases are generally going to be net beneficiaries
after such increases, too.

> Landlord don't have to play by some fair rules of economics or something.

Landlords aren't magically immune from economics, either.

~~~
joe_the_user
_Unless, by “the wind-fall” you mean the amount extractable not the amount of
the net benefit to their current tenant base._

The amount extractable is pretty much the net benefit. Maybe a little less but
not that much (ie, your argument above is faulty). This is because landlords
can raise prices immediately. the vast majority of tenants can't just jump to
other apartment on a moments notice _AND_ because there simply aren't a bunch
higher-priced apartment available - these apartments are occupied by _already_
by higher income tenant.

~~~
dragonwriter
> The amount extractable is pretty much the net benefit

No, it's not.

> This is because landlords can raise prices immediately.

Assuming the absence of all of lease contracts _and_ rent control _and_ legal
notice period for rent increase (e.g., California’s 30-day notice for an
increase that would bring the rent to more than 10% higher than the lowest
rent charged in the preceding 12 months) _and_ available competitive units,
sure.

> there simply aren't a bunch higher-priced apartment available - these
> apartments are occupied by already by higher income tenant.

Sure there are, except in the tightest markets. It's true that housing supply
can be a problem, particularly in done local markets, but that's an issue with
it without UBI.

------
RickJWagner
I'd like to help. It seems Y-Combinator is waiting until they get the whole
sum put together before they start. I'm willing to participate as a recipient
for a much smaller pilot program. :)

