
A New Approach to Aid: How a Basic Income Program Saved a Namibian Village - Flemlord
http://www.spiegel.de/international/world/0,1518,642310,00.html
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patio11
I am skeptical that you can bring someone out of poverty by giving them money.
Granted, I'd rather have it given directly to poor people than having it
appropriated by their friendly neighborhood corrupt official. However, it
seems calculated to make us feel better about ourselves rather than improving
conditions on the ground. We've spent how many billions on poverty eradication
in Africa, and for that matter in the US? Where is the ROI?

 _For a woman with seven children, this translates into 800 Namibian dollars a
month, which is considered a moderate income._

I think some economists are in for a rude surprise: poor people respond to
incentive structures, too. (One of the reasons why rich countries have less
children than poor countries is you have to concentrate capital on kids to get
ROI on them, to phrase it in a very reductionist way. They'll need to be
educated, supervised, etc. The invested kids then go on to win.

Poor people have little capital to invest and make up for by using the
children as a resource. It seems like a great idea at the time, but also
virtually guarantees that the kids will be poor. And the cycle repeats itself.

Despite this, economists are now suggesting paying people to have children.
What could possibly go wrong with that idea.

[Incidentally, while I hate to fact check a good story, paying a woman 9,600
Namibian dollars so that she can earn an unaudited "profit" of 1,000 Namibian
dollars raising chickens, when the annualized inflation rate is 10% a year, is
not all that impressive. Africa needs a few more hard-hearted capitalist
bastards to say "Wonderful story, that 'profit' is an accounting fiction, find
something that works."]

~~~
frig
This is in der Spiegel b/c there's much more basic income advocacy in Germany
(especially on the part of eg Gotz Werner, mentioned early in the article);
that this experiment is being run in Namibia is likely due to Namibia's links
with Germany.

A sustained basic income program differs markedly from just "giving people
money" and other "poverty eradication" methods in several ways, and it will be
interesting to see if those differences lead to different long-run results in
the future.

The two major differences are: basic income is uniformly distributed across
the population at predictable rates and on a predictable schedule; the second
is that the aide is explicitly in "cash money", and not in-kind.

The underlying logic is this:

(1) escaping from extreme poverty _requires_ making-and-following-through on
plans on a long time horizon; for example: deferring present consumption and
leisure and instead saving and pursuing education

(2) the circumstances of poverty are circumstances in which it is particularly
difficult to make and especially to follow-through on such long-term plans

(3) a basic income program directly addresses the perceived root cause of
poverty -- circumstances in which longer-term planning is too difficult to
follow-through on -- by providing a stabilization factor (a small but 100%
predictable income) and thereby making it substantially easier for those so-
inclined to stick to those plans

You don't have to believe in that logic, but that's the logic. Following
through on it:

\- just giving "windfalls" -- direct lump-sum cash -- shouldn't be expected to
have the same impact (even if, in an abstruse enough outlook there's no
difference between a windfall and an equivalent annuity; we're explicitly
talking personal psychology, here); it allows for a temporary improvement in
one's circumstances but does not directly address the predictability factor

\- just giving aid in kind -- wells, books, etc. -- likewise improves material
standard of living but does not directly address the ability to make-and-
stick-to long-term plans

...so it would be no surprise that earlier aid was ineffective, as it was
symptom-patching that didn't do anything to address the perceived root cause
of poverty.

Your commentary on the incentive-to-make-children thing is somewhat shallow:

Poor people have little capital to invest and make up for by using the
children as a resource. It seems like a great idea at the time, but also
virtually guarantees that the kids will be poor. And the cycle repeats itself.

The problem you sketch is this:

\- poor people produce children b/c children are an exploitable resource

\- poor people lack resources to invest in raising and educating their
children

\- ergo, the children go on to also become poor, perpetuating the cycle

You seem to have failed to draw the connection between the problem you pointed
out and the idea of pegging the stipend per-child; doing so means that the
situation now becomes

\- poor people produce children b/c children are an exploitable resource

\- poor people now receive k _$stipend per offspring; so long as $stipend >
$cost-of-adequately-educating-a-child there are no _monetary* obstacles to
educating and raising all k children (for whatever size of k we pick)

\- ergo, there's no longer the intrinsic link between "too many kids" and
"resources spread too thin to raise them right"; there's still room for moral
failings / bad culture / bad choices / etc., but moral failings / bad culture
/ bad choices / etc. were present before the experiment and will likely always
be with us, anyways

...which is why the stipend is tied to # of children. This now allows us to
back up and look at the earlier criticism: "incentive to produce children".

Let's assume you're right: the extra stipend an extra kid brings in is such a
material incentive that it materially effects the # of offspring women choose
to have.

We must then ask: would increased production of offspring be a problem?

You seem to assume "yes, of course", and then explain your reasoning (what we
just went through: inadequate resources => not raised right => cycle
perpetuates).

Were the program to result in children being raised "well enough" (to go up a
rung or two on the poverty ladder versus their parents) then the link between
"moar children" and "bad" is a little less clear; it might even be the case
that "moar children" == "good", in that having more children raised right
speeds the arrival of some future point in time when the majority of the adult
population has been raised right (instead of having learned the shiftless
habits of the previous generation).

Time will tell, of course; this experiment would have to run for years or
decades to get conclusive results; small changes happen quickly but most
cultural and behavioral patterns take longer to iron out.

You're also being a little uncharitable in your fact-check (not incorrect,
just uncharitable). Pre-BIG she wouldn't have been raising those chickens, b/c
buying chickens to breed-and-raise pays off over too long of a time horizon to
be practical; post-BIG, she's demonstrably using some of her surplus income to
invest in activities that pay off over a longer-term, which is a clear success
with respect to the general goals of what a basic income program is trying to
do. So the program's verdict would be "great, we gave people no-strings money
and hoped they'd use it to build wealth and lift themselves out of poverty
(instead of blow it on alcohol); this woman has done that" and not "well shit,
if we'd known she was going to want 40 chickens we could've just given her
some for 1/10th the price" (if that kind of aid worked there wouldn't be as
much poverty).

------
Empact
While the author mentions "a communist utopia," minimum income programs have
often come from market-oriented economists, such as with Milton Friedman's
Negative Income Tax, which he proposed as an alternative to a host of
disruptive policies including the minimum wage and welfare, and the FairTax
proposal, which includes monthly "prebate" checks.

~~~
lionheart
I agree. I'm very market-oriented myself, but I think this could be a good way
to run things, if done correctly.

It seems to provide good benefits to the poor, while also being the least
complex and least gameable welfare technique I can think of.

~~~
orangecat
Right. It also potentially lessens the need for other regulations. For example
minimum wage laws supposedly prevent exploiting the poor by "forcing" them to
accept unfairly low pay because the alternative is homelessness or starvation.
But with a guaranteed income the poor would have the ability to reject unfair
wages without having to worry about survival. Ditto for lousy working
conditions or excessive hours.

------
kiba
It sound all very positive but I alway have in the back of my mind the
possible unintended consequences of regulations and laws intended to alleviate
the poor out of poverty. Such examples like mininum wages actually hurt the
poor by making them incapable of getting jobs, and the side effect of job
training that may result from getting jobs.

In other words, the program seem suspect based on previous experience. It seem
to produce wonderful result, but I am going to pass on this one and see what
will become of Namibian in ten years of time.

Alway remember to not only analyze the seen, but also the unseen. It will
unmask any hidden grim consequences if any that are hidden on the face of an
intervention. Such is the art of analyzing economic interventions.

------
raheemm
Although giving money away seems counter-intuitive, when you consider these
small sums in the context of abject poverty, it starts to make sense. And then
if you look at the current model of large aid grants to often corrupt or inept
governments, it makes total sense to instead give the cash directly to the
very poor.

------
ErrantX
As I read it this article highlighted the biggest cause of problem in Nambia:
the "rich white farmers".

(obviously that's probably not wholly accurate - but the article does not
leave them in a good light!)

~~~
joubert
That is also what they thought in Zimbabwe.

~~~
ErrantX
and they solved that one badly as we all know (seriously my point was that the
whit farmer they mentioned seemed completely unapologetic about the situation
he helped continue!)

~~~
ErrantX
Im sorry this all came across in the way it did, reading it back I threw the
comment too loosely.

I'd never want to condone the sort of thing that went on in ZImbabwe.

Those white farmers have a perfect right to be where they are. But the way the
article presented that one guy made me think they sound like part of the
problem.

If the minimum wage is so low and they are "rich farmers" recognising the
problem (as he does, admittedly, do) then surely they _could_ raise wages.
Charities always talk about stimulating the economy in a sustainable way -
surely better wages and decent working structure is a good idea!

It could just be how they worded the article but it sounded to me like that
farmer at least was somewhat abusing the super-cheap local labour to turn a
big profit. Hence: part of the problem.

