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Want to help the poor and transform your economy? Give people cash. (chrisblattman.com)
146 points by nkoren on May 25, 2013 | hide | past | web | favorite | 109 comments



This is a great article. Not because it proves a particular point (we should accept the evidence no matter where it leads) but because of the clarity of the article, and the fact that it accurately represents the academic paper: on a cursory reading of the academic paper, the randomization is truly as good as they sell it in the linked article.

I think this is potentially a big step forward in our understanding of development. It challenges the assumption that the main thing holding back development is a lack of investment in human capital (training) rather than a lack of access to physical capital.

The only issue I have is whether you can expect the same results from one-off payments, as an ongoing basic income, and whether we can expect the same results for the whole population as the group that was selected, who seem to form a very specific group.


If I recall correctly, it has been shown that Basic Income Guarantees[1] (free cash without means testing besides citizenship) works incredibly well for both developed and developing countries. This article comes as no surprise, but is well-written and compelling which is a great boon to BIG. Despite stereotypes of poor people, basic income is used very effectively with little administrative cost (not for booze and gambling? how bizarre!): - People work more and for a higher wage (exceptions: recently pregnant mothers and students) - Domestic abuse plummets - People are unemployed LONGER, but use that time to find a job they like more (or create their own!)

This form of welfare has been supported by people on the right (Friedman, Hayek) and left (Russell). I'm really disappointed it isn't used to greater effect. Voters and tax-payers have simply no faith in those damned poor people to make the right decision it seems.

Here's a great story from in Canada, where it was referred to as Mincome [2]

BIG also works well in India, where women, in particular, benefit[3]. A further benefit is it is highly corruption resistant. There are no tests, forms, etc. If you're a citizen, you get cash. Done.

Please, anyone, show me some research that shows BIG doesn't work well. Cheers

[1] http://en.wikipedia.org/wiki/Basic_income_guarantee

[2] A town without poverty? http://www.dominionpaper.ca/articles/4100

[3] http://www.soas.ac.uk/news/newsitem84314.html


You are making very big claims without adequate references. The study shows the effects of a one-off payment, to a highly selective group (note that I'm not implying their randomization was bad, but that both treatment and control groups were very special relative to the whole population), an a particular developing country.

You may personally believe that this is part of a general phenomenon that applies to highly developed countries, to all groups of people in that country, and in the long term not just the short term, but you have presented little evidence for the claims in your first paragraph (I read all the links).

You seem to view BIG as somehow unique, when in fact it is functionally equivalent to progressive taxation plus welfare, when welfare is only conditional on income. It is also hard to argue against because it treats redistribution, which is a sliding scale, as something absolute: it suggests an (imaginary) bar for "basic" income.

I personally believe systems where welfare is primarily conditional in income, but weakly conditional on searching for work or getting training (such as Australia's) are optimal for developed countries. The government can be far more generous when it adds some strings to welfare, than when it is simply giving out money. The only issue is whether countries with different governmental frameworks can copy Australia's model.

In short, you seem to be overlooking what I consider the real interest of this study, which is its specific relevance to developing nations.

>Please, anyone, show me some research that shows BIG doesn't work well. Cheers

That's a very asymmetric way to think about the evidence for and against a particular policy.

edit: The specific problem with your evidence, is that on a such a broad topic, I would expect to see an academic review of the literature. What you provided was [1] wikipedia, [2] an interesting example with no control, and [3] something that wasn't an actual academic study, but a description of a program and it's alleged benefits without any peer-reviewed study demonstrating these benefits.


> I would expect to see an academic review of the literature. What you provided was [1] wikipedia

I expect this is why you're seeing downvotes.


If you look at that article, you will find it does not provide evidence for any of the claims in the post. That's not the fault of Wikipedia, as I explained, this is an extremely broad and complex issue, and most academics won't directly cover it because "basic income" is too vague a concept for them.

But that was the point I was making in the first place: you cannot cite three sources and then claim to have the evidence on your side, when these three sources don't provide the evidence that would be needed.


Personally, I assumed that whatever followed "If I recall correctly" would likely not be expertly sourced. I did look at that Wikipedia article-- it has 102 references, many of them offline. So hell if I know if there's evidence in there, but I'm certainly not complaining that I don't know where to read more for myself.

But like the GP-- It's something I want to believe, it's very well-credentialed, and I've seen some encouraging but inconclusive evidence. So naturally as a skeptic the main thing I'm looking for now is the strongly negative evidence, if such a thing can exist. Do you have any leads?


I don't want to get too bogged down in the details of this thread, so I'll just tell you straight up why I don't support the idea of a basic income guarantee. Hopefully doing so will indirectly address the issue of evidence that we were discussing.

The main problem is that the BIG is an unnecessary and unhelpful concept. I believe the sociology is that people like to believe in causes, rather than fine grained facts or principals, and so BIG is attractive as a cause in spite of not being a useful concept.

First, BIG confuses the issues around redistribution. Assuming welfare is only conditional on income, the sum total of taxation, welfare, BIG and others, can be thought of as a negative taxation system. BIG obscures this because it implies there is something special about redistribution through a "guaranteed" income. E.g. economists are very concerned about the incentive effects of welfare, because every dollar you earn results in less welfare. BIG obscures this by focusing on the flat portion (the guaranteed income) and drawing attention away from the more progressive income taxes that would be needed to pay for it.

Second, BIG is different from many current welfare systems because it is unconditional on being part of a special group (e.g. a parent, farmer, elderly) or certain actions (e.g. education, training, looking for work in good faith). I consider this to be a bad thing, in that it is too extreme in the direction of being unconditional, at least for the developed world. Both in terms of ethical fairness, political feasibility, and economic incentives, giving away money for nothing has strong limits on it. Adding a few conditions, like ensuring people are really looking for work, strikes a much better balance. So again, BIG takes a sliding scale decision (how much should welfare be conditional on certain actions, and should it be conditional on things other than income) and makes it seem like a binary decision by only providing one extreme as an alternative to the status quo.

btw, below I give a well argued article which claims BIG is a useful concept.

www.usbig.net/pdf/manyfacesofubi.pdf


I don't understand your problem with a basic income guarantee. You say that it is unhelpful, but it is a very clear description of the mechanics of redistribution. It is much easier to explain a "basic income" to my mother than a "negative income tax" -- and yes she understands that anything provided by the government must be paid for by taxation.

The unconditional aspect of a basic income allows individuals to accumulate capital. Many welfare systems require recipients to sell their cars, property, and maintain bank accounts at a near zero balance. They also clawback employment earnings at punitive tax rates of 50-100% (often higher than the top-marginal rate). Since welfare is often very low, those supplementing their income are often driven to working under-the-table for cash. This creates a welfare trap that keeps poor people poor.

Means checking requires an expensive bureaucracy, is paternalistic, and I think unnecessary.

If you read the research results for the Canadian and US experiments you will find that people want to work, even with a basic income. The slight negative incentives that were discovered can be attributable to two basic factors: 1. some women chose to stay home to care for children or elderly family members -- this has an obvious societal benefit, and 2. if the experiment is conducted in a non-saturation site (i.e. one fraction of the population gets a basic income while the other does not) then there will be an economic distortion affecting low income workers. Employers are driven to employ those without a basic income, who are more desperate for work. The same would happen if you tried to enforce a minimum wage on half the population. Employers would hire those without a minimum wage.

If you are looking for the real problems with the basic income, it is easy to find. The cost to raise everyone above the poverty line is _very_ high. One would have to consider the size of the family unit receiving funds and adjust for economies of scale. Nevertheless, it could be done. By contrast, a basic income at the rate of many existing welfare systems would be very affordable and would result in many collateral savings such as reduced health care and administration costs.

Also, despite the cost of a basic income, it has the support of many Nobel-prize winning economists because it increases utility. I have not yet seen a model for optimal income taxation that does not point to a negative tax / basic income. See, for example, textbooks on public economics or the classic paper by Mirrlees,

http://www.econ.yale.edu/~dirkb/teach/pdf/mirrlees/1971%20op...


While you make some interesting arguments for a basic income guarantee, I think your post would be better as a top level comment.

You don't seem to have addressed anything I wrote past the first two paragraphs (which were a kind of introduction). E.g. I explained precisely what I meant by the concept being "unhelpful".


I'm very predisposed to believe this. In fact, I'll go further and say I'm not sure I can think of a friend of mine who wouldn't do something really cool if you gave them a year's income in cash.

My friends, generally speaking, spent a lot of money on a very good education that's not valued by the labor market. To put that another way: My friends are wildly overqualified for what they do, and many of them are poorer than broke.

Those without a lot of ambition are pretty much the millenial layabouts you imagine. They're working median-wage retail jobs to pay the rent, smoking a lot of weed, and just generally hanging out. They don't want to work more, and they couldn't really work any less, but they seem pretty happy.

Those with ambition aren't living much different. They're working median-wage retail jobs to pay the rent, working second jobs to try to pay down their debt faster, smoking a lot less weed, and using the rest of their time trying hard to find a job in their field of expertise that wouldn't pay much more even if it did exist. These people could easily work a lot less if they wanted to, but they don't. They want to work more, and work harder, but they cannot find work to do. They seem like they're struggling.

So say we gave them all an unconditional grant which erases their debt and provides some capital. (A year's income wouldn't do this for most, but set that aside.) Most of the first group, maybe it wouldn't affect that much. They might quit their jobs or cut down on hours, but actually they don't mind their jobs that much. They might smoke more weed, but that's probably not possible. More likely they'll spring for a car or a house or a home theater and just keep on keepin' on.

For those in the second group, though, this changes everything. They've instantly jumped a decade into their own future. They'll quit their jobs the same day, immediately start planning a move to where they really want to live. They'll immediately open small businesses. They'll collaborate on epic works of art. Some of them will buy boats; some of them will buy farms. They'll travel, volunteer, teach, research, write, direct, design, produce, and make things. And you know what? They'll probably smoke even less weed.

It's just a wishful thought experiment, but it does seem plausible the overall economic effect would be massively positive. The argument against basic income seems to be basically that it would move people from the second category into the first category. Maybe that's the case for people in general, I don't know, but for the poor young people I know it seems far more likely to do the opposite.


There is an ongoing petition to the European Union ("Citizen initiative") for basic income: https://ec.europa.eu/citizens-initiative/REQ-ECI-2012-000028...

"On January 14th 2013, the European Commission accepted our European Citizens’ Initiative hence triggering a one-year campaign involving all countries in the European Union."

"If we collect one million statements of support for Basic Income from the 500 million inhabitants of the European Union, the European Commission will have to examine our initiative carefully and arrange for a public hearing in the European Parliament."

http://basicincome2013.eu/ubi/


How pointless, the EU couldn't impose this even if they wanted to. It'd be up to national governments.


Yes, but it wouldn't work very well if some EU governments introduced it and some didn't as you would still have freedom of movement within the EU.


I think this is extremely applicable in inefficient third world economies, but I can think of a few reasons it might not be as applicable in a first world country like the United States.

    - Most basic skilled services already have many providers.
    - The startup costs for these services are significantly higher in first world countries.
    - The expectations of consumers are also (probably) much higher.
So, I want to believe, but I'd like to see some evidence of broader applicability before we leap to conclusions. That brings up another problem, though: this is so much harder to do in a developed country because it is prohibitively expensive.


I the united states, studies have indicated that food stamps produce an economic return of $1.85 for every dollar spent. I would imagine additional cash spending could have a similar effect.


I would imagine too. I'm not really asking about imagining though.


Are you pretending he used the word "imagine" as "hope" rather than "expect"?


No, I'm pointing out that my expectations already align with his, and him sharing them does not cause me to update significantly.


It works resoundingly well in developed countries, see my comment here: https://news.ycombinator.com/item?id=5769233


All your citations are third world countries.


The second, in-depth reference([2]) takes place in Canada... a third-world country?


The Yukon isn't what most people think of as Canada, at least not the part of Canada that has ready access to "first world" (urban infrastructure) type services.


Many parts of "first world" countries are in a similar situation. The US is large.


You didn't read past the first line, did you? The experiment was in Dauphin, Manitoba.


Nope, I didn't. Doesn't change too much. Once they try the experiment in all of Canada and make it permanent, then I'll acknowledge the it was tried in Canada. With a city size of just over 8000 (probably 7000 in the 1970s), it isn't likely to have a particularly complex economic environment.


Sorry, I had seen another article under the same title that was talking about a study in India. My bad.


Canada is not a third world country...


Could you clarify? What are basic skilled services?


There is a big difference between being broke in the first world and poverty stricken in the 3rd world. Even in developed nations this article isn't talking about breaking the cycle of minimum wage retail, it's talking about breaking the cycle of poverty. Your friends aren't poverty stricken. They might be having a tough time and feeling regrets about over capitalising on an education they can't use but I sorely doubt that giving them an average year's wage would solve their problems because they already have all the opportunities that the years' wage buys the ugandan farmers.


I certainly don't mean to equivocate developed and developing poverty, but I also don't agree with the inverse. Yes, we are not starving or threatened, for the most part. But in both worlds, poverty means dependence. It means not having options, or not having the ability to take opportunities. It means being stuck in a bad situation because anywhere else is worse.

My friend who works at Macy's does have clean water coming out of her tap, and that's something to be very thankful for, but that by itself doesn't make her free.


I want to relate two experiences. Do with them what you will.

The first experience is of being rich. I'm not actually rich, mind you, but I've experienced what it's like to be rich because in early 2009 my good friend opened up an IT school in Ghana and I stayed there for a month to teach a database design course. There's a range of emotions and situations that arose that contribute to the fact that "I now know what it's like to be rich" but one situation really stands out and is, I think, pertinent to your post.

I had been hanging out with a guy and he showed me around a little. When I was leaving he wanted me to buy him a laptop. He thought that getting a laptop would somehow improve his situation. He had seen people with laptops achieve success (somehow) and wanted the same, so he asked me for one. Of course I had the means to provide it, but I knew for a fact it would change nothing. I didn't get him one.

Secondly I was in #startups a couple of years ago and some guy came in talking about his idea for a startup. It was a wikipedia for everything or something ridiculous and he was really excited about it. I've been through this before so I wanted to maybe talk some sense into him about the realities of business and the tech startup world that I wish someone had relayed to me when I was young and stupid.

In a private chat, he said that he just needed $800/month to build this thing, for 6 months. During our discussions I had mentioned I run a software consultancy and do some online marketing for folks and he said "I don't have a consultancy behind me" like as in "I don't have that luxury". I actually laughed out loud. As if I were the model of carefree success. Like I was so blessed to have this thing "behind" me (nevermind I'm in debt up to my eyeballs and only managed to actually start making some money after like 7 years of fumbling about failing left, right and centre).

It was preposterous to me, but seemed perfectly logical to him. I was somehow in a position of advantage, and all he needed was a big break. Again, I was perfectly capable of providing him with everything he thought he needed, but declined.


I appreciate your anecdotes, and I'll respond with one of my own.

I went to college with two people. (More, maybe!) Not people I knew that well, but it was a very small school. They were both written up ("infracted") for marijuana use-- I forget if as part of the same incident or just very close in time. One of these people was a girl from a wealthy family that paid cash in full; the other was a boy from some impoverished corner of the country who had earned a full-ride-plus scholarship. You know how this ends.

Now, marijuana use is not a crime in Massachusetts, so the institutional punishment was as draconian as it was mild. They had both used up their one warning on previous, unrelated infractions, so they both got the same deal: A hundred-dollar fine, a letter to the parents, and social probation.

Well, that's what the wealthy one got. The poor kid also had to deal with the fact that his scholarship had a clause indicating that being placed on probation, being cited for drug use, or some combination of the two (I don't recall preicsely) made him ineligible.

Yes, it was a very expensive school-- It was a very good school, and he had worked hard to prove he deserved to be there despite not being able to pay for it. But it wouldn't really have made a difference if it had been half or a quarter as much. And for all that we who could afford to be in debt were wealthy on paper, it gave us no ability to help him. In fact we were all servants of the same patron; he was just a little closer to going home.

So the slap on the wrist was de facto expulsion. This kid couldn't even afford to go home for the holidays-- somebody had to drive him to the airport. Somebody had to pay for his ticket home. And when he got home...

Well, to be honest, I don't know what happened. I haven't seen him on Facebook lately.

When I think of first-world poverty, I think about the difference between these two people. If one of them is free, the other must be something else.


What you're referring to is more about social injustice as a result of a fiercely meritocratic, free market capitalist society. Yes, I think that healthcare and education should be free (I come from Australia where they both are, and my family was "poor" and I had access to a University education - there's a debt there but it's not as bad as what you guys call student loans).

Incidentally I wonder how many of your college buddies would vote in favour of healthcare or education funding reform? (My guess is very very few but that's beside the point).

This is a completely different problem from what the original article is discussing. The original article is talking about the fact that in areas where the poverty is so absolute, giving people things like access to schools or social programs has virtually no impact, but giving them access to a tractor and a herd of cows generates a huge economic benefit, and creates a position from which they can later do things like build schools and run their own social programs. In other words the people have skills, are willing to work and have a plan to make money and feed themselves predictably and reliably. Giving them cash makes sense.

Now I agree that giving this guy free access to education and not having a double standard for students who pay versus those who don't (which has, incidentally, crept into the Australian system too since Howard fucked everything up) is a good idea. But giving him cash isn't.

First world poverty can and should be solved institutionally, because it is an institutional problem.


There is a fucking huge problem with this idea (excuse my french). The majority of jobs in this country, nobody wants to do- but they need to be done. If we just freely hand out a living wage to everybody, nobody will be working the crappy jobs and our world will fall apart.


Capitalism, hey? The garbage will pile up until somebody is willing to take away the garbage for what you are willing to pay. Then you will know what the real value of garbage removal is to you, when you can no longer use the inhumanities of poverty as a bargaining chip.


Thing is, the system is already stable. I take that as meaning it is a reasonable approximation of where most services belong.

Don't forget that the real value of garbage removal to me is not what defines the fair market price. It is the combination of what it is worth to me, and what someone will do it for. In the case of garbage removal, it is likely the latter is lower than the former, and thus where the market settled.


But again: labor supply levels are not like supply-levels for other commodities. If you want a continuous supply of fresh tomatoes, you give your plant water and sunlight, and if you want a consistent supply of willing labor, you should pay living wages.

Otherwise, you're not talking about bargaining in a fair market but about the religion of arbeit macht frei or karoshi, the worship of self-immolation through work.

(For those surprised by my turn of phrase, yes, this is in fact what "Arbeit macht frei" meant prior to WW2.)


nope, it's the combination of what it is worth to you, and what someone will do it for, when the alternative to doing it is to starve. if you remove that large influencing factor, you would get a lot closer to a fair market price, where the unpleasantness of a job factors more strongly into the value of doing it.


So you believe that not only does money have a diminishing marginal utility, the utility drop-off that comes just after not starving to death on the street is so strong that, should we abolish Slow-Death-by-Poverty, nobody would do certain jobs?

You know, as opposed to low-level employers just having to raise wages and automate more?


You're free to correct me if I'm wrong here, but it doesn't sound like Cushman is advocating giving people the absolute bare minimum simply to avoid starvation. We already have that after a fashion, it's called food stamps, and you can indeed try boostrapping a company while supporting yourself with foodstamps- it's been done. It sounds more like Cushman is advocating a number such as "$30k".


The problem is food stamps suck.

You can't pay down a debt, you can't buy shoes for that interview, you can't get a phone number, move to a better job market, afford first month/lastmonth/security on an apartment on a bus route, etc. And what is and isn't allowed is a constant political issue.

The point is cash lets some one target their own pain points while cutting down the inefficiency of needing a bureaucracy to define the aid packages.

Also a years wage from some shit retail job isn't 30k, it's more like 15k.


Not saying food stamps rock, but my parent approaches the issue as if I/we have royally decreed the poor should continue to starve in ditches. I felt it appropriate to point out that the USA generally (GENERALLY) doesn't let people starve in ditches.


Maybe not that many are starving to death, but many people in the USA don't get the food that they need.

In 2010, 17.2 million households, 14.5 percent of households (approximately one in seven), were food insecure, the highest number ever recorded in the United States [1]

[1]: http://www.worldhunger.org/articles/Learn/us_hunger_facts.ht...


This is completely tangential to the original point of discussion. I did not come here to argue about food stamps.


It is completely relevant. The ancestor post was making the argument that we already have a minimal support system in the USA that anyone can take advantage of a pursue their dreams. They just need to take food-stamps/etc. This doesn't seem to be working so instead, we need to give them $30k/year.

My point is that we aren't even providing minimal life support to everyone yet, so to say that it has failed is premature.

Show me a system where healthy food is accessible and free, and safe housing is also accessible, convenient and free where people are still struggling to invest and improve their situation and then I will believe that it doesn't work.


Yes, giving people the minimum to avoid starvation seems to make them dependent on that income. Giving people enough money to effectively take money off the table frees them to make intelligent decisions about how to invest not only that capital, but their remaining time and energy, greatly boosting their productivity.

To be clear, though, I advocate for evidence-based policy, and I've seen encouraging but not conclusive evidence. I've got a hunch on this one, and some notable economists seem to agree with me, but if we're wrong and it would hurt our society then... we shouldn't do that.


I was responding to the sentence, "If we just freely hand out a living wage to everybody, nobody will be working the crappy jobs and our world will fall apart."

I went with the "bare minimum" thing because a sub-living wage is a dying wage.


Supply and demand.

If they're jobs that need to be done, wages will rise until they're sufficient to either convince labor to allocate itself to the problem or convince capital to be substituted for it.


So will costs not then also rise?


Yes, they will. Both nominal and real. That's different from the world falling apart because no one wants to clean the toilets.

What will happen to price levels? It depends on the exact level of the basic income, but here's a likely scenario for my preferred level (around $10k-$12k per adult citizen).

The effects are much more strongly seen for things that require low skilled labor than high skilled: those low skilled workers now have an alternative, of not working. Some extra number of them over today would take that option, but most still will work: everyone still has the same incentive--more money!--to work. The big difference would be everyone has a pile of so-called "fuck you" money, which helps eliminate any monopsony power employers at the lower end of the market have.

So those costs would rise, because costs on the supply side have risen. Products and services provided by highly skilled workers would see nary a change in their cost structures: most of us get paid enough in a year to consume a decade at minimum income levels, but we choose not to do that.

The pattern of consumption would also be altered, depending on how the funding tax was structured. A reasonable proposal (perhaps a flat tax on all income over the basic guaranteed one) you'd expect to result in luxuries to be demanded compared to necessities.

Overall you get higher prices and higher consumption of basic necessities, and lower prices and lower consumption of luxuries.

(This is all secondary, in my view, to the core of what a basic income would allow: a grand infusion of both market entrepreneurship and non-easily-monetizable value into the economy. )


Well, I would say we get paid a decade worth of minimum income levels pre-tax and pre-expenses, but after taxes and high cost of living in the areas we generally live in, and after repaying loans to obtain qualifications to work these jobs, I'd say there's only one or two years of minimum income left over.


Nominal prices will rise, but what you're really seeing is the fair valuation of these services when costs aren't massively depressed by the abundance of free labor in a post-industrial society where there is less and less real work to do.


Maybe cleaning toilets should pay better than Wall Street.


Look how things work out in places with a working social safety net, state unemployment benefits pay for rent, public healthcare and gives enough money for food and basic comforts.

Basically it works pretty well, people want to feel like productive members of society and do something for a living, and employers end up having to treat employees with more respect since the threat of unemployment isn't so terrifying.


So raise the wages on those necessary jobs.


Why the obsession with weed?


Do you mean for me rhetorically, or in my peer group? Rhetorically, the common emotive argument against social welfare programs is that they enable the poor to do drugs all day rather than doing productive work (I suppose this is also an argument against drug use). Personally I feel that contradicts reality, and since marijuana use is a fact of life among the people I went to college with I think it's useful to bring it front and center now and again.

Why weed itself? Well it's an analgesic, euphoric, prosocial, psychedelic, stimulating, sedating, relatively non-addictive plant that will grow in most parts of the world, may actually be healthier for you than not using it, and to top it off has been a cornerstone of youth culture for fifty-odd years. One's mileage may vary, but it is hard for one not to see the appeal.


Some professors at Yale had a similar idea and set up a charity that allows you to directly transfer cash to very low income families in Kenya. They're doing a bunch of randomized control trials (RTCs) which are the NGO equivalent of A/B testing for outcomes. Highly recommend them if you're looking to support something like this directly (no pun intended).

http://www.givedirectly.org/


REALLY?

This is about the best news I've heard all week. Thank you VERY much for pointing us to this.

The costs of Basic Income test programs in the third world are SO damn low that I've been thinking for a while that it's possible to run some fairly credible privately-funded trials. Really pleased to find someone else doing it so I don't have to try to learn the NGO side of things :)


As much as I would like to say this is a good idea, it probably isn't.

Most "grants" that the world bank gives are usually as a supplement to some loan that they are giving to a country.

Think of it as Ford/World Bank funds a loan for a new road so they can sell cars. The world bank gives a loan for the road, Ford sells the cars. And on the side the world bank sets up a little side thing to show statistics by training existing motor mechanics how to fix Fords by giving them money for parts/tools and minimal support. The money is given out piece meal to ensure they spend it on the right things, like Ford parts.

World bank builds the road, Ford sells the cars, some small figure is given to keep the mechanics happy and help fudge figures. The road builders are from a foreign country and get a tax break as does Ford.

Some years down the track, after the professors go home, the road falls into disrepair. The government/people owe money for the loan for the road, and the Ford/Car owners are in debt to the banks for their vehicles. Poverty cycle starts again.

The only part of the road that is kept in good shape is the road from some mine to the port/market, if at all.

The figures presented in the article look at a small part of the larger picture. The countries that "fund" the world bank benefit as they use it prop up their own industries to the detriment of the developing country.

The long term figures on most of these "aid" programs are mostly awful. Most countries would be better off accepting no aid and building what they need.

I have spent too many years working with shit like this. The world bank and the IMF are much the same.

Note: Ford is an example, please replace it with any car company.

Edit/update: The author of the article is Chris Blattman; He is most likely going to say great things about any project that he writes about. If you write bad things you don't get invited back to write again/get paid more money.


Upvoted you because it's a very good analogy. The Washington Consensus and neoliberal trade theory have wrecked developing economies by at least 10-20 years. It's no surprise that the developing economies doing well right now accepted little to no aid. Reading up on structural adjustment policies give a good insight into what the consequences are of seemingly benevolent loans. It's basically like a mafiosi loan shark giving you a desperately needed loan, then threatening to break your legs because you don't have the means to pay it back, forcing you to do whatever they ask of you.


>It's basically like a mafiosi loan shark giving you a desperately needed loan, then threatening not to make any loans to you in the future because you don't have the means to pay it back, forcing you to do whatever they ask of you.

Fixed that for you


There was just a very good Planet Money that came to many of the same conclusions:

http://www.npr.org/blogs/money/2013/05/21/185801589/episode-...


I caught this episode a few days ago and I totally didn't expect this conclusion. Planet Money does a superb job of coming up with relevant topics and episodes way way beyond their original mission of explaining the 2007 meltdown.


Interesting how nearly a hundred and fifty years after Marx wrote "Das Kapital", it comes down to access to and ownership of the means of production in poor countries.


Sort of. Owning the means of production is the answer when other productive means of earning a living are not. That is to say, if you can't earn a living working for someone else's production, it makes sense to own your own.

Ergo, you don't necessarily need to own the means of production, you just need access to meaningful, productive and well-compensated positions. Owning your own production is one way to achieve this.


It also helps ensure that it stays achieved.


Though its not exactly what the article is talking about, I accept the idea of a basic income in some form as almost inevitable... but it'll have to wait until after the baby boomers loose power.


I doubt it will ever be accepted and I hope it isn't. Basic income is a waste of money -- a stack of clothing, a toothbrush and deodorant, 3 meals a day and a bed to sleep in could be provided to any citizen who asked for it for a lot cheaper and it would prevent anybody from dying in the streets (the scenario welfare proponents argue necessitates the governments involment), yet would also provide maximum incentives to get of welfare and to find a job.

(since I don't think this should be means-tested, I guess you could argue it is a form of basic income, although usually basic-income is paid in some form of cash).


Read the article. This is exactly what NGOs attempt to do right now, figure out exactly which things people need and provide the bare minimum. It doesn't work. The point of the article and paper is that people with choice actually do make good decisions and turn that money into economic growth.

While you may think that handing out a bunch of stuff to people (even if that stuff is the bare minimum) would provide incentive to move off of such assistance it doesn't. It strips people of any interest in agency and has them believe they don't control their own well-being. This is exactly what the development sector has gotten wrong for several decades and until things change, not much good will come out of it.


Yes that's exactly the point. I originally agreed that providing the basic units of subsistence would be the most equitable form of welfare, and perhaps in a country like the United States it is, but in a society without access to means of production or meaningful employment, the basic units of subsistence cannot provide economic growth.

If you want growth, you need enterprise, not subsistence.


> Basic income is a waste of money -- a stack of clothing, a toothbrush and deodorant, 3 meals a day and a bed to sleep in could be provided

If it's saving money you're worried about, just giving them the money is probably a lot more efficient. Whatever that crap you listed is worth? Give them the cash instead, let them handle the logistics of buying it (or buying something else they need, a determination they're in a much better position to make than you are), and save the substantial amount of money involved in having an entire apparatus for handing out crap.


The idea is to avoid the failure mode where people spend the money on drugs/art/whatever and then still die in the streets.


That's certainly not the ONLY idea. There are a seemingly infinite number of reasons why people want to avoid just giving poor people money, and many of them are well-intentioned.

The problem is that people don't even attempt an objective assessment of the impact of doing things one way versus the impact of doing things another way. It's more common to assess a plan based on "how does this jive with the ideology I've taken on for myself?" or to use a simple judgment based on aesthetics.


I suppose that, from an economic stand-point, the poor would benefit more from the same amount in money.

However the benefit isn't necesarilly what we care about, in this case at least I am much more interested in avoiding the failure mode where they stay on wellfare because it is nicer than getting a job.


No, actually the idea is to avoid the failure mode where people go on wellfare because it is better than to have a job while at the same time avoidng the failure mode where people starve and the failure mode where people don't have an incentive to work (which is what we have now, sadly).


Where are you going to get that stuff you're going to give people? A giant government procurement contract? Who will decide what goes into it? The problem with your suggestion is you're trying to do soviet-style central planning of consumption, even if only at "basic needs" level. As history shows, it will be both cost-inefficient and not inadequate at meeting the basic needs.


Where are you going to get that stuff you're going to give people? A giant government procurement contract?

Or perhaps many local ones. But yes, exploit the capitalist system and let the cheapest provider win.

Who will decide what goes into it?

The political system. Basically, there will be a public itemized list of what people gain from the welfare system. Periodically, progressive types will say "oh no, the poor lack XXX", and XXX will be added to the list of items. Conversely, conservative types can read the list and point out "WTF, why are we paying for YYY", and get such items removed.

It's far better than the current system, in which basically no one has any clue what goods and services the poor have access to. This enables progressive types to say "oh noes, the poor are barely surviving" and conservatives to say "they all drive cadillacs", and neither side can refute the other without reading obscure Census reports (and obviously no one does that).


How do I start earning money with only the items you listed?

I need a PC, internet connection, VPS server, appstore developer account, and smartphone.

Your list doesn't have any of those.


It isn't the governments job to start your business, you can do that with the money you save up while working part (or full time) and basically have no expenses (except, possibly, bus-fare).


Oh please, as if there will be jobs for most of the population in the future.


There is a difference though between giving someone a year's income in a 3rd world country like Uganda, where there is no other safety net, where as the OP states, nobody is "unemployed" because everybody has to find a way to scrape by, or die. So everyone is essentially an entrepreneur. Their mindset is that they need to work to survive. When they get cash, they do what entrepreneurs do, invest it in things that will let them generate more income.

In a developed country like the USA, if you gave a person on welfare a pile of cash, they'd most likely just go mad with it until it was all spent, then revert to their prior welfare lifestyle. This has been studied, though I can't find the citation I'm specifically thinking of. People who live in long-term poverty in the USA see money as something to be spent for immediate gratification. The idea of saving it and investing it is foreign to them.


> In a developed country like the USA, if you gave a person on welfare a pile of cash, they'd most likely just go mad with it until it was all spent, then revert to their prior welfare lifestyle.

Some people surely will. The question is, are those the outliers, or the mainstream? And, even if people do that, is that a cheaper way than the current social welfare provider industry structure to keep them out of prisons or emergency rooms or other expensive institutions?


People who live in long-term poverty in the USA see money as something to be spent for immediate gratification. The idea of saving it and investing it is foreign to them.

This is partly because they don't have enough money to take care of their immediate needs and save for something better, and partly because nobody they trust has shown them any other way of living.

Imagine you have a choice between paying for a flat screen TV and starving, and eating high quality food for a month. You have no social connections outside your economic class, thus no evidence that any action you can take will lead to your situation changing. If you are poor, you will choose the TV because it guarantees a baseline level of pleasure indefinitely, while the food will run out after a month and you'll be back where you started. Since you're constantly coping with the stress of being on the edge of survival, your willpower is continually depleted. Congratulations, you're now stuck.


I came here too to discuss a mincome system as well. But alas, your comments about the baby boomers seems spot on.


Those of you who are opposed to Basic Income Guarantees or cash transfers on the basis that you believe they don't work:

Can you define the assumptions / beliefs that make you think they don't work, in a testable fashion? (Ideally in a fashion which would be testable on as small and cheap a scale as possible.)

I'm not asking this because I'm planning to rubbish those assumptions or beliefs. I'm asking because this is an area of enough interest to me that I may look into organising fundraising for trials in the future, and it'd be useful to know what the most compelling hyphotheses to test would be.


I believe that expanding the BI would reduce the amount of work performed, thereby destroying wealth.

Assumptions: most people prefer not to work, and most people gain diminishing marginal utility from income. A lot of people will be satisfied to relax and produce nothing while enjoying merely the BI.

Evidence in support of this hypothesis: poor Americans already have a BI [1] and choose not to work. See some numbers here: http://www.chrisstucchio.com/blog/2011/why_the_poor_dont_wor...

In contrast, poor folks in many other nations (e.g., India) have a much lower BI and choose to work.


Business prefers not to hire a lot of people because their work is worth for the economy less then what they have to pay for their food and shelter.

Wealth does not come from human work. It comes from machine work. Business is no longer in recession. It produces as much as before 2008 but with much less people. Manufacturing just used the recession to shed off unnecessary workers.


The problem is the erosion of morals, and that is obviously difficult to test. It's not about what happens if someone gets a grant for a couple of years to do whatever, it's waking up in the morning, every morning, and knowing that even if you never lift a finger to do a single thing for someone else, you're guaranteed a minimum quality of life.

The promises of the vast european welfare systems were similar to those of the basic income guarantee proposals: That people's morals are fundamentally wired to be ashamed of idleness and eagerness to contribute to society, so if you just remove the negative spirals of poverty, everything will fix itself.

The lessons from the european welfare systems, however, shows something quite different: Plenty of people are happy never to lift a finger, either for themselves or anyone else, and a culture of entitlement has blossomed.


"Plenty of people are happy never to lift a finger, either for themselves or anyone else, and a culture of entitlement has blossomed."

Nothing we can do about that. They will continue to do so no matter what the system is. So, we can either keep going as we are, or we can have a basic income.

Keep going as we are; these people who won't lift a finger continue to do so. All the people who would use a basic income to better themselves and thus improve society are also still screwed. Society does not benefit.

Have basic income; these people who won't lift a finger continue to do so. All the people who would use a basic income to better themselves and thus improve society do so. Society benefits.

Is it fair? No. Given the choice between more fair, or less fair and a better society (by which I mean an actual opportunity for people to build themselves better lives, because no matter what propaganda we hear about "American dream" the evidence clearly indicates it's just that - a dream), which should we pick? That's a personal choice, but I know which I'd go for.


You're missing two dimensions in your analysis:

1: The possibility that some people that are currently contributing (by having a job, even if it's not a great job, and takes care of themselves) choose a life of no positive activity. I don't know what the calculus is, but they're not balanced out by just any >0 number of people choosing to improve society.

2: That when at least some of those people on long term passive income receive a good, solid kick in the butt (in terms of expiring benefits), they are, in fact, able to turn their lives around and become contributing members of society.


Guess all we can do is look at the evidence where this has been tried.

It's my understanding that it looks good. Seems that more people are caught in the benefits trap than choose to actually be there.


European welfare systems are not BI because you loose the benefits if you go to work. They penalize getting a job hence people are disincentivised to get one. At leas legal one.


Indeed they're not, and BI has a lot going for it in it's simple incentives.

I just struggle to think that's the only thing keeping so many people passive for so long.


We are so hung up on the idea that "you can teach a man to fish and that will feed him for a lifetime" in reality if you give a man a boat and fishing gear he will figure out how to fish on his own. The US doesn't have the same credit issues as uganda but we instead have the wellfare trap which could be easily solved by raising the minimum wage to above poverty level, heck raising the minimum wage to $30/hr would solve a lot of our economic problems.


Some economists look at basic income as a theoretically superior alternative to minimum wage, i.e. with a basic income you would not need a minimum wage at all. I think the idea is that the supply of labor exceeds the demand, which necessitates a minimum wage. The basic income solves this by reducing the supply of labor. This post (and parent thread) talks about it a bit more: https://news.ycombinator.com/item?id=5657604


Raising minimum wage to $30/hr would soon be followed by the price of basic essentials quadrupling. Money is just a medium of exchange, a convenient way of saying 20 minutes of floor sweeping is about equal in value to one gallon of gasoline; raise the pay for the former and the cost of the latter will rise in kind.


That sounds very reasonable but it actually isn't true see this MIT study: http://www.irle.berkeley.edu/workingpapers/157-07.pdf


Uhhhh. No kidding. It's cash that created the prosperity in the 1st world. It wasn't really wages but labor unions that could force wages to rise and conditions to ease up so that people had more free time that really did it. It rebalanced the workday so that the high wages could be spent on acquiring capital, and thus be redeployed into other activities that, among other things, started new businesses and broke up market monopolies.


Want to transform your economy? Instead of bailing out banks, bail out student loans. :)


Living in a 3rd-world socialist country has taught me one thing: "you do not multiply wealth by dividing it." Capatalism breeds in an ethos of elitism, the ratio of motivated:lazy seems to be driven by the possibility of dire failure.

Put another way, my government spends ridiculous amounts of money (as much as 20% of the salaries of the earners) on "people," and all they get in return is an unmotivated nation. The only people that are truely motivated are the demographic that are excluded from the government assistance (and I think that they would stand to be unmotivated in the event that they government gave them money instead).

The only way to transform the economy would be to give money to people that are deeply motivated; people who do what they do because they believe it is what is needed (religeous for want of a better word). The problem is that those people need to be identified.

Instead of discussing "give everyone money," I think it's better to instead discuss "identify who deserves gratis money." Universities play a pretty big role in our current grant system; unfortunately they are broken beyond all hope - they are doing a terrible job at it.


There was a very similar article here a few weeks (months?) ago about a startup Give Directly (or something like that) ... Perhaps they referenced this research.

it may seem like a tautology to say this but this only works where the root cause of poverty is lack of capital.

In cases where the root cause of poverty is deeply entrenched social disadvantage, mental illness, substance abuse or corruption then handing out cash will do little to solve poverty.


Agreed, in those places you need to have a min wage that's higher than the poverty level and higher than any wellfare traps.


In Brazil there is a government initiative named Bolsa FamĂ­lia that gives US$ 45,00 per child on school. It's removing proplr from poverty and increasing the local market in some cities.

The main benefit is that the people doesnt want to earn this money from govern, so they stsrt to look at job opportunities.


More information about the program: http://en.wikipedia.org/wiki/Bolsa_Fam%C3%ADlia


I tried this with two homeless girls and it literally mostly went up in smoke. Giving them anything but (groceries, parts for their projects, etc) worked a lot better,


This reminds me of myself because I've been trying to get $100 to make a website, but not one person has given me a single dollar...


We have structural unemployment that is only going to get worse so something will have to change but idle hands being the devil's workshop I think some minimum of productive output will have to be required if only for their own sake. Volunteer charity work or art, anything but total sloth.


I'm not sure what to say to this, honestly, and I technically mean that, given my background in philosophy. I see the Sorite's Paradox pop up everywhere, and I'm frankly surprised to see it uniquely apply here.

How Much do I give? I frequently hand out $5s, $20s, on the principle that at that given time, given what is in my pocket and on my (spontaneously emerging) schedule, this cash would better service this chap, bloke, schizo, street-ranter, street-cryer, snot driveling, moaning, wailing, decaying, wasting -- stop me when you get my point.

Whence cometh Jesus?

On every occasion I give large sums, thinking "not too large" because well -- [insert tangent:] Today I stopped for a BIT too long to hand a bloke on the street a cigarette. I'm wearing my usual dapper attire. A second person accosts me. Then a third. Before I knew it, I had half a pack of cigarettes. I was handing out the first as a romantic gesture, latent in capitalism: "Here's yr last cig, mate." We all do it. Are you ready to buy a pack, walk out, hand them all out, and sleep without absurdity?

Are you calling for decentralized, anarchism liquidation? If you are, fucking say so. Because I've been fucking waiting for this day. If you tell me to fucking burn down a bank, don't leave it to my imagination to make out that you're trying to say that. This is becoming infuriating the way we programmers are writing.

I dropped a street violinist a $20. He MOANED at me, and STOPPED playing. I had to REMIND him that I listened to him from a hotel room from which I was staying for 45 minutes. He kept me sane, as a programmer isolated and stranded in a remote city. I could not communicate this to him.

Do you think green bills with "God" printed on them are the solution? This is NOT mature thinking. I just don't care.

Are you telling me I need a GTD strategy to liquidating my hard-earned, mentally crippling, psychologically and socially handicapping means for a living through this computer such that everyone on my street gets the average? Should I become a servant to the masses, when I'm already working for them in my own form of labor that I know?

Not to mention the opportunities for factionism and favoritism. Perhaps it's time for this. Perhaps this is what you are saying. But do I still have to accept that anarchism only works on paper? If I hand someone a bill and say, "Thank Anarchism, not God. Thank the realization of postscarcity."

I'll get slapped by mothers and gang members alike. It's just going to get spun as a hand out.




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