Universal Basic Income, Part 1 of 3

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In 1776, Thomas Paine anonymously published a pamphlet called Common Sense, wherein he advocated for independence from Great Britain in favor of a more egalitarian government. It was so influential that it is often cited as responsible for crystallizing public support around the revolution, so much so that John Adams wrote that “without the pen of the author of Common Sense, the sword of Washington would have been raised in vain.”

Paine was renowned for his rhetoric and ability to make a compelling argument by appealing to a democratic ethos. This egalitarian commitment is further demonstrated by another one of his proposals: the guaranteed minimum income.

UBI in America

“It is a position not to be controverted that the earth, in its natural, uncultivated state was, and ever would have continued to be, the common property of the human race… It is proposed that the payments, as already stated, be made to every person, rich or poor… because it is in lieu of the natural inheritance, which, as a right, belongs to every man, over and above the property he may have created, or inherited from those who did.”

— Thomas Paine, Agrarian Justice

Portrait of Thomas Paine

Portrait of Thomas Paine

What Paine proposed is now commonly referred to as Universal Basic Income (UBI), though it has had many other names, and a more storied history than you might think. The concept of a UBI has been around at least as long as the idea of utopia, and was in fact described in Thomas More’s Utopia.

Although Paine’s arguments for UBI did not catch hold as well as his call for independence did, UBI has had its fair share of supporters throughout American history. In 1962, Milton Friedman, Nobel Laureate in economics and iconic neoliberal, wrote in favor of a negative income tax (essentially a system where those earning below a certain amount would get money from the government instead of paying taxes).

Five years later, Martin Luther King, Jr. wrote, “I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.”

These ideas had power in Washington as well. In 1969, the Family Assistance Plan (FAP) was proposed by the Nixon Administration as a guaranteed income, similar to a negative income tax scheme, to replace the AFDC aid program targeting poor families. This actually was adopted by a large majority in the House of Representatives, only to be rejected by the relevant Commission in the Senate, and definitively rejected in 1972 due to a coalition of those who found it too timid, and those who found it too bold.

As these brief examples illuminate, UBI has gathered a motley crew of supporters. This has continued to today, where a recent resurgence has found sympathizers including efficiency-hound libertarians, techies worried about job automation, and philanthropists seeking an end to poverty.

The Basics of UBI

What exactly is Universal Basic Income? Simply put, it is unconditional direct cash payments to everyone. The Basic Income Earth Network (BIEN) gives these 5 characteristics:

  1. Periodic: it is paid at regular intervals (for example every month), not as a one-off grant.

  2. Cash payment: it is paid in an appropriate medium of exchange, allowing those who receive it to decide what they spend it on. It is not, therefore, paid either in kind (such as food or services) or in vouchers dedicated to a specific use.

  3. Individual: it is paid on an individual basis — and not, for instance, to households.

  4. Universal: it is paid to all, without means test (i.e. to both rich and poor).

  5. Unconditional: it is paid without a requirement to work or to demonstrate willingness-to-work.

The goals of this are as diverse as its proponents (and opposing in some cases). Libertarians want to replace all social welfare programs with UBI, preferring cash transfers to the paternalism of welfare programs that tell people what services and goods they can access. Many others advocate for the ways it avoids the “poverty traps” of social assistance with a means test, where people can disqualify themselves for services by earning too much.

This is all fine and good, but let’s get down to the real issue: does it work?

Does It Work?

One of the main challenges that UBI faces is that we really just don’t know how it works or if it works. There are no models for this; no other countries implement UBI as a national economic system. Because it is radically different from anything we’ve seen, there is a timid skepticism, and perhaps a tacit belief that if it was such a good system, someone would already be doing it.

That’s not to say there haven’t been any studies, or small-scale attempts in the past. In fact, the U.S. conducted several small negative income tax experiments in sites across the the country starting in 1968. (Interestingly, the task force charged with leading these experiments was headed by Donald Rumsfeld and Dick Cheney). The results were mixed, and not politically useful, as demonstrated by the failure of the FAP legislation. One of the points of contention was the resulting decrease in work effort of about 13%. Most often, this extra time was dedicated to spending more time at home with newborns, and pursuing continuing education. Although this could be viewed as an economic boon in the form of human capital accumulation, the political framing spun off into the territory of work disincentives, which was portrayed as disastrous for the labor market.

In 1974, the province of Manitoba in Canada began a minimum income experiment, MINCOME, for some residents in mostly rural communities, some in Winnipeg, and one “saturation” site for all 10,000 residents of Dauphin, a small prairie town. Midway through, budget cuts stopped the flow of funding, and the results were never properly analyzed until one researcher, Evelyn Forget, uncovered the data and published the results in a paper titled “The Town With No Poverty.” In it, she describes a decrease in hospitalizations, especially those concerning mental health, an increase in high school completion, and a drop in the average number of children born to women before age 25.

More recently, there has been renewed interest in UBI. GiveDirectly, a globally renowned charity, is preparing to launch an unprecedented 10 year UBI study in extremely poor communities in rural Kenya. They will be doing a randomized controlled trial, using the methods needed for a rigorous scientific study. Translation: it should provide real evidence about the effects of UBI. This is also unique because of the specific focus on extreme poverty. GiveDirectly has already shown the positive impact of unconditional cash transfers to the poor; this experiment takes that finding to the next level to see if this can be a real path to the eradication of poverty.

Another large-scale UBI experiment is brewing in Silicon Valley. In early 2016, Sam Altman of Y Combinator announced the launch of a program to conduct a 5 year UBI study in the United States. The motivation for this is slightly different than GiveDirectly’s; instead of trying to solve the current issue of poverty, Altman’s eye is to the future. “I’m fairly confident that at some point in the future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of [UBI] at a national scale,” wrote Altman in his announcement.

This reflects the broad concern of some leading technologists that automation will eliminate jobs to the point where some, if not many, people are not able to find employment as we now know it. Elon Musk reiterated this recently at the World Government Summit in Dubai: “There will be fewer and fewer jobs that a robot cannot do better… And if my assessment is correct and they probably will happen, then we have to think about what are we going to do about it? I think some kind of universal basic income is going to be necessary.”

Some national governments are considering experiments of their own. At the beginning of this year, Finland launched a 2 year UBI experiment, providing 560 euros/month to 2,000 citizens. The Netherlands and Ontario, Canada are both set to start UBI experiments this year, and many other countries are considering following suit.

After all that, what is there to say? We have some notion of what UBI is, know that it has been tried in the past at a very small scale and to varying degrees, and that there is renewed interest coming from multiple directions. None of that lends itself toward any conclusions. To get any insight on how to think about this, we’re going to have to leave the safe harbor of empirical evidence and set out into the open waters of inspiration. So grab your galoshes and hoist the mainsail: we’re about to get visionary.