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Comment by ChuckMcM | Hacker News Reader

There have been a number of BI experiments and the results have so far been universal, initial growth followed by stagnation.

The challenge is to create productive work for these people so that they can earn an income. Some of the Chinese 'make work' projects have been interesting in that regard but they are not a final solution.

What might be a more durable system would be to create a manufacturing plant that these folks could work in. It doesn't have to be complex, could be as simple as making cinder block for building construction. It has to be run as a business in the sense that standards are set and checked and people are paid based on their production. You have to be rigidly scrupulous about keeping corruption out of it, this is a lot harder than you estimate. Ideally the production is consumed in other projects. (like building buildings or railroads or other factories).

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Do you have any references to these experiments that were followed by stagnation? I only found a few experiments listed here: http://en.wikipedia.org/wiki/Basic_income_guarantee and all appeared to have positive outcomes with no mention of stagnation.

In Spain something similar has been used for decades now. It's called PER , rural employment plan, it's not exctly BI, as people Is supposed to earn the pay with days recolecting fruits or olives. But there is a lot of fraud and most people avoids doing them but they still receive the paycheck. Initially it was done to improve the poverty of that country zones, and it certainly has improved, but people has become adicted to the free money and that region is perpetually low growth figures. Peole just works the necesary to live, you must add tha the climate is pretty good and is easy to be at a terrace all day having a coffe or some beers. This system also is prone to ballot buys by local policians. Every time someone wants to reduce the payments she looses lots of votes. I think that on it's own BI will improve the living conditions of people dramatically, but on the long run will need to be substituted and complemented by other system.

Yes, OTOH, economists need to realise that "there is indeed a free lunch" at lots of places, especially in sunny and humid areas. If you can eat with almost zero effort, you will probably not put any more effort in anything. Tropical countries are very much influenced by this.

By "it's not exactly BI," you mean "it's not at all BI."

The core premise and compelling logic of BI comes from the fact that it is simple, not-gameable, and, most importantly, doesn't have huge disincentive effects at the margin as benefits phase out.

PER sounds like it runs headlong into all of those issues. By the standard you're using to critique BI using PER, I could just as well point to PER to critique markets as a whole.

It´s not just a critique, I was writing fast from the iphone and I haven´t explained my point completely. I think that in places like that small towns where people is "owned" by the landlord and a vicious circle of debt and low wages, it´s a necessary to use a system like BI to brake the chains and improve the living conditions. In fact in Spain country living conditions in certain areas, used to be quite similar to those of india(surely not that extreme, but not that far off at the beginning of the XX century). People lived in towns that where inside big landlords (most of them old nobility). The landlord used to be like a small king in their lands able to change the fate of families, that have to pay land rents. So the public wages was a big help to end that problem (that and the emigration to the cities that reduced the population). But there is moment when this no-conditions money just keeps people from improving further. You may see it as an engine starter, without it, is impossible to start the engine, if you stop it too early, the whole engine will stop again, but if you keep it engaged it will drag the engine and keep it from working properly.

What about the system that was at work in communist Poland (and other USSR sattelites, I believe)?

There was obligation to work, unless you were sick. You could choose your trade, and if you were lazy/stupid/handicapped you were offered job that weren't demanding. Salaries were centrally planed, as was prices. The end effect was - less than 1% unemployement, huge drop in efficiency, no creativity boost to speak of.

I wonder if BI experiments suffer from observer bias - if the experiment was going bad it would be stopped, or at least people participating may think it would be. It's usually small community so they know who isn't working, and they can influence him.

If you were to introduce BI on huge scale, in a way that people take it for granted, I think the results would be much worse (and much more realistic).

You leave out the part where the USSR and other centrally planned economies had to balance linear systems of billions of variables by hand (and rudimentary computers). And where they had to invent from scratch an ideal allocation of goods and services, which tended to represent what was best for the Soviet state and its bureaucrats at the expense of consumer goods and entrepreneurial capital.

People react to incentives. In the Soviet Union, "they pretended to pay us, and we pretended to work": although workers certainly received money in exchange for labor, increasing the amount of money you had did not typically increase the goods and services available to you, as the price system was so messed up that real prices were measured in waiting times and political favors.

A basic income avoids that trap because it leverages the distributed computation of the market to set prices. People will still be at least as entrepreneurial as they are now, because there's the opportunity for huge, outsized profits for both the entrepreneur and the provider of capital.

Also note that most salary workers nowadays make far in excess (typically 50k+) of what the minimum income would provide (on the order of 10k). Most of us here could work for a year, survive on what the minimum income would provide, and then have enough savings left over for nearly another decade at minimum income levels. But we don't do that, because we want more, and that wouldn't change with a minimum income.

Cite?

I try to follow BI, and although the BI experiments I've heard of certainly have had cons to go along with the pros (spiraling costs in Manitoba, for instance), "stagnation" has never been one. I'd love to see that study.

I've gone back and looked for the paper I read on BI and have yet to find it sadly. It was published in the late 90's and and I believe it came out of Harvard but I'm less confident about that origin. Basically my in-laws were big fans of South America and were thinking about emigrating to Argentina [1] in 92 - 93 and had mentioned they were experimenting with BI as a way of mitigating crime in the slums. That lead me to look into whether or not it worked and I found the article which basically confirmed my suspicions. Sadly Google Scholar doesn't have nearly as many pre-1999 journal articles as it does post 1999. Scholar did turn up this article [2] which I've downloaded to my iPad to read.

[1] They eventually moved to Brazil instead.

[2] http://esp.sagepub.com/content/12/4/307.short

One of those moments where I bemoan my lack of access to closed scientific research. =)

The abstract suggests that it is looking at means tested and conditional benefits, including programs to "guarantee a minimum income": that should not be confused with a basic income, despite the similarity in terminology.

In the literature when people refer to a guaranteed minimum income they're referring to the government supplementing a person's income up to some predefined level. This makes it significantly cheaper than a basic income, because people who "don't need it" aren't receiving the income; but a really nasty side effect of that, as with nearly all welfare programs, is that it creates incredibly steep effective marginal tax rates. The simplest design--looking at someone's income, and filling it up until it hits the desired minimum--in fact leads to a 100% marginal tax rate, because a dollar earned from work is a dollar lost in benefits.

This means there's absolutely no incentive to work before you've made the minimum; contrast it to the unconditional basic income, where even someone who's only capable of producing half the value of the basic income is fully incentivized to do that work. So you avoid the deadly (literally!) welfare trap where the government actively punishes you for finding work.

I don't know if you are in the US or not but our local city library can get journals on inter-library loan. Stanford used to have an affordable non-student library card fee but it has since gone through the roof. That said you can often do the legal part of what Aaron Schwartz did which is use the WiFi in a college library and get access to their journal subscription but this only works well if you already know what articles you want. And Google Scholar can be good for that but not as good before 1999 sadly.

I recognize the difference between BI and GMI as strategies but just so you know they are often both talked about in the same papers as they are both approaches to putting capital to work effectively amongst the poorest.

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