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A new report on a basic income scheme launched in Iran

151 points by pmcpinto 9y ago

oarla 9y ago
Maybe a dumb question, but I have always wondered this. Won't UBI just shift the poverty line to a value above whatever it is now(0 maybe), without changing the income inequality/wealth difference. In a hyper-simplistic hypothetical scenario, if it's assumed that a person is poor if he has $0, with UBI, he'll have $X/month, making him above the poverty line. But now the entire country, rich and poor, have at least $X/month, which might translate to an increase in cost of all goods/services by $X, rendering the poor as poor and rich as rich.
- Chinjut 9y ago
  It's unlikely for $0 pre-basic income and $X post-basic income to have the same value. The former is, well, nothing, and the latter is, well, something.
- AnthonyMouse 9y ago
  > Won't UBI just shift the poverty line to a value above whatever it is now(0 maybe), without changing the income inequality/wealth difference. As far as I can tell this keeps coming up because the answer is "no" but the explanation is complicated. The are two types of inflation. One is industry-specific and happens when the government subsidizes something. For example, if the government provides education subsidies then the cost of education increases compared to other things like food or transportation. The other is currency-specific. When the government prints a lot of new currency, the value of a dollar goes down. Prices go up not because there is more demand for products but because there is less demand for dollars. A UBI doesn't do either of those things. It doesn't subsidize any specific thing and it doesn't create any new money. The closest you can get is that there is a theory that higher income people spend less of their income than lower income people, so anything that transfers money from higher income people to lower income people is equivalent to creating new money, because the money in the hands of higher income people was effectively out of circulation. That general form has nothing to do with a UBI. It applies equally to any government program that produces per-capita public benefits from sales or income tax revenues. The rich pay a tax and the poor get public schools and housing subsidies, which means the poor have the money they didn't spend on schools or housing and can spend it on something else. Moreover, the effect is small (most people aren't rich enough to never spend their money), and it's simple to compensate for it -- the government is constantly creating new currency because more currency is required as the economy grows. So if you want less inflation, print less money. And that's assuming that moderate inflation would be a problem, but in fact it's a benefit. The country is in a debt crisis. People have too much mortgage debt, too much student debt, too much credit card debt. The government itself has too much public debt. The prices of housing and education and medicine are too high, but lowering nominal prices is very difficult because everyone has mortgages and contracts that assume the existing prices. The US balance of trade has been out of whack for decades. Lowering the value of the dollar helps with all of those things because it lets the nominal price of those things stay the same while reducing their actual cost back to sane levels.
  - mac01021 9y ago
    Imagine, though, a city where most poor people earn about $1000 per month spend about $750 rent (housing). If the landlords catch wind that everyone is now taking in $1200 after the institution of UBI, won't they collectively up their rates to $950 (because where else are the tenants going to go)? And who does that help but the landlords? This is the (less abstract) way I've seen the question asked before. I'm not necessarily saying that this is what would happen (it could though, especially if the landlords are on the zoning board). I'm just saying you haven't necessarily answered the concern here.
    - AnthonyMouse 9y ago
      > Imagine, though, a city where most poor people earn about $1000 per month spend about $750 rent (housing). If the landlords catch wind that everyone is now taking in $1200 after the institution of UBI, won't they collectively up their rates to $950 (because where else are the tenants going to go)? Where is the extra $200/month supposed to come from? A UBI doesn't create new money. If the average person had $1000/month before then they will still have $1000/month. For the government to pay $1 in UBI it has to collect $1 in taxes. There is no extra money for the landlords to capture.
      - dragonwriter 9y ago
        > For the government to pay $1 in UBI it has to collect $1 in taxes. Excluding debt financing (with which it need not increase present taxes) or monetization (with which it need never increase taxes.) > There is no extra money for the landlords to capture. Even in the balanced-budget, non-monetized case, landlords renting to a particular social class may have more money to capture if the taxes are levied on a different class (landlords or other vendors selling to a different class may lose money for the same reason.)
        AnthonyMouse 9y ago
        > Excluding debt financing (with which it need not increase present taxes) or monetization (with which it need never increase taxes.) Which is equally true of any government program financed in those ways. > Even in the balanced-budget, non-monetized case, landlords renting to a particular social class may have more money to capture if the taxes are levied on a different class (landlords or other vendors selling to a different class may lose money for the same reason.) That's hardly "UBI leads to fully-canceling prices increases".
- lastyearman 9y ago
  If productivity stays the same, then all we can ever do is to shift wealth around. That is all there is to it. So the important questions are: does UBI increase or decrease productivity and how is wealth divided after UBI.
cbanek 9y ago
These studies have been popping up on HN, and they're all pretty interesting, yet all seem fairly inconclusive to me. This one started in 2011, and I'm guessing since the article doesn't say they stopped, that it is still going on? > The report found no evidence for the idea that people will work less under a universal income, and found that in some cases, like in the service industry, people worked more, expanding their businesses or pursuing more satisfying lines of work. but yet they say: > The researchers did find that young people — specifically people in their twenties — worked less, but noted that Iran never had a high level of employment among young people, and that they were likely enrolling in school with the added income. It seems like tracking how many people who are enrolled in school would be fairly easy to track to verify this. They do say in the paper that youth does have a reduced labor rate, but then they say it might be education (but provide no numbers): > While there is no evidence of a negative supply response for the average worker, male or female, there is one for youth in their twenties. If one were to expect a strong negative impact it would be for youth, who have weak job attachment, can stay in school longer, or enjoy more leisure, though we do know which of these options they choose. While I do think there's value in looking at the micro circumstances, I do wonder how culture will change and shift because of UBI, and how that will also affect its outcome. For example, if we say that we believe in UBI, that means that basically everyone should have enough money to live. We're offering an entitlement to which people will feel entitled. Over time, how will that change society? One past example of this would be college education. Nowadays everyone goes to college, but it wasn't always so. Would as many people to go college if society didn't push them that way? One other such cultural shift might be women entering the workforce, or desegregation, and how that lead toward the fight for civil rights.
- simion314 9y ago
  Since many things happen in that period this is not a controlled experiment so you can't have strong conclusions, they can notice some correlations at most such as the program did not increased the number of unemployed people, maybe something else balanced this program but this was not found so the authors are challenging others to look at the data and find things that support the idea that unemployment would rise or other bad side effects.
Endama 9y ago
I wonder if UBI actually allows the economy to become more efficient. It could be the case that an abusive employer would be more severely punished by the labor market if the economic cost to the worker is diminished by a UBI (i.e. My boss is a jerk, I'm just going to quit and find an employer that treats me better). I would assume then that satisfied employees, with good employers, would then be more productive than their dissatisfied counterparts. It also seems reasonable to assume that workers would also be more likely to create new businesses entirely if the personal financial risks associated with doing so were diminished by a UBI.
- bryondowd 9y ago
  This seems like the biggest win, to me. When your employer represents your important but nonessential income, while your basic survival is guaranteed, it becomes far easier to tell an asshole boss to stuff it while you go looking for new work. It becomes easier to move to a new location without getting a job in advance. It becomes easier to start your own enterprise. It even makes more sense to work part time while developing more in-demand skills or just taking a partial vacation. It opens up so many freedoms of choice that are currently only afforded to people who can make lots of excess money and stash it away as savings.
  - lxmorj 9y ago
    As shitty as working for Uber might be, this is a huge benefit that they currently present. You can get by driving for Uber for a bit, allowing you to hold off on accepting an okay outcome and find better employment opportunities than otherwise.
    - Drdrdrq 9y ago
      Except - you are not searching for opportunities, you are working. It takes your focus and time. I agree that it helps you get by, but the cost is much higher than it would be with basic income.
  - corford 9y ago
    >It becomes easier to start your own enterprise. I lived in France for a few years and noticed something that validates this a little. French unemployment pay is quite generous (can't remember the exact figures but it's close to or 100% of your last salary for 12 months) - effectively quasi UBI for a year. I knew a lot of 'twenty somethings' that used this cushion to give them 12 months runway to try their hand at a startup.
nnfy 9y ago
>The report found no evidence for the idea that people will work less under a universal income, and found that in some cases, like in the service industry, people worked more, expanding their businesses or pursuing more satisfying lines of work. >The researchers did find that young people — specifically people in their twenties — worked less, but noted that Iran never had a high level of employment among young people, and that they were likely enrolling in school with the added income. Seems the authors' agendas are leaking through, these two consecutive paragraphs from the article essentially contradict each other and the premise of the article. What I read: "we found evidence that young people did work less, but we hand waved it away with a seemingly plausible and totally unsubstantiated assumption." This is politicized science.
- bryondowd 9y ago
  Alternatively, if the decrease in young people was marginal, and the increase in other age groups balanced it out, it could be true that there was no overall decrease. Hard to say without seeing their numbers. Especially if these young people were only a tiny percentage of the labor pool to begin with, it may be an inconsequential blip in the bigger picture, which is how I read it. In other words, if young people were 10% of the labor pool, and experienced a 10% reduction in work, that would be significant to that demographic, but a less significant 1% increase overall would mask it from impacting the bigger picture.
- swampangel 9y ago
  The linked report makes the distinction a little clearer: > For the most part, we focus on the labor supply of poorer workers, who are more likely to reduce their labor supply as a result of a modest increase in unearned income. Our results do not indicate a negative labor supply effect for either hours worked or the probability of participation in market work, either for all workers or those in the bottom 40% of the income distribution. We do find a negative labor supply effect for workers 20-29 years old for their hours worked.
  - notahacker 9y ago
    The linked report is also more comprehensive than the summary, including the points that: (i) the next Iranian government and Iranian press strongly believe that it did cause massive reductions in labour supply in certain suggestions including citing a paper claiming a loss of 500,000-700,000 agricultural workers[2] (ii) the context of the poorer people not dropping out of work was a period of enormous inflation (caused in part by US sanctions) and the removal of enormous food and fuel subsidies which the program replaced and (iii) this measures very short term impacts (prior to the program launch and within the first three months): against the backdrop of rising prices and brand new US sanctions it's perhaps particularly unlikely that many poorer workers would rush to quite their jobs, even if it were to produce such an effect in the longer term in times of greater economic security (iv) it's actually specifically focusing whether people were more likely to quit their jobs than people who didn't get the subsidy for the first three months due to paperwork problems rather than whether employment didn't fall overall; the paper correctly points out that in an economy with wide access to cheap credit (not Iran) the orthodox economic view would actually expect those receiving subsidies now and those expecting to receive them asap to respond by reducing willingness to supply labour by similar amounts (v) there was a perfectly good reason for them doing the study that way because Iranian labour force trends are all over the place TLDR: the actual study doesn't tell us very much through no fault of the authors, because a lot of other shocks were happening to the economy at the time. Which is a shame, because it was a huge new program in a middle income country that didn't involve outside capital, which would have made it much better evidence of a UBI's expected effects than most studies carried out. [2]having read that paper as well, it doesn't appear to be a claim with empirical support
ChuckMcM 9y ago
Specifically they found that generally people didn't work less, although young people did and they aren't sure if they are just not working, or if they are going to school. They counter that observation that employment in young people is also low in general. (presumably allowing for systemic unemployment of some form). There is a consistent outcome from many BI tests, which is that just knowing there will be some money each month can mitigate stress and anxiety in people. People with reduced stress and anxiety are both more productive and more functional.
- maxxxxx 9y ago
  I think you can judge success of UBI only over decades and generations of people. People who grew up in a world of UBI will have a totally different view on life than current generations. I am not saying it's good or bad but I think it will be very difficult to figure out what the eventual outcome of UBI will be in a few decades.
  - vorg 9y ago
    > you can judge success of UBI only over decades and generations of people. People who grew up in a world of UBI will have a totally different view on life Thay's why I think experiments like the Finnish one also mentioned on the linked page: "Finland will select 2000 unemployed citizens to receive 560 euros a month for 2 years - no strings attached. It's part of an experiment to find out what happens people's desire to work when they're guaranteed a basic income." are nearly useless for evaluating the effect of UBI on an economy.
tezka 9y ago
Even though I am sympathetic to the idea of Universal income, the fact the Iran's economy experienced inflation as high as 45% the rapid rise of which correlates closely with the start of this program[1], should make this a worrisome rather than promising case study. [1] https://d3fy651gv2fhd3.cloudfront.net/charts/iran-inflation-cpi.png?s=irairaninfnrate&v=201705282226v&d1=20070101&d2=20171231 https://d3fy651gv2fhd3.cloudfront.net/charts/iran-inflation-...
- a-priori 9y ago
  That's more attributable to the sanctions placed on Iran in 2010, in response to their nuclear program, which led to shortages and price surges. https://en.wikipedia.org/wiki/United_Nations_Security_Council_Resolution_1929 https://en.wikipedia.org/wiki/United_Nations_Security_Counci... http://www.nytimes.com/2013/04/02/world/middleeast/irans-double-digit-inflation-worsens.html http://www.nytimes.com/2013/04/02/world/middleeast/irans-dou...
- intopieces 9y ago
  It also correlates closely to the increase in banking sanctions, which were enacted very close to the spike in that graph. https://www.nytimes.com/2013/06/04/world/middleeast/us-adds-to-its-list-of-sanctions-against-iran.html https://www.nytimes.com/2013/06/04/world/middleeast/us-adds-...
  - tezka 9y ago
    sure, sanctions may very well be one of the factors causing such high inflation levels (although I am hesitant to say that they completely explain away the massive increase in the money supply. FWIW, according to IMF, in 2008 Iran's M1 base has been around $70 billion[1]. Giving a population of over 75M a $1.5 * 365 does nicely increase that base by around 50%). My main main point however was not to claim that the UBI program caused the inflation, rather to challenge the reliability of the main claim of the report as to the change the UBI makes to people's working behavior. Under such high inflation, whatever the cause, people need to work more, rather than less, to make ends meet, so comparing their behavior to pre-inflation periods is just bad science. [1] https://en.wikipedia.org/wiki/Central_Bank_of_the_Islamic_Republic_of_Iran#Money_supply_and_inflation https://en.wikipedia.org/wiki/Central_Bank_of_the_Islamic_Re...
jasode 9y ago
Found a litte more background info.[1] If I'm reading that right, Iran basically tried to swap fuel subsidies with "universal grants" (aka "basic income"). The grants were a lower amount than the fuel subsidies so it was a strategy for the government to reduce overall spending. What's not clear is if people kept working to help pay for the shortfall in fuel subsidy or compensate for spending on other goods that the higher fuel subsidies allowed. Maybe this clarification is in the researchers 31 page pdf but I haven't had a chance to read the whole thing. [1] https://books.google.com/books?id=MPahDQAAQBAJ&pg=PT162&lpg=PT162#v=onepage&q&f=false https://books.google.com/books?id=MPahDQAAQBAJ&pg=PT162&lpg=...
kangnkodos 9y ago
The article says, “In the U.S. such a measure would translate to about $16,000 per year.” No. $1.50 per day per household is not the same as $45.00 per day. I see what they did. They zeroed in on 29% of median income. That’s a nice trick to make their argument stronger, but it makes no sense. $1.50 per day is $1.50 per day regardless of the median income. This article tells us what would probably happen if you gave a family $1.50 per day. It says absolutely nothing about what would happen if you gave them $45.00 per day
- bryondowd 9y ago
  I was going to argue with this, but looking into it, it seems the cost of living is only about 50% of the US, so it's really more equivalent to $3/day or so in the US, which would be about $1k/yr. So yeah, I'm a lot less impressed by this now. It looks like you'd be able to maybe cover basic staple foods in Iran with this income, without anything left for shelter or other necessities. But that said, it means the median income is only about equivalent to $3k/yr US in spending power, which is incredibly depressing, and makes me wonder if I'm doing some math wrong, since surely half the population can't be poor to the point of homelessness. Perhaps the numbers I'm looking at don't factor cost of living in rural vs urban areas, and there is an order of magnitude difference?
  - notahacker 9y ago
    Shelter costs very little in poorer countries where the land is worth much less and building regulations and taxes are reduced (and some consumer goods Iranians don't expect to have or don't replace regularly cost more) which is one of the big problems with PPP adjustments trying to assess costs of living in different countries based on a basket of goods. Not that the unconventional method the article uses of scaling median income to suggest it's as high as $16k per year is any more representative. To the extent it's possible to compare the standard of living of an Iranian on UBI with a US standard of living it's probably in between those extremes...
    - gorkemyurt 9y ago
      Very few homeless people in Iran as people can always return back to their 'village' if they don't make it in the city. There will be relatives helping them out and land more or less costs nothing.
tuxidomasx 9y ago
To be honest, the idea of universal income appeals to me because it sounds like free money. So one could simply decide not to work at all and use that UBI money for housing, food, and habits and everybody would be fine with that. I can see how that would have appealed to my 20-something year old self; and it's not much different than how it appeals to my 30-something year old self.
- bluGill 9y ago
  You lost me with the "and habits". Bill Gates has said he wants his kids to have enough money to do anything, but not so much they can do nothing. Which is to say you can get a good education, but at some point you need to do something with your life other than gamboling, drugs and prostitutes [you can substitute/add whatever wasteful habits you want here]. It is quite obvious (almost a straw-man) that if everybody did that society would collapse. I want enough of a fall back that people survive. I want it uncomfortable enough that people decide to get a more productive job if they can. (leaving only the disabled to actually live on the basic income) Of course I don't know what your habits are. If they are walking around the park you can do that cheaply, I'm willing to take the risk that you won't get bored quickly doing that.
  - ythn 9y ago
    At what point is your definition of "discomfort" another person's definition of "poverty?" Discomfort today is poverty tomorrow, especially if the standard of living keeps going up.
    - bluGill 9y ago
      this is a trick question and the fact that I do not have an answer is why I ultimately oppose the idea (everything else I can see the pros and cons going either way so I would want to see how they plays out in practice in our culture before I give judgement on if it is good or bad). The reason it is a trick question is based on the following two real people I know. (I'm trying to hide as many details as I can, but these are real people so there isn't much I can do) Person A was a straight-A student until she dropped out in 10th grade. Then she a few kids by different men - all losers who rarely held any sort of job (she dropped out before getting pregnant, but getting pregnant was her plan). In short the stereotypical image of "folks standing in a welfare line" Person B was born with Downs Syndrome. He is assistant usher at the movie theater, a job he has held for years and does okay in, but when there are problems the head usher (some kid who has only worked there for 2 weeks) takes over. When we are talking person A: she made her bad choices and I have no sympathy for them, she can live well below the poverty line. I make some different choices: when she dropped out her life was better (no school) than mine, but by choosing to continue in school I made my life better. When we are talking person B: life is stacked against him. He was never able to amount to anything, but he has my full sympathies. I want him to have a few luxuries in life that he will never earn himself. There are lots of other cases you can point to where ultimately I want to give a different answer on a case by case basis.
pesfandiar 9y ago
Iranian expat with some insight into this program here; any study that doesn't isolate confounding factors will be inconclusive at best, especially since the Iranian economy has been changing drastically in recent years. Hyperinflation during Ahmadinejad administration, economic embargoes, and the nuclear deal affected people's lives so much more than a measly basic income. Also, a fraction of the average (or even median) income is not a good indicator, because of high class division in Iran. It certainly doesn't translate into what $16K can give you in the US. E.g. if you're an unemployed youngster living with your parents in Tehran, it can help you with your entertainment budget, but it's in no way a life-changing amount.
- bryondowd 9y ago
  Just curious, but would it be enough to subsist in a rural part of the country? Just curious what the amount of money could cover, in terms of food and shelter.
  - pesfandiar 9y ago
    It could be a big help. In fact, the program's name roughly translates to "subsidy" or "helper amount", which sets the right expectation I guess. The cost of living is vastly different in urban centres and rural areas though, as is the quality of life in general. You can live on that kind of money if you live in the boonies and only consume locally-sourced food (increasingly rare as the middle east is getting hit hard by climate change), but anything that's imported will be prohibitively expensive. That includes medicine and fuel. Once you enter a large city (where you can have an acceptable quality of life), shelter becomes very expensive. Putting together the deposit to rent an apartment for Iranian youth is almost as hard as saving up for a mortgage downpayment in the US.
    - geff82 9y ago
      And honestly, most now live in the cities. By the way on a good standard for many and with almost no homeless people to be seen (I call you, USA).
darioush 9y ago
Having lived in Iran, the program is not a UBI, but a "replacement" for the petroleum and energy subsidies that were provided to all. So, instead of the government paying for your gas - which subsidies consumption - the idea is to pay a fixed subsidy primarily to benefit the very poor. This income has a large benefit for the very poor parts of society, but they still have to work to make ends meet. If this amount of money makes a difference to you, you probably have no disposable income. This is more akin to a tax reform than a UBI program, though.
neilwilson 9y ago
Why basic income experiments are a fallacy of composition. https://medium.com/modern-money-matters/is-basic-income-basically-finnished-babadac2d29b https://medium.com/modern-money-matters/is-basic-income-basi...
geff82 9y ago
I disagree to call this a UBI. No one in Iran was ever able to live from this in any way. It is like the 193€ child support the German state pays to every parent: it is helping, but I could not pay even the lowest rent in the country with it. I know this "UBI" from Iran because of my relatives there and essentially it was considered a joke and no one cried a tear when it went away.
idibidiartists 9y ago
I believe UBI would lead to changing the fundamental nature of money as it goes from scarcity based to rate-of-flow based in its value basis. It will work as long as people who receive UBI spend that money, as opposed to horde it. That mens UBI should be given to people who have no other sources of income, not to those who will likely just accumulate it with no intent to spend it.
- vizeroth 9y ago
  There's a significant gap between the bottom end of people with other sources of income and those who will "accumulate it with no intent to spend it". Further, even if you give it to everyone across the board, most of the people who don't need it for basic expenditures and have no intention of saving for a big purchase at some point in the future (e.g. a down-payment on a car or house) would likely be making enough money that the UBI is less than their taxes.
matthjensen 9y ago
Here is a new working paper on implementing a budget-neutral UBI in the US. We use a suite of open source models. https://www.aei.org/wp-content/uploads/2017/05/UBI-working-paper.pdf https://www.aei.org/wp-content/uploads/2017/05/UBI-working-p...
ttoinou 9y ago
This article is really bad. M. Friedman has nothing to do with UBI. What is the origin of the money given ? No one seem to talk about it. From the paper "Assuming that leisure is a normal good, economic theory predicts that an increase in unearned income reduces labor supply [...] In this paper we study a large cash transfer program in a developing setting, one that has come under criticism for its potential negative labor supply effect" Why would reducing the labor supply be a bad thing ? If we can live the same lives and work less, that's definitely a good thing.
- gorkemyurt 9y ago
  I agree. Milton Friedman says; "Instead of giving non-cash benefits like food stamps, housing vouchers and education we should calculate how much those benefits cost per person distribute that to people as negative income tax." Government spends tons of resources running these programs and leads to corruption and unfair distribution for a lucky few, "bucket is leaking". Every single UBI proposal/experiment I have seen keeps all the benefits and then adds an extra basic income payment, which works fine in a small experiment but quickly becomes unaffordable if you scale it to the whole country.
- ende 9y ago
  Friedman advocated a form of UBI called negative income tax. Today we know it applied as policy in the form of the EITC.
  - ttoinou 9y ago
    Didn't know the US EITC, thanks for the info. Read the wikipedia entry, it seems aweful. I actually like M.F. negative income tax as a theorical idea, but don't think it'll ever be applied the way he formulated it.
  - dragonwriter 9y ago
    The EITC is not a negative income tax or UBI, it's a ramp-up/ramp-up means-tested and behavior-tested welfare program. It may have been inspired by the NIT, but the essence of the inspiration was lost entirely in conventional welfare-program thinking.
ghufran_syed 9y ago
My concern about UBI is not the initial situation, but what happens in a democratic society, when the majority of citizens can continually vote for increases in the level of UBI, which will be paid for by the small number of the richest in society. If $20000 UBI annually is good, why not vote to increase it to $40000? Or $60000? Or $1,000,000? And will "the rich" be happy to keep paying more and more, while their level of work remains the same? Isn't there some level of taxation at which those people would quite rationally either work (and earn) less, or go live in another country that doesn't have a similar tax burden? I feel there is something very different between the richest 80% choosing to tax themselves more to support the poorest 20%, vs the poorest 80% or 90% forcing the richest 10 or 20% to hand over an ever-increasing amount of money. Even if you think that is morally correct, I don't think it would work
- flukus 9y ago
  The situation is no different than it is now. People can vote for welfare increases or lower taxes, or vote for increased taxes on the rich.
nwah1 9y ago
The biggest problem is that, as per the law of rent, rents will rise by the amount of the dividend once the market has time to react to it. There would be constant compulsion to raise the basic incomes at the cost of greater and greater public debts or taxes on production... and all the corresponding deadweight loss. However, if it were funded by taxing land by value, then the rising rents would produce a sustainable public surplus.

151 points by pmcpinto 9y ago

Maybe a dumb question, but I have always wondered this. Won't UBI just shift the poverty line to a value above whatever it is now(0 maybe), without changing the income inequality/wealth difference. In a hyper-simplistic hypothetical scenario, if it's assumed that a person is poor if he has $0, with UBI, he'll have $X/month, making him above the poverty line. But now the entire country, rich and poor, have at least $X/month, which might translate to an increase in cost of all goods/services by $X, rendering the poor as poor and rich as rich.

Chinjut 9y ago
It's unlikely for $0 pre-basic income and $X post-basic income to have the same value. The former is, well, nothing, and the latter is, well, something.
AnthonyMouse 9y ago
> Won't UBI just shift the poverty line to a value above whatever it is now(0 maybe), without changing the income inequality/wealth difference. As far as I can tell this keeps coming up because the answer is "no" but the explanation is complicated. The are two types of inflation. One is industry-specific and happens when the government subsidizes something. For example, if the government provides education subsidies then the cost of education increases compared to other things like food or transportation. The other is currency-specific. When the government prints a lot of new currency, the value of a dollar goes down. Prices go up not because there is more demand for products but because there is less demand for dollars. A UBI doesn't do either of those things. It doesn't subsidize any specific thing and it doesn't create any new money. The closest you can get is that there is a theory that higher income people spend less of their income than lower income people, so anything that transfers money from higher income people to lower income people is equivalent to creating new money, because the money in the hands of higher income people was effectively out of circulation. That general form has nothing to do with a UBI. It applies equally to any government program that produces per-capita public benefits from sales or income tax revenues. The rich pay a tax and the poor get public schools and housing subsidies, which means the poor have the money they didn't spend on schools or housing and can spend it on something else. Moreover, the effect is small (most people aren't rich enough to never spend their money), and it's simple to compensate for it -- the government is constantly creating new currency because more currency is required as the economy grows. So if you want less inflation, print less money. And that's assuming that moderate inflation would be a problem, but in fact it's a benefit. The country is in a debt crisis. People have too much mortgage debt, too much student debt, too much credit card debt. The government itself has too much public debt. The prices of housing and education and medicine are too high, but lowering nominal prices is very difficult because everyone has mortgages and contracts that assume the existing prices. The US balance of trade has been out of whack for decades. Lowering the value of the dollar helps with all of those things because it lets the nominal price of those things stay the same while reducing their actual cost back to sane levels.
- mac01021 9y ago
  Imagine, though, a city where most poor people earn about $1000 per month spend about $750 rent (housing). If the landlords catch wind that everyone is now taking in $1200 after the institution of UBI, won't they collectively up their rates to $950 (because where else are the tenants going to go)? And who does that help but the landlords? This is the (less abstract) way I've seen the question asked before. I'm not necessarily saying that this is what would happen (it could though, especially if the landlords are on the zoning board). I'm just saying you haven't necessarily answered the concern here.
  - AnthonyMouse 9y ago
    > Imagine, though, a city where most poor people earn about $1000 per month spend about $750 rent (housing). If the landlords catch wind that everyone is now taking in $1200 after the institution of UBI, won't they collectively up their rates to $950 (because where else are the tenants going to go)? Where is the extra $200/month supposed to come from? A UBI doesn't create new money. If the average person had $1000/month before then they will still have $1000/month. For the government to pay $1 in UBI it has to collect $1 in taxes. There is no extra money for the landlords to capture.
    - dragonwriter 9y ago
      > For the government to pay $1 in UBI it has to collect $1 in taxes. Excluding debt financing (with which it need not increase present taxes) or monetization (with which it need never increase taxes.) > There is no extra money for the landlords to capture. Even in the balanced-budget, non-monetized case, landlords renting to a particular social class may have more money to capture if the taxes are levied on a different class (landlords or other vendors selling to a different class may lose money for the same reason.)
      - AnthonyMouse 9y ago
        > Excluding debt financing (with which it need not increase present taxes) or monetization (with which it need never increase taxes.) Which is equally true of any government program financed in those ways. > Even in the balanced-budget, non-monetized case, landlords renting to a particular social class may have more money to capture if the taxes are levied on a different class (landlords or other vendors selling to a different class may lose money for the same reason.) That's hardly "UBI leads to fully-canceling prices increases".
lastyearman 9y ago
If productivity stays the same, then all we can ever do is to shift wealth around. That is all there is to it. So the important questions are: does UBI increase or decrease productivity and how is wealth divided after UBI.

cbanek 9y ago

These studies have been popping up on HN, and they're all pretty interesting, yet all seem fairly inconclusive to me. This one started in 2011, and I'm guessing since the article doesn't say they stopped, that it is still going on? > The report found no evidence for the idea that people will work less under a universal income, and found that in some cases, like in the service industry, people worked more, expanding their businesses or pursuing more satisfying lines of work. but yet they say: > The researchers did find that young people — specifically people in their twenties — worked less, but noted that Iran never had a high level of employment among young people, and that they were likely enrolling in school with the added income. It seems like tracking how many people who are enrolled in school would be fairly easy to track to verify this. They do say in the paper that youth does have a reduced labor rate, but then they say it might be education (but provide no numbers): > While there is no evidence of a negative supply response for the average worker, male or female, there is one for youth in their twenties. If one were to expect a strong negative impact it would be for youth, who have weak job attachment, can stay in school longer, or enjoy more leisure, though we do know which of these options they choose. While I do think there's value in looking at the micro circumstances, I do wonder how culture will change and shift because of UBI, and how that will also affect its outcome. For example, if we say that we believe in UBI, that means that basically everyone should have enough money to live. We're offering an entitlement to which people will feel entitled. Over time, how will that change society? One past example of this would be college education. Nowadays everyone goes to college, but it wasn't always so. Would as many people to go college if society didn't push them that way? One other such cultural shift might be women entering the workforce, or desegregation, and how that lead toward the fight for civil rights.

simion314 9y ago
Since many things happen in that period this is not a controlled experiment so you can't have strong conclusions, they can notice some correlations at most such as the program did not increased the number of unemployed people, maybe something else balanced this program but this was not found so the authors are challenging others to look at the data and find things that support the idea that unemployment would rise or other bad side effects.

Endama 9y ago

I wonder if UBI actually allows the economy to become more efficient. It could be the case that an abusive employer would be more severely punished by the labor market if the economic cost to the worker is diminished by a UBI (i.e. My boss is a jerk, I'm just going to quit and find an employer that treats me better). I would assume then that satisfied employees, with good employers, would then be more productive than their dissatisfied counterparts. It also seems reasonable to assume that workers would also be more likely to create new businesses entirely if the personal financial risks associated with doing so were diminished by a UBI.

bryondowd 9y ago
This seems like the biggest win, to me. When your employer represents your important but nonessential income, while your basic survival is guaranteed, it becomes far easier to tell an asshole boss to stuff it while you go looking for new work. It becomes easier to move to a new location without getting a job in advance. It becomes easier to start your own enterprise. It even makes more sense to work part time while developing more in-demand skills or just taking a partial vacation. It opens up so many freedoms of choice that are currently only afforded to people who can make lots of excess money and stash it away as savings.
- lxmorj 9y ago
  As shitty as working for Uber might be, this is a huge benefit that they currently present. You can get by driving for Uber for a bit, allowing you to hold off on accepting an okay outcome and find better employment opportunities than otherwise.
  - Drdrdrq 9y ago
    Except - you are not searching for opportunities, you are working. It takes your focus and time. I agree that it helps you get by, but the cost is much higher than it would be with basic income.
- corford 9y ago
  >It becomes easier to start your own enterprise. I lived in France for a few years and noticed something that validates this a little. French unemployment pay is quite generous (can't remember the exact figures but it's close to or 100% of your last salary for 12 months) - effectively quasi UBI for a year. I knew a lot of 'twenty somethings' that used this cushion to give them 12 months runway to try their hand at a startup.

nnfy 9y ago

>The report found no evidence for the idea that people will work less under a universal income, and found that in some cases, like in the service industry, people worked more, expanding their businesses or pursuing more satisfying lines of work. >The researchers did find that young people — specifically people in their twenties — worked less, but noted that Iran never had a high level of employment among young people, and that they were likely enrolling in school with the added income. Seems the authors' agendas are leaking through, these two consecutive paragraphs from the article essentially contradict each other and the premise of the article. What I read: "we found evidence that young people did work less, but we hand waved it away with a seemingly plausible and totally unsubstantiated assumption." This is politicized science.

bryondowd 9y ago
Alternatively, if the decrease in young people was marginal, and the increase in other age groups balanced it out, it could be true that there was no overall decrease. Hard to say without seeing their numbers. Especially if these young people were only a tiny percentage of the labor pool to begin with, it may be an inconsequential blip in the bigger picture, which is how I read it. In other words, if young people were 10% of the labor pool, and experienced a 10% reduction in work, that would be significant to that demographic, but a less significant 1% increase overall would mask it from impacting the bigger picture.
swampangel 9y ago
The linked report makes the distinction a little clearer: > For the most part, we focus on the labor supply of poorer workers, who are more likely to reduce their labor supply as a result of a modest increase in unearned income. Our results do not indicate a negative labor supply effect for either hours worked or the probability of participation in market work, either for all workers or those in the bottom 40% of the income distribution. We do find a negative labor supply effect for workers 20-29 years old for their hours worked.
- notahacker 9y ago
  The linked report is also more comprehensive than the summary, including the points that: (i) the next Iranian government and Iranian press strongly believe that it did cause massive reductions in labour supply in certain suggestions including citing a paper claiming a loss of 500,000-700,000 agricultural workers[2] (ii) the context of the poorer people not dropping out of work was a period of enormous inflation (caused in part by US sanctions) and the removal of enormous food and fuel subsidies which the program replaced and (iii) this measures very short term impacts (prior to the program launch and within the first three months): against the backdrop of rising prices and brand new US sanctions it's perhaps particularly unlikely that many poorer workers would rush to quite their jobs, even if it were to produce such an effect in the longer term in times of greater economic security (iv) it's actually specifically focusing whether people were more likely to quit their jobs than people who didn't get the subsidy for the first three months due to paperwork problems rather than whether employment didn't fall overall; the paper correctly points out that in an economy with wide access to cheap credit (not Iran) the orthodox economic view would actually expect those receiving subsidies now and those expecting to receive them asap to respond by reducing willingness to supply labour by similar amounts (v) there was a perfectly good reason for them doing the study that way because Iranian labour force trends are all over the place TLDR: the actual study doesn't tell us very much through no fault of the authors, because a lot of other shocks were happening to the economy at the time. Which is a shame, because it was a huge new program in a middle income country that didn't involve outside capital, which would have made it much better evidence of a UBI's expected effects than most studies carried out. [2]having read that paper as well, it doesn't appear to be a claim with empirical support

ChuckMcM 9y ago

Specifically they found that generally people didn't work less, although young people did and they aren't sure if they are just not working, or if they are going to school. They counter that observation that employment in young people is also low in general. (presumably allowing for systemic unemployment of some form). There is a consistent outcome from many BI tests, which is that just knowing there will be some money each month can mitigate stress and anxiety in people. People with reduced stress and anxiety are both more productive and more functional.

maxxxxx 9y ago
I think you can judge success of UBI only over decades and generations of people. People who grew up in a world of UBI will have a totally different view on life than current generations. I am not saying it's good or bad but I think it will be very difficult to figure out what the eventual outcome of UBI will be in a few decades.
- vorg 9y ago
  > you can judge success of UBI only over decades and generations of people. People who grew up in a world of UBI will have a totally different view on life Thay's why I think experiments like the Finnish one also mentioned on the linked page: "Finland will select 2000 unemployed citizens to receive 560 euros a month for 2 years - no strings attached. It's part of an experiment to find out what happens people's desire to work when they're guaranteed a basic income." are nearly useless for evaluating the effect of UBI on an economy.

tezka 9y ago

Even though I am sympathetic to the idea of Universal income, the fact the Iran's economy experienced inflation as high as 45% the rapid rise of which correlates closely with the start of this program[1], should make this a worrisome rather than promising case study. [1] https://d3fy651gv2fhd3.cloudfront.net/charts/iran-inflation-cpi.png?s=irairaninfnrate&v=201705282226v&d1=20070101&d2=20171231 https://d3fy651gv2fhd3.cloudfront.net/charts/iran-inflation-...

a-priori 9y ago
That's more attributable to the sanctions placed on Iran in 2010, in response to their nuclear program, which led to shortages and price surges. https://en.wikipedia.org/wiki/United_Nations_Security_Council_Resolution_1929 https://en.wikipedia.org/wiki/United_Nations_Security_Counci... http://www.nytimes.com/2013/04/02/world/middleeast/irans-double-digit-inflation-worsens.html http://www.nytimes.com/2013/04/02/world/middleeast/irans-dou...
intopieces 9y ago
It also correlates closely to the increase in banking sanctions, which were enacted very close to the spike in that graph. https://www.nytimes.com/2013/06/04/world/middleeast/us-adds-to-its-list-of-sanctions-against-iran.html https://www.nytimes.com/2013/06/04/world/middleeast/us-adds-...
- tezka 9y ago
  sure, sanctions may very well be one of the factors causing such high inflation levels (although I am hesitant to say that they completely explain away the massive increase in the money supply. FWIW, according to IMF, in 2008 Iran's M1 base has been around $70 billion[1]. Giving a population of over 75M a $1.5 * 365 does nicely increase that base by around 50%). My main main point however was not to claim that the UBI program caused the inflation, rather to challenge the reliability of the main claim of the report as to the change the UBI makes to people's working behavior. Under such high inflation, whatever the cause, people need to work more, rather than less, to make ends meet, so comparing their behavior to pre-inflation periods is just bad science. [1] https://en.wikipedia.org/wiki/Central_Bank_of_the_Islamic_Republic_of_Iran#Money_supply_and_inflation https://en.wikipedia.org/wiki/Central_Bank_of_the_Islamic_Re...

jasode 9y ago

Found a litte more background info.[1] If I'm reading that right, Iran basically tried to swap fuel subsidies with "universal grants" (aka "basic income"). The grants were a lower amount than the fuel subsidies so it was a strategy for the government to reduce overall spending. What's not clear is if people kept working to help pay for the shortfall in fuel subsidy or compensate for spending on other goods that the higher fuel subsidies allowed. Maybe this clarification is in the researchers 31 page pdf but I haven't had a chance to read the whole thing. [1] https://books.google.com/books?id=MPahDQAAQBAJ&pg=PT162&lpg=PT162#v=onepage&q&f=false https://books.google.com/books?id=MPahDQAAQBAJ&pg=PT162&lpg=...

kangnkodos 9y ago

The article says, “In the U.S. such a measure would translate to about $16,000 per year.” No. $1.50 per day per household is not the same as $45.00 per day. I see what they did. They zeroed in on 29% of median income. That’s a nice trick to make their argument stronger, but it makes no sense. $1.50 per day is $1.50 per day regardless of the median income. This article tells us what would probably happen if you gave a family $1.50 per day. It says absolutely nothing about what would happen if you gave them $45.00 per day

bryondowd 9y ago
I was going to argue with this, but looking into it, it seems the cost of living is only about 50% of the US, so it's really more equivalent to $3/day or so in the US, which would be about $1k/yr. So yeah, I'm a lot less impressed by this now. It looks like you'd be able to maybe cover basic staple foods in Iran with this income, without anything left for shelter or other necessities. But that said, it means the median income is only about equivalent to $3k/yr US in spending power, which is incredibly depressing, and makes me wonder if I'm doing some math wrong, since surely half the population can't be poor to the point of homelessness. Perhaps the numbers I'm looking at don't factor cost of living in rural vs urban areas, and there is an order of magnitude difference?
- notahacker 9y ago
  Shelter costs very little in poorer countries where the land is worth much less and building regulations and taxes are reduced (and some consumer goods Iranians don't expect to have or don't replace regularly cost more) which is one of the big problems with PPP adjustments trying to assess costs of living in different countries based on a basket of goods. Not that the unconventional method the article uses of scaling median income to suggest it's as high as $16k per year is any more representative. To the extent it's possible to compare the standard of living of an Iranian on UBI with a US standard of living it's probably in between those extremes...
  - gorkemyurt 9y ago
    Very few homeless people in Iran as people can always return back to their 'village' if they don't make it in the city. There will be relatives helping them out and land more or less costs nothing.

tuxidomasx 9y ago

To be honest, the idea of universal income appeals to me because it sounds like free money. So one could simply decide not to work at all and use that UBI money for housing, food, and habits and everybody would be fine with that. I can see how that would have appealed to my 20-something year old self; and it's not much different than how it appeals to my 30-something year old self.

bluGill 9y ago
You lost me with the "and habits". Bill Gates has said he wants his kids to have enough money to do anything, but not so much they can do nothing. Which is to say you can get a good education, but at some point you need to do something with your life other than gamboling, drugs and prostitutes [you can substitute/add whatever wasteful habits you want here]. It is quite obvious (almost a straw-man) that if everybody did that society would collapse. I want enough of a fall back that people survive. I want it uncomfortable enough that people decide to get a more productive job if they can. (leaving only the disabled to actually live on the basic income) Of course I don't know what your habits are. If they are walking around the park you can do that cheaply, I'm willing to take the risk that you won't get bored quickly doing that.
- ythn 9y ago
  At what point is your definition of "discomfort" another person's definition of "poverty?" Discomfort today is poverty tomorrow, especially if the standard of living keeps going up.
  - bluGill 9y ago
    this is a trick question and the fact that I do not have an answer is why I ultimately oppose the idea (everything else I can see the pros and cons going either way so I would want to see how they plays out in practice in our culture before I give judgement on if it is good or bad). The reason it is a trick question is based on the following two real people I know. (I'm trying to hide as many details as I can, but these are real people so there isn't much I can do) Person A was a straight-A student until she dropped out in 10th grade. Then she a few kids by different men - all losers who rarely held any sort of job (she dropped out before getting pregnant, but getting pregnant was her plan). In short the stereotypical image of "folks standing in a welfare line" Person B was born with Downs Syndrome. He is assistant usher at the movie theater, a job he has held for years and does okay in, but when there are problems the head usher (some kid who has only worked there for 2 weeks) takes over. When we are talking person A: she made her bad choices and I have no sympathy for them, she can live well below the poverty line. I make some different choices: when she dropped out her life was better (no school) than mine, but by choosing to continue in school I made my life better. When we are talking person B: life is stacked against him. He was never able to amount to anything, but he has my full sympathies. I want him to have a few luxuries in life that he will never earn himself. There are lots of other cases you can point to where ultimately I want to give a different answer on a case by case basis.

pesfandiar 9y ago

Iranian expat with some insight into this program here; any study that doesn't isolate confounding factors will be inconclusive at best, especially since the Iranian economy has been changing drastically in recent years. Hyperinflation during Ahmadinejad administration, economic embargoes, and the nuclear deal affected people's lives so much more than a measly basic income. Also, a fraction of the average (or even median) income is not a good indicator, because of high class division in Iran. It certainly doesn't translate into what $16K can give you in the US. E.g. if you're an unemployed youngster living with your parents in Tehran, it can help you with your entertainment budget, but it's in no way a life-changing amount.

bryondowd 9y ago
Just curious, but would it be enough to subsist in a rural part of the country? Just curious what the amount of money could cover, in terms of food and shelter.
- pesfandiar 9y ago
  It could be a big help. In fact, the program's name roughly translates to "subsidy" or "helper amount", which sets the right expectation I guess. The cost of living is vastly different in urban centres and rural areas though, as is the quality of life in general. You can live on that kind of money if you live in the boonies and only consume locally-sourced food (increasingly rare as the middle east is getting hit hard by climate change), but anything that's imported will be prohibitively expensive. That includes medicine and fuel. Once you enter a large city (where you can have an acceptable quality of life), shelter becomes very expensive. Putting together the deposit to rent an apartment for Iranian youth is almost as hard as saving up for a mortgage downpayment in the US.
  - geff82 9y ago
    And honestly, most now live in the cities. By the way on a good standard for many and with almost no homeless people to be seen (I call you, USA).

darioush 9y ago

Having lived in Iran, the program is not a UBI, but a "replacement" for the petroleum and energy subsidies that were provided to all. So, instead of the government paying for your gas - which subsidies consumption - the idea is to pay a fixed subsidy primarily to benefit the very poor. This income has a large benefit for the very poor parts of society, but they still have to work to make ends meet. If this amount of money makes a difference to you, you probably have no disposable income. This is more akin to a tax reform than a UBI program, though.

neilwilson 9y ago

Why basic income experiments are a fallacy of composition. https://medium.com/modern-money-matters/is-basic-income-basically-finnished-babadac2d29b https://medium.com/modern-money-matters/is-basic-income-basi...

geff82 9y ago

I disagree to call this a UBI. No one in Iran was ever able to live from this in any way. It is like the 193€ child support the German state pays to every parent: it is helping, but I could not pay even the lowest rent in the country with it. I know this "UBI" from Iran because of my relatives there and essentially it was considered a joke and no one cried a tear when it went away.

idibidiartists 9y ago

I believe UBI would lead to changing the fundamental nature of money as it goes from scarcity based to rate-of-flow based in its value basis. It will work as long as people who receive UBI spend that money, as opposed to horde it. That mens UBI should be given to people who have no other sources of income, not to those who will likely just accumulate it with no intent to spend it.

vizeroth 9y ago
There's a significant gap between the bottom end of people with other sources of income and those who will "accumulate it with no intent to spend it". Further, even if you give it to everyone across the board, most of the people who don't need it for basic expenditures and have no intention of saving for a big purchase at some point in the future (e.g. a down-payment on a car or house) would likely be making enough money that the UBI is less than their taxes.

matthjensen 9y ago

Here is a new working paper on implementing a budget-neutral UBI in the US. We use a suite of open source models. https://www.aei.org/wp-content/uploads/2017/05/UBI-working-paper.pdf https://www.aei.org/wp-content/uploads/2017/05/UBI-working-p...

ttoinou 9y ago

This article is really bad. M. Friedman has nothing to do with UBI. What is the origin of the money given ? No one seem to talk about it. From the paper "Assuming that leisure is a normal good, economic theory predicts that an increase in unearned income reduces labor supply [...] In this paper we study a large cash transfer program in a developing setting, one that has come under criticism for its potential negative labor supply effect" Why would reducing the labor supply be a bad thing ? If we can live the same lives and work less, that's definitely a good thing.

gorkemyurt 9y ago
I agree. Milton Friedman says; "Instead of giving non-cash benefits like food stamps, housing vouchers and education we should calculate how much those benefits cost per person distribute that to people as negative income tax." Government spends tons of resources running these programs and leads to corruption and unfair distribution for a lucky few, "bucket is leaking". Every single UBI proposal/experiment I have seen keeps all the benefits and then adds an extra basic income payment, which works fine in a small experiment but quickly becomes unaffordable if you scale it to the whole country.
ende 9y ago
Friedman advocated a form of UBI called negative income tax. Today we know it applied as policy in the form of the EITC.
- ttoinou 9y ago
  Didn't know the US EITC, thanks for the info. Read the wikipedia entry, it seems aweful. I actually like M.F. negative income tax as a theorical idea, but don't think it'll ever be applied the way he formulated it.
- dragonwriter 9y ago
  The EITC is not a negative income tax or UBI, it's a ramp-up/ramp-up means-tested and behavior-tested welfare program. It may have been inspired by the NIT, but the essence of the inspiration was lost entirely in conventional welfare-program thinking.

ghufran_syed 9y ago

My concern about UBI is not the initial situation, but what happens in a democratic society, when the majority of citizens can continually vote for increases in the level of UBI, which will be paid for by the small number of the richest in society. If $20000 UBI annually is good, why not vote to increase it to $40000? Or $60000? Or $1,000,000? And will "the rich" be happy to keep paying more and more, while their level of work remains the same? Isn't there some level of taxation at which those people would quite rationally either work (and earn) less, or go live in another country that doesn't have a similar tax burden? I feel there is something very different between the richest 80% choosing to tax themselves more to support the poorest 20%, vs the poorest 80% or 90% forcing the richest 10 or 20% to hand over an ever-increasing amount of money. Even if you think that is morally correct, I don't think it would work

flukus 9y ago
The situation is no different than it is now. People can vote for welfare increases or lower taxes, or vote for increased taxes on the rich.

nwah1 9y ago

The biggest problem is that, as per the law of rent, rents will rise by the amount of the dividend once the market has time to react to it. There would be constant compulsion to raise the basic incomes at the cost of greater and greater public debts or taxes on production... and all the corresponding deadweight loss. However, if it were funded by taxing land by value, then the rising rents would produce a sustainable public surplus.