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We'll Soon Have Hard Evidence About The Benefits Of A Universal Basic Income

It might seem like pie-in-the-sky insanity to just give people free money, but a massive new experiment in Africa could prove how effective it is.

We'll Soon Have Hard Evidence About The Benefits Of A Universal Basic Income

Illustrations: Photobank gallery via Shutterstock

The idea of a universal basic income, where the state gives everyone in society enough money to meet basic needs, has a long history. The conservative economist Milton Friedman championed it in the early 1960s, and President Richard Nixon even passed a basic income bill through the House of Representatives (before the measure was killed—by Democrats!—in the Senate). But while it's a great idea on paper and every small experiment with it has been a success, it's never really been properly tried and evaluated with a large section of people and over a long period.

That may now begin to happen. The recent burst of interest in UBI could see a number of biggish experiments—notably in Finland, where the government is planning a trial with up to 1,000 people—and in East Africa, where GiveDirectly, a pioneer in direct cash transfers, is planning a 10-15 year pilot. After years of conjecture about the possible merits and demerits of UBI, we could finally get some data to go on.

GiveDirectly's cofounder Michael Faye says the advantages of experimenting in Africa start with costs. The nonprofit's $30 million pilot will cost about 30 times less than the equivalent study in the U.S. or Europe. Up to 15,000 people will be involved, with 6,000 getting the full basic income amount (probably about $1 a day) and the rest getting one of two variants: the same amount over a shorter period (two or five years, say) and a smaller amount.

Faye expects the first results to start appearing well before the end of the study, which will be evaluated by outside academics.

"We won't need to wait 10 years to find out the impact. The expectation of getting an income for that long could potentially change the decisions [participants are] making today about career, consumption, investment, and so on," he says. "If we come along and say, 'We'll give you a cash transfer for a year,' you might not make some of the life-changing decisions you would if you were to receive it continuously over a longer period of time."

GiveDirectly—which we've covered before—bypasses the normal intermediaries in foreign aid, funneling cash directly to poor people. And it's demonstrated good results. An independent study showed it helps raise family earnings and cut the number of kids that go without food. Meanwhile, a big World Bank study-of-studies last year showed how cash, capital goods or livestock were better at promoting employment than micro-finance and training programs.

The literature on cash transfers also helps beat back a common complaint about a universal basic income: that it will make people lazy and encourage their vices. Researchers recently reviewed 19 studies covering cash transfers and the use of alcohol and cigarettes. In four-fifths of cases, the effect was actually negative: that is, people drank and smoked less. Only in 2% of cases was the impact positive in a significant way.

Proponents of basic income argue that it would reduce bureaucracy and waste compared to traditional forms of welfare, and empower people to make their own economic decisions. "Across many countries and continents, the evidence is remarkably consistent on the positive impact of cash transfers. The exact mechanism and use of the money may differ, but at the headline level, the conclusion is often similar," Faye says.

GiveDirectly's pilot is due to start at the end of 2016. It will be closely watched by the growing number of people advocating for a basic income in both developing and developed countries.

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