For years now, GiveDirectly has been conducting the world’s largest test of basic income: It is giving around 6,000 people in rural Kenya a little more than $20 a month, every month, starting in 2016 and going until 2028. Tens of thousands more people are getting shorter-term or differently structured payments.
One of the big questions GiveDirectly is trying to answer is how to direct cash to low-income households. “Just give cash” is a fun thing to say, but it elides some important operational details. It matters whether someone gets $20 a month for two years or $480 all at once. [...] A certain $20 every month can help you budget and take care of regular expenses, while $480 all at once can give you enough capital to start a business or another big project.
The latest research on the GiveDirectly pilot, done by MIT economists Tavneet Suri and Nobel Prize winner Abhijit Banerjee, compares three groups: short-term basic income recipients (who got the $20 payments for two years), long-term basic income recipients (who get the money for the full 12 years), and lump sum recipients, who got $500 all at once, or roughly the same amount as the short-term basic income group. The paper is still being finalized, but Suri and Banerjee shared some results on a call with reporters this week.
By almost every financial metric, the lump sum group did better than the monthly payment group. Suri and Banerjee found that the lump sum group earned more, started more businesses, and spent more on education than the monthly group. “You end up seeing a doubling of net revenues” — or profits from small businesses — in the lump sum group, Suri said. The effects were about half that for the short-term $20-a-month group.
The explanation they arrived at was that the big $500 all at once provided valuable startup capital for new businesses and farms, which the $20 a month group would need to very conscientiously save over time to replicate. “The lump sum group doesn’t have to save,” Suri explains. “They just have the money upfront and can invest it.”
Intriguingly, the results for the long-term monthly group, which will receive about $20 a month for 12 years rather than two, had results that looked more like the lump sum group. The reason, Suri and Banerjee find, is that they used rotating savings and credit associations (ROSCAs). These are institutions that sprout up in small communities, especially in the developing world, where members pay small amounts regularly into a common fund in exchange for the right to withdraw a larger amount every so often.
“It converts the small streams into lump sums,” Suri summarizes. “We see that the long-term arm is actually using ROSCAs. A lot of their UBI is going into ROSCAs to generate these lump sums they can use to invest.”
As @stu2b50 mentioned, this really isn't UBI in the sense that most people in the western world are thinking of. It's a lot closer to the established concept of microloans. I'm not surprised at...
As @stu2b50 mentioned, this really isn't UBI in the sense that most people in the western world are thinking of. It's a lot closer to the established concept of microloans.
I'm not surprised at all by the results, though it's always good to get things validated by data. Lump sums make a big difference but are very hard to come by. It's difficult to explain directly without coming across the wrong way, but it's really hard to save up money in rural Africa. There are so many demands on you that rural Africans find it simply impossible to put money away. Big purchases - like a sheet of metal for a new roof - are almost universally handled by getting one or more loans.
So for that reason, it makes sense to me that the monthly payments probably just vanished into the ever-present gaping need, while the lump sums were used to do things like start businesses.
I think it's a bit strange to measure the success of basic income in terms of metrics like "businesses started" or "money gained after one year" The goal is to ease off on financial pressures the...
I think it's a bit strange to measure the success of basic income in terms of metrics like "businesses started" or "money gained after one year"
The goal is to ease off on financial pressures the lower classes experience and reduce the need for "arbitrary jobs" that people hold just to exist, that nobody is really passionate about. It's cool that people feel like they can use their extra money to start a business or invest in something, but it seems antithetical to the idea in general. People should feel less pressure to participate in capitalistic grinds, and it would be nice to see metrics like "time devoted to family or hobbies" or some general happiness index.
That's mostly Vox's fault for characterizing this as a "basic income experiment". I don't believe GiveDirectly has ever counted themselves as such. GiveDirectly is inquiring about a different...
Exemplary
That's mostly Vox's fault for characterizing this as a "basic income experiment". I don't believe GiveDirectly has ever counted themselves as such. GiveDirectly is inquiring about a different problem: when giving charity aid to the needy, is it best to give them resources (like food, or water filters, etc) or just give them money and let them buy what they need? There's arguments either way, but what GiveDirectly is arguing is that its better to just give them money - money's fungibility is more beneficial than the advantages of converting it to resources beforehand.
People should feel less pressure to participate in capitalistic grinds, and it would be nice to see metrics like "time devoted to family or hobbies" or some general happiness index.
This is so far away from the Maslow hierarchy the people GiveDirectly services that it's a bit absurd to try and measure it. Monetary wealth is directly linked to happiness, not to mention surviving another day, at that level of poverty.
If you give someone no-strings cash and they start a business then that’s clearly what they want to do. And if it’s successful then you don’t need to give them cash anymore. A more interesting UBI...
If you give someone no-strings cash and they start a business then that’s clearly what they want to do. And if it’s successful then you don’t need to give them cash anymore.
A more interesting UBI study for me would be in the US where I suppose we can maintain a high standard of living with only a fraction of people employed.
Yeah. Something was rubbing me the wrong way while reading this and I think that's it. No mention of happiness, or at least health indicators, or satisfaction with life and whatnot.
Yeah. Something was rubbing me the wrong way while reading this and I think that's it. No mention of happiness, or at least health indicators, or satisfaction with life and whatnot.
This is nothing more than welfare. The entire point of basic income is to be able to live a life that's above poverty and without needing to work. This "experiment" is absolutely pointless and no...
This is nothing more than welfare. The entire point of basic income is to be able to live a life that's above poverty and without needing to work. This "experiment" is absolutely pointless and no one in a developed country would take its results into consideration if they were voting on implementing basic income or not.
Specifically, people who donate money to GiveDirectly (or other charities) to help the poor might have interest in learning about what’s more effective. Politicians have nothing to do with that.
Specifically, people who donate money to GiveDirectly (or other charities) to help the poor might have interest in learning about what’s more effective. Politicians have nothing to do with that.
How does that help? I'm poor, how do I receive this money? What are you talking about? Basic income is all about the government giving money to the people.
How does that help? I'm poor, how do I receive this money?
Politicians have nothing to do with that.
What are you talking about? Basic income is all about the government giving money to the people.
I don’t want to make assumptions about your circumstances, but given you’re posting in a niche community on the internet and with a pretty good grasp of written English, I’d like to know more...
I don’t want to make assumptions about your circumstances, but given you’re posting in a niche community on the internet and with a pretty good grasp of written English, I’d like to know more about your situation.
When you say that you’re poor, do you think being given an income or chunk of money like GiveDirectly (in this case, $20 per month) would substantially change your year?
I think the relative poverty in the US is absolutely crushing, but it’s also a very different experience to the absolute poverty in Africa. I’d just like to make sure we’re on the same page when it comes to further discussion on this topic.
I would take these results into consideration. Are we going to force recipients of basic income to not work? The article clearly says that long-term monthly payments provide flexibility for...
I would take these results into consideration.
Are we going to force recipients of basic income to not work?
The article clearly says that long-term monthly payments provide flexibility for recipients to decide whether to invest and, therefore, work as a possibility, or receive the money and, possibly, not work.
These results can be extrapolated and we would need evidence to plainly discard them as useless in the poor population of developed countries.
Yes, the payments are unconditional. There's an assumption that many of the very poor people getting the money do work, that the payments help them increase their income from working, and that's a...
Yes, the payments are unconditional. There's an assumption that many of the very poor people getting the money do work, that the payments help them increase their income from working, and that's a good thing.
I'm skeptical about extrapolation because the available opportunities are different. The people getting the payments in GiveDirectly campaigns in Africa are living in villages in remote, rural areas. For example, it doesn't seem like there is any rent to pay. If someone wants better shelter, a tin roof instead of a thatched roof, they need to build it, and it's the cost of materials that's holding them back.
It doesn't seem like there's much in the way of regulatory restrictions about what businesses they could start? I wonder how property rights work there?
They live in different contexts regarding climate and absolute level of poverty. However, their situation is similar regarding the need for additional money. The results showed that long term...
They live in different contexts regarding climate and absolute level of poverty.
However, their situation is similar regarding the need for additional money. The results showed that long term payments offered the possibility of entering into debt (to use the money as a lump sum payment) or having a regular additional supply of money.
That is human behavior, and either to buy a bit of roof or some tools to begin working on something can be extrapolated to other humans living in different absolute levels of poverty.
Imagine that for 12 years you have a large portion of your rent paid. Or would you prefer to use your additional income to negotiate a loan to get closer to a down payment? That flexibility is achieved by one of the systems and I do not see how that cannot be extrapolated. It does not matter what they buy or for what they use the money. Long term payments seem to be the best.
That's certainly a plausible argument about how it might work, but still, the experiment itself doesn't tell us how far its results will generalize. You can argue that people are all the same or...
That's certainly a plausible argument about how it might work, but still, the experiment itself doesn't tell us how far its results will generalize. You can argue that people are all the same or that there are important differences. Other experiments will be needed to tell which argument holds up.
Glad that you open up to the possibility that human behavior will be the same in other societies. In fact, I do not see a reason why not in this specific issue. Maybe next year will not work the...
Glad that you open up to the possibility that human behavior will be the same in other societies. In fact, I do not see a reason why not in this specific issue.
Maybe next year will not work the same in the original place. However, it makes sense, a lot of sense, that the results might be replicated in another time and another place.
I think the way to go is to imagine multiple scenarios. Can I imagine how it might replicate in developed countries? Sure. But I can also imagine it not working for culture-specific reasons. How...
I think the way to go is to imagine multiple scenarios. Can I imagine how it might replicate in developed countries? Sure. But I can also imagine it not working for culture-specific reasons. How do you narrow that down? Imagination alone won't do it.
That's why more experiments are needed. Sometimes experiments are done in multiple countries. If it works in multiple cultures that are quite different from each other then it's reasonable to start thinking of it as a general rule.
(This sort of replication doesn't need to be done for physics because we can reasonably assume physics is the same everywhere.)
This is a fancy way of saying "I don't know." We start out in ignorance and even a large, well-done experiment only goes so far to change that.
How do you know you need more experiments? Where are you generalizing from? Experience in economics show that some behaviors, like those regarding this issue, can be generalized. It is a matter of...
How do you know you need more experiments? Where are you generalizing from?
Experience in economics show that some behaviors, like those regarding this issue, can be generalized. It is a matter of knowledge. Not imagination.
You need more experiments when you don't have strong theoretical justification that things work the same way everywhere. I'm not sure that's true of economics? There are broad rules of thumb but...
You need more experiments when you don't have strong theoretical justification that things work the same way everywhere.
I'm not sure that's true of economics? There are broad rules of thumb but many exceptions.
How do you know that? How do you know there are not strong theories regarding that issue. You are forcing your argument with common places assuming that there are unknowns everywhere in...
How do you know that? How do you know there are not strong theories regarding that issue.
You are forcing your argument with common places assuming that there are unknowns everywhere in everything.
Variability is finite and human behavior is very repetitive across cultures. Stability and choice are paramount for personal prosperity. This study is like confirming the obvious.
Besides you saying "it cannot be extrapolated because the context is different...", which is a common place. What specifically prevents you from postulating that it might be generalized? You have not provided but the slogan. What in the different context may cause that stable long term income is not the best way to invest in poor populations in comparison with short term or lump sump payments?
I do not see any reason.
It is good to be skeptical, but it has to be justified and specific. If not, never ever has been proven if I do not need to say why and just state it.
There are economic theories that treat people all the same (and as rational agents, too) to simplify the model, but that's understood to be not technically true, and I suppose this rests on the...
There are economic theories that treat people all the same (and as rational agents, too) to simplify the model, but that's understood to be not technically true, and I suppose this rests on the common-sense notion that if you travel the world then you will find that countries, customs, laws, and economic systems are often very different.
Why these results may not extrapolate? Be specific. You keep citing common places that can be applied to everything, from public health, to urbanization, to economics, etc. The study was about how...
Why these results may not extrapolate? Be specific. You keep citing common places that can be applied to everything, from public health, to urbanization, to economics, etc.
The study was about how to distribute free income. Therefore, fill the blank, "it cannot/might not be extrapolated because..._______________________________________________________ "
No more from my side.
From the article:
As @stu2b50 mentioned, this really isn't UBI in the sense that most people in the western world are thinking of. It's a lot closer to the established concept of microloans.
I'm not surprised at all by the results, though it's always good to get things validated by data. Lump sums make a big difference but are very hard to come by. It's difficult to explain directly without coming across the wrong way, but it's really hard to save up money in rural Africa. There are so many demands on you that rural Africans find it simply impossible to put money away. Big purchases - like a sheet of metal for a new roof - are almost universally handled by getting one or more loans.
So for that reason, it makes sense to me that the monthly payments probably just vanished into the ever-present gaping need, while the lump sums were used to do things like start businesses.
I think it's a bit strange to measure the success of basic income in terms of metrics like "businesses started" or "money gained after one year"
The goal is to ease off on financial pressures the lower classes experience and reduce the need for "arbitrary jobs" that people hold just to exist, that nobody is really passionate about. It's cool that people feel like they can use their extra money to start a business or invest in something, but it seems antithetical to the idea in general. People should feel less pressure to participate in capitalistic grinds, and it would be nice to see metrics like "time devoted to family or hobbies" or some general happiness index.
That's mostly Vox's fault for characterizing this as a "basic income experiment". I don't believe GiveDirectly has ever counted themselves as such. GiveDirectly is inquiring about a different problem: when giving charity aid to the needy, is it best to give them resources (like food, or water filters, etc) or just give them money and let them buy what they need? There's arguments either way, but what GiveDirectly is arguing is that its better to just give them money - money's fungibility is more beneficial than the advantages of converting it to resources beforehand.
This is so far away from the Maslow hierarchy the people GiveDirectly services that it's a bit absurd to try and measure it. Monetary wealth is directly linked to happiness, not to mention surviving another day, at that level of poverty.
If you give someone no-strings cash and they start a business then that’s clearly what they want to do. And if it’s successful then you don’t need to give them cash anymore.
A more interesting UBI study for me would be in the US where I suppose we can maintain a high standard of living with only a fraction of people employed.
Yeah. Something was rubbing me the wrong way while reading this and I think that's it. No mention of happiness, or at least health indicators, or satisfaction with life and whatnot.
This is nothing more than welfare. The entire point of basic income is to be able to live a life that's above poverty and without needing to work. This "experiment" is absolutely pointless and no one in a developed country would take its results into consideration if they were voting on implementing basic income or not.
The results might not generalize beyond very poor people in Africa, but it's not pointless, because some people actually do care about that.
Irrelevant, it doesn't matter what 99.9% of the population thinks, only what politicians think matters. They won't care about this.
Specifically, people who donate money to GiveDirectly (or other charities) to help the poor might have interest in learning about what’s more effective. Politicians have nothing to do with that.
How does that help? I'm poor, how do I receive this money?
What are you talking about? Basic income is all about the government giving money to the people.
I don’t want to make assumptions about your circumstances, but given you’re posting in a niche community on the internet and with a pretty good grasp of written English, I’d like to know more about your situation.
When you say that you’re poor, do you think being given an income or chunk of money like GiveDirectly (in this case, $20 per month) would substantially change your year?
I think the relative poverty in the US is absolutely crushing, but it’s also a very different experience to the absolute poverty in Africa. I’d just like to make sure we’re on the same page when it comes to further discussion on this topic.
I would take these results into consideration.
Are we going to force recipients of basic income to not work?
The article clearly says that long-term monthly payments provide flexibility for recipients to decide whether to invest and, therefore, work as a possibility, or receive the money and, possibly, not work.
These results can be extrapolated and we would need evidence to plainly discard them as useless in the poor population of developed countries.
Yes, the payments are unconditional. There's an assumption that many of the very poor people getting the money do work, that the payments help them increase their income from working, and that's a good thing.
I'm skeptical about extrapolation because the available opportunities are different. The people getting the payments in GiveDirectly campaigns in Africa are living in villages in remote, rural areas. For example, it doesn't seem like there is any rent to pay. If someone wants better shelter, a tin roof instead of a thatched roof, they need to build it, and it's the cost of materials that's holding them back.
It doesn't seem like there's much in the way of regulatory restrictions about what businesses they could start? I wonder how property rights work there?
They live in different contexts regarding climate and absolute level of poverty.
However, their situation is similar regarding the need for additional money. The results showed that long term payments offered the possibility of entering into debt (to use the money as a lump sum payment) or having a regular additional supply of money.
That is human behavior, and either to buy a bit of roof or some tools to begin working on something can be extrapolated to other humans living in different absolute levels of poverty.
Imagine that for 12 years you have a large portion of your rent paid. Or would you prefer to use your additional income to negotiate a loan to get closer to a down payment? That flexibility is achieved by one of the systems and I do not see how that cannot be extrapolated. It does not matter what they buy or for what they use the money. Long term payments seem to be the best.
That's certainly a plausible argument about how it might work, but still, the experiment itself doesn't tell us how far its results will generalize. You can argue that people are all the same or that there are important differences. Other experiments will be needed to tell which argument holds up.
Glad that you open up to the possibility that human behavior will be the same in other societies. In fact, I do not see a reason why not in this specific issue.
Maybe next year will not work the same in the original place. However, it makes sense, a lot of sense, that the results might be replicated in another time and another place.
I think the way to go is to imagine multiple scenarios. Can I imagine how it might replicate in developed countries? Sure. But I can also imagine it not working for culture-specific reasons. How do you narrow that down? Imagination alone won't do it.
That's why more experiments are needed. Sometimes experiments are done in multiple countries. If it works in multiple cultures that are quite different from each other then it's reasonable to start thinking of it as a general rule.
(This sort of replication doesn't need to be done for physics because we can reasonably assume physics is the same everywhere.)
This is a fancy way of saying "I don't know." We start out in ignorance and even a large, well-done experiment only goes so far to change that.
How do you know you need more experiments? Where are you generalizing from?
Experience in economics show that some behaviors, like those regarding this issue, can be generalized. It is a matter of knowledge. Not imagination.
You need more experiments when you don't have strong theoretical justification that things work the same way everywhere.
I'm not sure that's true of economics? There are broad rules of thumb but many exceptions.
How do you know that? How do you know there are not strong theories regarding that issue.
You are forcing your argument with common places assuming that there are unknowns everywhere in everything.
Variability is finite and human behavior is very repetitive across cultures. Stability and choice are paramount for personal prosperity. This study is like confirming the obvious.
Besides you saying "it cannot be extrapolated because the context is different...", which is a common place. What specifically prevents you from postulating that it might be generalized? You have not provided but the slogan. What in the different context may cause that stable long term income is not the best way to invest in poor populations in comparison with short term or lump sump payments?
I do not see any reason.
It is good to be skeptical, but it has to be justified and specific. If not, never ever has been proven if I do not need to say why and just state it.
There are economic theories that treat people all the same (and as rational agents, too) to simplify the model, but that's understood to be not technically true, and I suppose this rests on the common-sense notion that if you travel the world then you will find that countries, customs, laws, and economic systems are often very different.
Why these results may not extrapolate? Be specific. You keep citing common places that can be applied to everything, from public health, to urbanization, to economics, etc.
The study was about how to distribute free income. Therefore, fill the blank, "it cannot/might not be extrapolated because..._______________________________________________________ "
No more from my side.