- Everything you need to know about Monetary Policy Decisions - October 31, 2018
- The end of crises: can we reach financial stability? - March 15, 2018
- Basic income: actually a bad idea - December 13, 2017
- The BoFEB-traineeship - November 29, 2017
- The sunny side of the temperature - May 17, 2017
- Trumponomics - February 8, 2017
- Talent Day 2016: a career in the making? - December 16, 2016
Recently, talking about a basic income has become, so to speak, fashionable. The Dutch Bureau for Economic Analysis has calculated the effects of such a basic income, but argued that it would be a bad idea. Without the equations, but with qualitative arguments, I shall try here to explain why a basic income does not bring the benefits we hope to see from it and why the results of the experiments that so far took place are not reliable.
First, the theory. A basic income brings income security for all, with no conditions. There are two problems with such generosity. First, it is generic. This means that a basic income for everyone: the lawyer, the banker, the millionaire. This obviously needs to come at the expense of something. Here, there are two possibilities. First, it’s possible to raise taxes. However, they likely need to be raised to such a level that, in combination with a guaranteed income, that labour participation will fall, leading to even higher taxes to keep public finance sustainable. Second, it’s possible to lower the basic income to such a level that it remains affordable. This will most likely mean a fall in income for those who are social security now, such as the disabled. One is helping the rich at the expense of the poor.
Second, the experiments. Proponents argue that a basic income has many advantages and external effects: it reduces crime, increases entrepreneurship and improves health.
Most of these effects, however, are just the effects of a higher income. Giving people a basic income will in most cases increase their income. Numerous experiments – and common sense – show that a higher income will lead to less criminal behaviour and better health. There is, however, an easier way to provide for this. One can also try to reduce income inequality to reach exactly this goal.
The second problem concerning such experiments is that they are temporarily. They don’t last forever, and so the people that are in them know. This might have implications for behaviour: I think that people adjust their behaviour differently to permanent changes compared to temporary.
The attractiveness of a basis income is that it reduces the administrative burden. While it is unknown but probable that this is a serious problem, this burden has a reason. It makes social security target, and this s exactly what a basis income lacks.