What Would Happen If We Gave Everyone Free Money?

No one knows, but several new experiments in universal basic income hope to find out.

|
Jun 2 2016, 4:00am

Image by Sarah MacReading

Somewhere in Sarasota, Florida, there is a man named Edwin. It doesn't really matter how old Edwin is, or what he does for a living. It doesn't matter if he has kids or a chronic back problem or if he's racked up $100,000 in credit card debt. Edwin could be rich or poor, young or old, black or white. Edwin is everyman, with one small exception: He is now $15,000 richer.

Edwin was the winner of the first-ever basic income lottery in the United States on Tuesday, sponsored by a San Francisco–based group called My Basic Income. The group created the sweepstakes to rally interest in a universal basic income—the idea that every person should be given enough money to cover their basic needs, regardless of financial hardship or work ethic or anything else, with no strings attached. In Edwin's case, he'll get $1,250 per month for a year to do with what he likes, in the hopes that it will paint a clearer picture of how individuals in the United States would use a basic income supplement in the future.

The concept of universal basic income was first detailed in Thomas More's Renaissance-era Utopia and has garnered support over the years from Milton Friedman, Martin Luther King Jr., half a dozen US presidents, Noble prize–winning economist Christopher Pissarides, and more than 33,000 Redditors.

But right now, basic income is experiencing what is perhaps its biggest moment ever. Tuesday's basic income lottery event comes on the heels of two major announcements—one from the tech incubator Y Combinator, which will sponsor a five-year basic income experiment in Oakland, California; another from the charity GiveDirectly, which will pilot a decade-long basic income program in Kenya. Later this week, Switzerland will vote on whether or not to guarantee every citizen about $2,500 per month, which would make it the first country to put a basic income program into practice.

"There are a lot of assumptions about what happens when you give people free money. But in reality, we really don't know," said Cameron Ottens, the co-founder of My Basic Income, in an interview with VICE. "We're trying to figure out what real people would actually do with it and how it would impact real peoples' lives, to move beyond academic speculation about peoples' behavior."

Past experiments have made a compelling case for how basic income can improve society at large, but haven't paid much attention to how individuals spend the money they're given. One of the more famous experiments—the minimum income or "Mincome" project in Manitoba, Canada—gave monthly income supplements to the poorest third of residents of a small town called Dauphin. The project began in 1974, but after five years, the government shut it down. An official report of the findings was never released.

Years later, though, an economist at the University of Manitoba used the archived data from the project to compile a review. Her report, published in 2011, showed that during the five years that residents collected basic income, workplace accidents decreased, high school graduation rates increased, and people spent less time at their jobs and more time with their families. Basically, if you no longer have to work to live, your quality of life gets a lot better.

Another experiment among low-income families in North Carolina found that giving families a cash stipend led to a decrease in behavioral and emotional disorders among children. There's also evidence to suggest that this kind of supplemental income lowers stress levels, reduces crime rates, and improves the quality of people's diets, as it did for recipients of basic income experiments in Kenya, Nambia, and India, respectively. Free money is not a panacea, but it's pretty close.

Of course, those studies prove only that having money improves peoples' lives, not that basic income is necessarily the method of doing so. And there are plenty of questions about the feasibility of basic income on a large scale: How would we pay for it? How much money would people need? Would it disincentive people from working, or enable people to spend government money on luxury items? New York Times writer Eduardo Porter argued that it's a "poor tool to fight poverty" in a column published yesterday. And Ezra Klein at Vox pointed out that a basic income would require Americans to completely redefine their relationship to work, something he isn't sure is possible. But for all the valid arguments against a basic income, no one has yet been able to answer the simplest question, which is: What exactly would people do with it?

The My Basic Income lottery, which was modeled after a similar project in Germany, aimed to collect data on this question. Anyone could enter the sweepstakes as long as he or she answered the question: What would you do with the money if you won?Ottens said the group collected roughly 3,000 responses.

"The spread we're seeing so far has a lot to do with people going through transitions," Ottens told VICE. People wrote about using the cash to offset their expenses while getting a degree, quitting a bad job, or starting a business. There were also responses about handling unexpected expenses, like paying off a hospital bill or a car repair—something more than half of Americans said they couldn't afford, according to a recent survey from Bank Rate. "I don't think people realize how often peoples' lives are disrupted by someone who gets in a car accident or gets cancer."

Edwin, who won the sweepstakes, wrote that he would "save the money for a rainy day."

It doesn't really matter what Edwin does with the money, so long as his year of basic income adds to the pool of data about what a basic income could look like for individuals. He could spend all $15,000 on strippers, and, while the people who crowdfunded that money would probably not be pleased, it would at least add another data point about how individuals would use a basic income. "If someone says, 'I'm going to [use the money to] buy a brand new car and never drive it,' that would be good to know too," said Ottens.

Now is the perfect time to work out the kinks of a basic income system, since advances in technology threaten to put more and more people out of work, according to Natalie Foster, a fellow at the Institute for the Future and a co-founder of the Universal Income Project.

"Basic income has had supporters throughout history, from Milton Friedman to Martin Luther King Jr. Even the founding fathers talked about universal basic income. But we haven't seen it move from idea to actual policy," Foster told VICE. "Whether or not you believe that robots are going to come take our jobs, the future is here—it's just unevenly distributed."

Foster said that while the Swiss vote on basic income is "not likely" to pass this week, other governments—including Finland and the cities of Ontario, Canada, and Utrecht in the Netherlands—are considering their own basic income program.

And whether those programs succeed or fail, basic income advocates argue that it's time to start experimenting with them in earnest.

"The idea from the sweepstakes was that you'd get people who were thinking, I could use $15,000, who had nothing to do with the movement, who had nothing to do with the politics, who just thought that amount of money was meaningful," said Ottens. "And then they realize that there are people talking about this: What if everyone could survive without a job? What if you could walk away from an abusive relationship [without worrying about money]? What if you could work less? What if we could try to solve those problems once and for all?"

For more information about My Basic Income's second lottery, visit its website.

Follow Arielle Pardes on Twitter.

Stories