Archimedes Would Endorse a Basic Income Guarantee
With the Iowa Caucus rapidly approaching, arguably the most pivotal campaign proposal made to date has not received sufficient attention from the candidates. Andrew Yang’s Freedom Dividend, a plan to distribute a Universal Basic Income of $1000 per month to every citizen 18 years old or older, should not be ignored in the media or by other presidential campaigns any longer. Yang sells the idea as a response to poverty, limited upward economic mobility, and the potential future workforce disruption of automation. Yet critics warn a UBI would disincentivize work and societal engagement, risk runaway inflation, and ironically make the welfare system increasingly regressive. To find answers to this debate, we should turn to the man rumored to have run naked through the streets of Italy screaming about how he found his own answer in the face of uncertainty.
In ancient Sicily, King Hieron II commissioned a goldsmith to fashion him a crown. The goldsmith took the king’s gold and returned with the requested wreath. However, Hieron grew suspicious and feared the smith had stolen some of the gold for himself and substituted a lesser material in the forging process. To know for sure, the king summoned the mathematician Archimedes to test to the crown’s composition. There was a caveat, however. The crown could not be melted or tampered with on the chance that it was genuine. Archimedes struggled with this assignment for weeks with no success. Eventually, the story goes, he took a break from the problem to go to a bath house. He filled his bath to the brim, got in, and noticed how his body had displaced the water. Once he realized this displacement could also measure the crown’s composition, he had his moment of jubilant, satisfying eureka.
Long before we were able to offer a tested scientific explanation for sudden realizations such as this, the tale of Archimedes showed us that the human brain functions on a two-track system and that these tracks work best when playing off one another. The X Track serves quick, short-term decision making and it is informed by intuition and biases. The Y Track is reserved for concerted, strenuous thinking that deals with complex and long-term issues. When a person spends too long in only one of these tracks, they run into mental blocks. Archimedes, for instance, spent the majority of his time for a relatively long period of time in the Y Track while working on his task. It was only once he took his leisurely bath that he switched back to a pure X Track state of mind. He solved this problem while in the X Track, yes, but the crucial part is the transition from Y to X.
This phenomenon holds true on either end. Just as Archimedes likely would not have solved the crown problem if he had stayed in only the Y Track, it is detrimental for anyone to stay too long in only the X Track. Unfortunately, low-income households in the U.S. today lead lives that demand they function in a near constant X Track state of mind. Living paycheck-to-paycheck requires budgeting and weighing cost-benefits on a daily, sometimes hourly, basis. In virtually all areas of life, low-income individuals must make quick decisions on what is best for right now. This “Right Now Tax” uses up the majority of their mental bandwidth, making the transition to the Y Track, which requires intensely focused thinking, not feasible. This is why upward economic mobility is so challenging for households near the poverty line. Planning strategically, investing in skill development and education, and dealing with matters that have no roadmap or clarity all require Y Track thinking, not to mention abundant time.
Providing income assistance and ensuring these households are no longer living paycheck-to-paycheck would remove these mental barriers and afford low-income earners access to their Y Tracks. This is important for two reasons. First, accessibility to the Y Track provides an opportunity to perform the aforementioned functions necessary to make self-improvements and facilitate long-term upward mobility. Second, as Archimedes demonstrates, spending more time in the Y Track and transitioning back to X Track improves X Track thinking. Recall, the X Track is informed by intuition and biases, and these are expanded upon and are made more appropriate and robust when an individual operates in the Y Track. As a result, quick decision-making can improve as well, which means improvements in daily job performance, better choices in social settings, greater impulse control, and smarter money management. The saying goes “Give a man a fish, you feed him for a day. Teach man to fish, and you feed for a lifetime.” In this analogy, providing basic income would equate to giving him a fishing pole and some bait and then letting his fishing skills develop naturally.
This counters the popular grievance that a guaranteed income would essentially subsidize laziness and complacency. Additionally, multiple experiments on unconditional monetary benefit payouts in the U.S. and foreign countries find that there is no significant negative correlation between income assistance and the desire to work. In a rural area of Manitoba, Canada, the “vast majority” of qualified recipients kept working. A Finland case study using a randomized sample polled its treatment and control groups, finding that unemployed individuals receiving a basic income were in fact more likely to state a desire to get back to work than unemployed individuals not receiving any assistance (69% vs. 58% respectively). Other response data may explain this difference. The same report shows lower levels of stress and greater self-perceptions of physical and financial well-being among the treatment group. An 18-month study from Stockton, California finds that recipients used their allowances with reasonable prudence. Of the money tracked — $500 per month for each individual — 40% went towards food. “Sales and merchandise” made up another ~25% of the monthly spending, and ~12% was spent on utilities.
Granted, these and similar cases studies are imperfect experiments. They often begin with a predetermined end date, which may affect tendencies to either save or spend, and they do not send benefits to an entire population, so macroeconomic impact should not be inferred from their results. Going forward, we ought to design experiments that can measure a UBI’s effects more comprehensively and specifically aim to measure economic impact more accurately and precisely to determine feasibility. However, these examples clearly indicate positive psychological and behavioral changes among low-income beneficiaries. Such changes suggest great potential for a UBI as an alternative or supplement to our current welfare system that is too often inefficient, demeaning, underfunded, and structurally deficient for the purposes of enabling households to climb a ladder of upward economic mobility.
Therefore, we must earnestly debate the logistical and economic aspects of Yang’s proposal. We shouldn’t shy away from debating amended versions of a UBI either. Putting aside encouragement of entrepreneurial and creative pursuits, perhaps giving the top two income quintiles monthly checks is wasteful and regressive, and an income guarantee for only the lower quintile earners is indeed more appropriate. Perhaps a truly universal income boost invites a dangerous inflation rate. Similarly, how does all of this factor in with a recently flattening Phillips Curve? The Freedom Dividend is a bold proposal, but it cannot simply be written off as liberal fantasy or as a fringe candidate’s gimmick. Based on the evidence, this issue deserves serious discussion and we ought to prioritize answering these remaining questions. Archimedes would concur.
