What if we arranged for you to get an extra five-hundred dollars every month? [1] You wouldn’t have to do anything to get it. You could spend the money on whatever you wanted. It wouldn’t matter how much money you made in other ways. And it wouldn’t matter whether you had a job or not. The government would send you a check each month just for being a citizen.

This arrangement is known as a “universal basic income”. It’s a serious economic proposal. And five-hundred per month is on the modest end of existing proposals, not meant to be a complete income, but more of a supplement.

If this is the first you’ve heard of it, some concerns might leap to mind. I’ll mention some concerns toward the end of the article. For now, just know that a universal basic income has seen support from thinkers on both the left (Martin Luther King Jr., Bertrand Russell, James Meade, Eric Olin Wright) and the right (Friedrich Hayek, Milton Friedman, Charles Murray). [2]

There are some good economic reasons to implement a basic income. Putting money in people’s hands would increase demand for goods and services. That would make the economy grow, and would be a boon for entrepreneurs and small businesses. It would also take up some of the slack in the labor market and give us a scalable way to deal with the possibility that machines will be taking more and more of our jobs in the future.

That said, my concern today is not with GNP (gross national product), but with GNH (gross national ). My question is this: are there reasons to think a universal basic income would make people happier? I’ll start with the positive case and will present six reasons why a basic income might, on average, improve the psychological well-being of citizens.

(And, as a kid who often ate his cake before his frosting, I’ll be saving the best for last.)

One: more money means more happiness (up to a point)

Let’s start with the obvious. Money can produce happiness fairly directly. But not everyone will be made equally happy by the same amount of money. [3][4]

For example, if someone comes up a bit short for rent, and you give them five-hundred dollars, they can now make rent. That reduces and has a great effect on their day to day well-being for at least a month. If you give the five-hundred dollars to a billionaire, it won’t be worth their time to cash the check.

If a billionaire loses a hundred million in the stock market it stings for a few minutes, and then the billionaire moves some funds around and tees off at the next hole. If you take that hundred million and divvy it up into thousand-dollar checks for poor people, it will increase the happiness of a hundred-thousand people. The psychological benefit to each person will likely be greater than the psychological harm to the billionaire, and when we multiply that happiness boost by a hundred thousand, and realize that the happiness boost will likely last for weeks, the two events are barely comparable.

This is part of the rationale behind progressive taxation and welfare programs. When there are many more poor people than rich people, and the difference in wealth is high, downward redistribution will almost certainly increase average happiness. And a basic income, funded by higher taxes on the wealthy, would follow the same logic. [5]

In utilitarian terms we would cause a very small amount of pain in order to create a great amount of pleasure. In libertarian terms, we would infringe a little on the negative liberty of a few wealthy people in order to create a substantial amount of positive liberty for the vast poor and middle classes. [6]

Now this raises a question. Because of the declining utility of money, it’s likely that “only” the bottom 97% of people would see substantial psychological benefit from receiving an extra $500/month. If that’s the case, then why give the benefit to everyone? The answer is that giving the money to the top 3% doesn’t cost that much more (in fact, it costs right around 3% more), and giving the money to everyone might actually increase the happiness of the poor even more than if it were only given to the poor.

And that’s because . . .

Two: A universal basic income would reduce shame for our poorest citizens.

When people fall on hard times they often feel . They feel like other people were expecting them to make more of their opportunities than they made of them. And they also feel like they are a special burden to their friends, family, and society at large.

Shame is a very strong emotion, and can motivate us to change our behavior. That’s probably why people shame other people. They want those people to change their behavior.

But shame is only productive when people feel empowered to change their situation. If we choose to shame the unemployed when there are 20 million people looking for work and only 4 million jobs, at most 20% of that shame will be productive. The rest will be toxic.

Shame is powerful, and, if it has no productive outlet, it will find an unproductive outlet. When people feel shame and lack hope at the same time, they will likely withdraw socially, and they might even become bitter, engage in antisocial behavior, abuse drugs and , and contemplate .

A universal basic income would reduce shame, and especially the toxic, hopeless kind of shame. A universal basic income is universal. That means everyone gets it, regardless of income or job status. Poor people get it. Rich people get it. Employed people get it. Unemployed people get it.

That means people are less likely to fall on hard times in the first place, because they will have more economic margin. And, since everyone gets it, the people who need it most can receive it without feeling like a special case or announcing to the world that they need it. The middle class can’t complain about the lower class getting handouts when everyone is getting the same handouts.

But without shame (or threat of starvation), how do we encourage people to become more productive? Well, a basic income can help with that as well. Consider . . .

Three: A basic income enhances work motivation for those who receive welfare.

If an unemployed person receives $8,000/year in welfare benefits, what happens if they get a job that pays $8/hour for 1000 hours? The answer is that it depends on how the welfare system is set up.

If the government reduces their welfare benefit dollar for dollar, they will now get $8,000 from their job and $0 from welfare (instead of $0 from work, and $8,000 from welfare). This arrangement makes some sense. It makes sure people don’t fall below $8,000/year, and it’s designed to make sure taxpayers don’t pay any more for welfare than they need to.

But there’s a problem with this plan. It won’t take anyone long to figure out that they can A) work zero hours and get $8,000, or B) work a thousand hours and get the same amount. If they take the job, they are essentially choosing to work a thousand hours for zero dollars per hour. Who wants to do that?

And what if working those thousand hours means they have to pay for daycare and spend more money on gas? Then taking the job will actually put them further in the hole financially (in addition to taking up a thousand hours of their time). We can moralize until we’re blue in the face about the value of hard work and contributing to society. We can even shame people for freeloading. But the fact remains, a welfare system like this would provide strong incentive for a person to avoid work and stay on welfare.

That’s partly why most means-tested welfare programs don’t work like that. Those who designed the existing programs knew that people wouldn’t want to work for zero dollars per hour, so their plans don’t reduce benefits dollar for dollar, but maybe fifty-cents on the dollar instead. That way more work would always equal more money. In our example, the person would receive $8,000 from work, and $4,000 from welfare, netting an extra $4,000 for the thousand hours of work. Working for $4/hour is more motivating than working for $0/hour (though it’s not clear by how much).

But a basic income provides even more incentive to work. With a basic income there would be absolutely no reduction of benefit with earned income. So the person in our example would keep the full $8/hour from their work. That’s still not a great wage, but $8/hour is a lot more motivating than $4/hour. The end result would be more willingness to work, and a higher total income for those who would otherwise be on means-tested welfare programs. [7]

Not only would a basic income give poor people an incentive to work more hours, it might also help both poor and middle-class people be more productive (and happier) while they work. That’s because, . . .

Four: A basic income increases autonomy.

If you want people to work harder (and happier), increase their autonomy. According the Self Determination Theory (SDT), autonomy is one of the three basic human psychological needs, and the research suggests it is the most important of the three.

Autonomy, competence, and relatedness, these three remain. But the greatest of these is autonomy.

When people have their psychological needs (for autonomy, competence, and relatedness) met, they are happier, they pursue personal and professional growth, they have a more coherent sense of self, they integrate better with society, and they want to contribute to society through their work. When they lack autonomy, competence, and relatedness, they tend to feel oppressed, become moody, draw inward, and seek escapist pleasures (such as drugs, social media, and video games). [8]

In a nutshell, autonomy is the ability to do what you do for your own reasons. That doesn’t mean you don’t work with (or for) others. Autonomy is not the same thing as independence. Navy Seal recruits might be autonomous even while going through Hell Week, provided they have freely chosen to be there, and their participation is an expression of their deepest values.

Ideally every job would be freely chosen in a market where the worker has many options. The worker would receive fair compensation based on their contribution. The job would not reach into their personal lives. It would allow them to develop skills and a viable path. It would not require them to cheat customers or sabotage the (other than through superior customer satisfaction). And it would allow them to feel like they are making a positive difference in the world.

When people have jobs like that, they have more to be productive than when they feel coerced, bored, or put at odds with their fellow human beings.

A modest basic income won’t magically turn every job into every worker’s dream. But it would very likely move things in that direction overall. A basic income would give workers a little more margin in their budgets. That would allow them a little more bargaining leverage with their employers. They could push back when asked to do things that are unethical, they could hold out for higher wages, and they could request roles in the firm that will better match the direction they want to take their careers. And, with a shame-free partial safety net in place, those who are so inclined would be in a better position to take on some risk toward opening a yoga studio, pursuing a music career, or become an indie game developer.

A basic income would also provide people more autonomy in their personal lives, and would allow (for instance) otherwise financially-dependent persons to walk away from abusive relationships.

Autonomy is important for happiness and , and a basic income would increase average autonomy. But let’s not forget about our psychological needs for competence and relatedness. They are very important as well, and, in the modern world, our sense of competence might be even more endangered than our sense of autonomy. We’ll see now that a basic income can help with the challenges to our competence as well, because, . . .

Five: A basic income reduces the pain of creative destruction.

New technologies take jobs away from people. It’s been that way since at least the invention of the wheel. Farm machinery took millions of agricultural jobs away. Factories wiped out millions of cottage-industry jobs. Robots have taken millions of factory jobs. Computers have taken millions of clerical jobs.

This is what Joseph Schumpeter called “creative destruction”.[9] It’s “creative” because it represents creative progress for society as a whole. It creates new goods and services. And (sooner or later) it creates new jobs, too. But it’s “destructive”, because it wipes out jobs, careers, and industries in the process.

Measured by the yardstick of a human life, the pace of creative destruction has been fairly slow thus far. But if you’re there at the moment when a new technology is taking your job away, it can change your life overnight. And, in an era where robots and software are expanding their capabilities daily, it’s natural to suspect that the pace of creative destruction will rapidly increase going forward.

Once your industry replaces your job with a machine, or the market replaces your product with a substitute, you have to scramble. You spent a lifetime developing good skills so you could support your family. Your skills were a source of both pride and income. And now the market tells you it doesn’t need your skills anymore. If you’re young, it can be a minor setback. If you’re getting up there in years, your sunk costs are greater, and your remaining working years are fewer, so the prospect of re-tooling can be daunting. It might not seem worth it to take a significant pay cut to do something you’re not as good at. You might feel like giving up at that point.

Creative destruction harms a great number of people in the process of benefitting a greater number of people.

If we can figure out good ways to maintain the livelihoods and dignity of those people whose industries or careers are being destroyed, we could celebrate creative destruction more and it less.

And that’s where a basic income could be helpful. It could reduce some of the that comes with creative destruction. It could help those who have lost their jobs, and it can help those who fear they might soon lose their jobs or careers. It would provide margin in people’s budgets. That would give them some time to re-tool, and some funds to purchase new training. It might not replace the pride that came with the old skills, but at least it could remove some of the financial anxiety that comes with that loss of pride.

And, in the event that robots and software take most of our existing jobs (and most of the new jobs, too), a basic income could be scaled up from 10% of national income to 40% or 50% of national income. At that point we could all pursue our own creative projects while the machines keep the economy running. And that wouldn’t be all bad, would it?

So far we’ve seen that a basic income might reduce stress, reduce shame, increase work motivation, increase autonomy, and provide some consolation for the fact that machines might soon make our skills obsolete.

The case is already very strong. But perhaps the most important reason to consider a basic income is because . . .

Six: A universal basic income provides a sense of belonging and natural inheritance to every citizen.

Rich kids start with millions. Poor kids start from near zero. And starting from near zero today is worse (in some ways) than it was for hunter-gatherers. At least then the earth itself provided a natural inheritance of game, roots, berries, and materials for shelter. You rarely fell too far behind your tribe mates, and people didn’t criminalize your attempts to forage for food or construct your own shelter from things you found around. [10]

But why should some inherit millions while most inherit next to nothing? Why should anyone start from near zero in a nation as prosperous as the United States? Why not provide a modest natural inheritance to all citizens?

Some people think of a universal basic income as a kind of welfare. But what if we think of it differently? What if we think of it as the fruits of a natural inheritance? While many people are uncomfortable with the thought of poor people getting money without having to work for it, almost everyone is comfortable with the idea of investors receiving passive investment income without having to work for it. [11]

Some proponents strengthen the inheritance framing by defining the benefit in terms of national income. For instance, with a modest basic income, we might set the benefit at 10% of per capita national income. Currently that comes to about $450/month. Since it’s pegged to national income, it would go up with every rise in inflation or national productivity. It’s like each citizen receives an inheritance of 10% of per capita national wealth, and they get to keep the investment income it earns (at least once they reach adulthood).

In essence a modest basic income slightly levels out the lottery of birth and inheritance. Rich kids will still inherit millions, but at least everyone will inherit something.

We might even call it a “Universal Prosperity Dividend” instead of a “Universal Basic Income”. If we frame it as a stake in the nation’s prosperity, we create a sense of belonging and investment in every citizen who receives it. And we restore some of the natural inheritance we lost when we removed the ability to forage for a living.

But, . . .

That all sounds wonderful, you say. But . . .

How are we going to pay for it?

Won’t it also undermine some people’s motivation to work?

Wouldn’t it cause inflation?

Isn’t all taxation basically theft?

Isn’t this socialism?

These are all good, fair, and open questions. And I’m not going to address them directly in this article. These economic questions are discussed all over the internet, and I encourage everyone to join in on the discussion.

The conclusion here is provisional. The conclusion is simply that if the economics, the , and the political theory work out, then a Universal Basic Income should be strongly considered based on its psychological benefits.

But, you might have also noticed that my presentation of psychological effects has been pretty one-sided. I’ve pretty much considered only the benefits. Aren’t there some psychological harms that would be created alongside the benefits?

For instance:

Might a basic income undermine the pride people take in picking themselves up by the bootstraps and making their own way without any help?

Might a basic income increase the rate, because poor people would be less financially dependent on each other?

Wouldn’t many people choose to work fewer hours and just play video games all day? [12]

These questions should all be discussed. And like the economic issues, I encourage everyone to discuss them (a great place to do so is /r/basicincome )

These remaining questions are one reason why some proponents of a Universal Basic Income suggest that we start modestly, with something like $500/month instead of trying to provide a full living wage to everyone right out of the gate. If we start modestly, we can minimize any unintended consequences, and we can study the effects a universal basic income would have on productivity, inflation, labor supply, and happiness, before deciding whether we want to increase the benefit.

Notes:

[1] That’s $500 USD. The United States is my primary example. While the dollar amounts in the examples will fit the US situation, the main ideas should apply to any nation.

[2] See the Wikipedia article on basic income.

[3] A 2010 study by Daniel Kahneman and Angus Deaton found that more money is associated with higher levels of emotional well-being up to about $75,000 per year. Above that amount the association weakens considerably.

[4] And it’s not like there’s a big threshold at $75,000. There can be some threshold effects. If you need $200 to make rent, then the second $100 will make you happier than the first. But most of the time the effect is a fairly smoothly decreasing function. Economists have long held that money has “decreasing marginal utility”, which is a fancy way of saying that how happy a given amount of money makes you will depend on how much money you already have. The less you have, the happier you are with a given amount.

[5] We also have to consider the asymmetry between the pain of loss and the pleasure of gain, the effect of redistribution on trust, incentive, growth, and planning in the economy, and personal rights, such as property rights. With current levels of inequality, though, there seems to be room for substantial levels of redistribution without producing substantial harm in the process.

[6] This is a consequentialist framing for libertarianism. Not every libertarian would like it. But it seems to me to be a fair way to frame things.

[7] For a much more in-depth treatment of work motivation and UBI, see Ed dolan’s work motivation articles, starting with: A Universal Basic Income and Work Incentives. Part 1: Theory

[8] See Deci and Ryan (2000): “The What and Why of Goal Pursuits”.

[9] See the Wikipedia article on “Creative Destruction”.

[10] Obviously we benefit from much of the technology we have that hunter-gatherers don’t. Our health care is better. We have better infrastructure. And there are systems in place to help the poor get plugged in. But if you are born to poor parents in a poor neighborhood, and fall through the cracks, it’s more difficult to make your way in a socially-accepted manner than it was back then.

[11] Investors do put their money at risk. And one could frame that as a kind of “work”. But the wealthy don’t actually have to take that much risk in order to match gains in per capita national income. And they rarely need to play with their kids’ milk money.

[12] This is a legitimate concern. For more of my own thoughts on this, see: Have You Accidentally Sabotaged Your Motivation To Work?





