Wednesday, July 15, 2020

Experiment shows that giving people money reduces psychological stress!

An article in the New Yorker trumpets the promising results of a citywide basic income experiment. A few paragraphs into the article we find this statement of the study's objectives:
The study set out to prove that a basic income could, according to the research plan, “lead to reductions in monthly income volatility and provide greater income sufficiency, which will in turn lead to reduced psychological stress and improved physical functioning.”
Of course, in our world of empiricism, we have to give money to people to see if that will lead to the hoped-for results.

Well, if you income is low, then $500/month has to lead to less volatility. I think that the math basically guarantees it. And, if your income is low, does having a guaranteed $500/month reduce your psychological stress? Let me tell you, my income is greater than the people participating in this study, and $500/month would even reduce my psychological stress!

Of course, this result comes in an economics environment which produces a Nobel Prize (actually, the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) for finding that:
Making the schoolwork more relevant to students, working closely with the neediest students and holding teachers accountable — by putting them on short-term contracts, for example — were more effective in countries where teachers often don’t bother showing up for work.
Another amazing result, that making schoolwork relevant and teachers accountable led to improvements. No economist in the Austrian school would have thought to bother testing for these obvious outcomes. No wonder Israel Kirzner has not received the prize!

As a final comment on the Stockton experiment, I quote Benjamin Franklin, who said:
I am for doing good to the poor, but...I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed...that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.
These observations were also made by Alexis de Tocqueville in his Memoir On Pauperism: Does public charity produce an idle and dependant class of society?.

Is there a place for thinking in today's economics? It seems doubtful.

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