The FAILED UBI Experiment
Summary
TLDRThe video script discusses a study on Universal Basic Income (UBI) funded by OpenAI's CEO, where 3,000 low-income Americans were given either $50 or $1,000 per month. The study revealed that UBI recipients worked less, with no increase in productive activities, education, or savings. Health improvements were short-term, and the script suggests that UBI does not address the root causes of poverty, such as lack of ambition and long-term thinking, advocating for job creation and private charity over government welfare.
Takeaways
- 💼 A study funded by the CEO of OpenAI provided 3,000 low-income Americans with either $50 or $1,000 per month for three years.
- 📊 The study revealed that participants receiving $1,000 per month worked less, with no significant increase in productive activities.
- 📉 Labor force participation fell by 2% for those receiving $1,000, and unemployment spells grew longer.
- 🕒 Recipients and their partners reduced working hours by over one hour per week on average.
- 💰 Giving individuals $1,000 a month reduced their individual income by about $1,500 and their partners' income, leading to a 20% overall income reduction.
- 🛋️ The extra time gained was mostly spent on leisure, with no significant increase in childcare, exercise, job searching, or self-improvement.
- 🏥 Recipients spent more on medical care and experienced short-term improvements in stress levels and food security, but no long-term physical health benefits.
- 🧘 The mental health benefits of the cash transfers were temporary, suggesting that more targeted interventions may be needed for health inequality.
- 💡 The study suggests that a lack of ambition and long-term thinking could be reasons for persistent poverty.
- 🚫 The script argues that unconditional cash transfers, like UBI, do not incentivize productivity, saving, education, or increased work effort.
- 🌐 The conclusion is that UBI and similar welfare schemes may not have the intended positive impact and could be destructive without addressing underlying issues of poverty.
Q & A
What was the purpose of the study mentioned in the transcript?
-The study aimed to investigate the effects of providing unconditional basic income (UBI) to low-income Americans, specifically how it impacted their employment, productivity, and overall well-being.
Who funded the study on UBI and how many participants were involved?
-The study was funded by the CEO of OpenAI and included 3,000 low-income Americans aged 21 to 40 from 19 counties in the Dallas and Chicago areas.
How was the study's participant group divided, and what were their average household incomes?
-Participants were divided into a control group and an experimental group. The control group received $50 a month, while the experimental group received $1,000 a month. The average household income was just under $30,000.
What was the total cost of the study over the three-year period?
-The total cost of the study was $36 million, funded primarily by private donations, including the founder and CEO of OpenAI.
What was the primary finding regarding employment after providing UBI?
-The study found that recipients of the $1,000 monthly UBI spent less time working, with no significant increase in productive activities such as starting a business or engaging in self-improvement.
How did the UBI affect labor force participation and unemployment duration?
-Labor force participation fell by 2 percentage points for the group receiving $1,000, and periods of unemployment grew about a month longer compared to the control group.
What was the overall financial impact on recipients and their partners due to the UBI?
-Giving someone $1,000 a month reduced their individual income by about $1,500 and their partners' income, resulting in an overall reduction of more than 20% of the dollar received.
What did the recipients do with their extra time after receiving the UBI?
-Leisure time increased by about as much as work went down, with no meaningful increase in time spent on childcare, exercise, job searching, or self-improvement.
Did the UBI have any effect on recipients' health?
-Recipients spent about $20 more a month on medical care and experienced short-term improvements in stress levels and food security, but there was no enhancement in overall physical health or long-term mental health.
What was the conclusion drawn about the impact of UBI on ambition and long-term thinking among recipients?
-The conclusion was that providing more money did not increase recipients' productivity, savings, or investment in education. It suggested that one reason people are poor is due to a lack of ambition and an inability to think long-term.
What is the speaker's view on the role of UBI and welfare in addressing poverty?
-The speaker believes that UBI and welfare are not effective solutions to poverty, as they do not address the root causes such as lack of ambition and unwillingness to work hard. Instead, the speaker suggests creating an environment with ample job opportunities and letting private charities handle assistance.
Outlines
💼 Effects of Unconditional Basic Income on Employment and Productivity
This paragraph discusses a study funded by the CEO of OpenAI, which examined the effects of unconditional basic income (UBI) on 3,000 low-income Americans. Participants were divided into a control group receiving $50 a month and a test group receiving $1,000 a month for three years. The study, costing $36 million and privately funded, revealed that those receiving the higher amount worked less, with a 2% drop in labor force participation and longer periods of unemployment. The reduction in work did not translate into increased productive activities such as starting a business or self-improvement. Instead, leisure time increased, and for every dollar received, 20 cents less was earned in their regular jobs. The study's findings suggest that UBI may not incentivize productivity or long-term improvement in recipients' lives.
🏥 Health Impacts and Behavioral Changes Due to Basic Income
The second paragraph delves into the health consequences and behavioral changes observed in the UBI study. Recipients spent slightly more on healthcare, experienced temporary improvements in stress levels and food security, but did not show long-term enhancements in physical health or mental health. The study also found no significant improvement in job quality or increase in savings, as recipients either reduced work or increased consumption, using up nearly all of the money received. The lack of ambition and long-term thinking among the poor is highlighted as a potential reason for the limited positive impact of UBI, suggesting that wealth distribution alone may not address the root causes of poverty.
🛑 Critique of UBI and Proposals for Welfare Reform
The final paragraph critiques the concept of UBI, arguing that it does not necessarily improve people's lives in a meaningful or long-term way. It suggests that the poor often lack ambition and the ability to think long-term, which cannot be fixed by simply giving them more money. The author proposes phasing out welfare and creating an environment with ample job opportunities, allowing people to earn a living without handouts. The role of private charities is emphasized over government welfare programs, which are seen as having negative consequences and lacking incentives for improvement. The paragraph concludes by advocating for a shift away from UBI and towards policies that promote self-sufficiency and economic empowerment.
Mindmap
Keywords
💡Ubi
💡Control Group
💡Labor Impact
💡Productive Activities
💡Leisure
💡Non-parents
💡Human Capital
💡Health Consequences
💡Ambition
💡Welfare
💡Private Charity
Highlights
A study funded by the CEO of OpenAI investigated the effects of Universal Basic Income (UBI) on 3,000 low-income Americans.
Participants were selected from 19 counties in the Dallas and Chicago areas with an average household income of just under $30,000.
Two-thirds were assigned to the control group, receiving $50 a month, while the rest received $1,000 a month for three years.
The study cost $1 million a month, totaling $36 million, funded primarily by private donations.
The study aimed to analyze the labor impact of UBI, specifically its effect on employment.
Recipients of $1,000 a month worked less, with no offset by other productive activities.
Labor force participation fell by 2% for those receiving $1,000, and unemployment spells grew longer.
Working hours were reduced by more than one hour per week on average for recipients and their partners.
UBI did not incentivize increased productivity, savings, or investment in education.
The extra time was mostly spent on leisure activities rather than productive ones.
The reduction in work was concentrated among non-parents, suggesting single individuals or those without children were more likely to reduce work effort.
There was no significant improvement in job quality or human capital among recipients.
UBI recipients spent more on medical care but did not show enhanced overall physical health.
Mental health improvements from UBI were only temporary.
The study suggests that more targeted interventions may be needed to reduce health inequality.
The study's findings indicate that simply giving people money does not necessarily improve their long-term prospects.
The conclusion is that lack of ambition and long-term thinking may be reasons for persistent poverty.
The study's results suggest that UBI may not be as effective as hoped and could have limited impact on poverty alleviation.
The debate on UBI should consider these findings, which show potential negative consequences of unconditional cash transfers.
The study highlights the importance of creating an environment with ample job opportunities rather than relying on handouts.
Private charity may be more effective in providing help due to better incentives and adaptability.
Transcripts
uh let's talk about Ubi I talked about a
little bit yesterday but let me let's go
a little bit deeper into what what what
happened so there was a study uh funded
by the uh CEO of um of open
Ai and uh the study included 3,000
lowincome Americans aged 21 to 40 drawn
from 19 counties in the Dallas and
Chicago areas average household income
just under
30,000 2third of these folks were
randomly assigned to the control group
and they were paid $50 a month for their
continued participation so every month
they got 50 bucks and their behavior was
monitored and everything uh over a
period of three years the other thousand
participants so that's 2,000 another
th000 participant got $1,000 every month
and this Cod for 3
years so uh uh basically the the expense
here was $1 million a month so they
spent $36 million over the whole period
And this is funded by private donations
but primarily uh from the money of um uh
as we said uh uh the the the the uh
founder and and CEO of open
AI so our researchers collected detailed
data what happened
participates and that detailed data was
published yesterday in a working paper
you can find that working paper at NB
NBR is a National Bureau for economic
research so first they looked at the uh
the labor impact what did this do to
employment um and
uh you know so did this affect
employment in any way
so the upshot of this
experiment
is
that the people who got the
,000 actually spent less time
working that they actually saw a
reduction in work
effort and uh to quote the
authors's this reduction in work effort
does not
appear off to be offset by other
productive activities so one of the
ideas is that people would work less
because they had more money but they
would start a business they would engage
in some other productive activity in
order to increase their
long-term um their long-term uh
prospects labor force participation fell
by 2% points points
and uh for the group that got the ,000
versus the the uh the control group um
and spells of unemployment grew about a
month
longer participants and their Partners
each cut their working hours by more
than one hour per week on average
overall giving someone $112,000 a year
reduce their individual income by about
$1500 and also reduced Partners income
for an overall reduction of more than
20% dollar received so for every dollar
received they worked they got 20 cents
Less in their regular
job so they still they're better off but
it
didn't didn't do anything to incentivize
them anything to incentivize
them the authors also collected data on
what the individuals did with their
extra time by the way this is this was
published I I'm looking at an article
was published about this in the City
Journal City journal.
org Au also collected data on what
individuals did with their extra time
and what happened was Leisure increased
by about as much as work went
down so they stopped they they didn't
work as hard and instead they had more
Leisure
Time um recipients did not meaningfully
increase time spent on child care or
exercise or searching for a job or
self-improvement so they just hang out
they just used the1 th000 that they got
to just hang
out and not only that the reduction in
work was strongly concentrated among
non-parents implying that they you know
so uh They al anyway so yeah nonparents
so you're single or you're married but
you don't have any kids and somebody
gives you $1,000 a month and you go yes
I can party
more as far as investing in their own
education or what economists sometimes
called human capital
no detectable Improvement occurred in
recipients job
quality uh though younger participants
may have gotten a bit more
education there also wasn't much growth
in
savings recipients went through nearly
all of the money they received either by
reducing work or by increasing
consumption now there was a second paper
that also looked at the health
consequences so it found that recipients
spent about $20 a month more on Medical
Care went to the hospital more and
enjoyed short-term improvements in
stress levels and food
security yet the transfers did not seem
to enhance overall physical health and
only temporarily improved mental health
as the author summarized quote more
targeted interventions may be more
effective at reducing Health inequality
between highend low income
individuals I mean here's the bottom
line handing people money does not make
the world better off it doesn't increase
their productivity it doesn't cause them
to become bigger Savers it doesn't cause
them to invest more in education it
doesn't cause them to hustle more at
work and I think one of the one of the
indications here
is that one of the reasons people are
poor is that they lack
ambition one of the reasons people are
poor is because they lack
ambition
and you know you can't you can't fix
that by giving them more
money all they use that more money is
not to improve their
life in any material way or any
long-term way but they use and and one
of the problems I think with poor people
is that they lack the willingness or
ability or however you want to call it
to think long
term think long
term people stay
poor for not unsurprising
reasons they stay poor because they
don't think long-term because they're
not willing to work as hard as some
other people
people they're not willing to invest in
themselves they don't act
rationally you know and and and that's
why they're
stuck this is the conclusion of at least
the City Journal article and anyway
these results have at Great expense
confirmed what always seemed
likely
that likely unconditional track cash
transfers reduce work while benefiting
recipients in generally short-term
weight
that finding may not end the debate but
it deserves to be a big part of any
discussions on such transfers going
forward people who are long people who
would take that money and say oh wow
I've got an extra thousand let me go
back to school let me invest it let me
save
it let me use this as an incentive or
some way to increase my capacity to earn
let me start a side
business those people people who people
who find ways to do those things
anyway and the reality is that most
people get extra thousand think cool I
can party more than I did
before that is sad but that is the
reality
of poverty in America and I think around
the world and it's why Ubi and the
different variety of Ubi schemes as much
as they appear appealing
will have no real impact and why welfare
is so destructive because while welfare
I is is more restrictive but welfare is
so complicated and difficult and Welfare
is just particularly in the United
States unless so in
Europe just has so
many negative
consequences and the solution is not to
replace wealth it's not to add Ubi on
top of
welfare and the solution is not to
replace welfare with
Ubi the solution is to phase welfare out
the solution is to create an environment
where there's so many jobs so many
possibilities for people to earn a
living that they don't get a
handout and that the handouts are turned
over to private Charities and the
government gets out of the business of
trying to manipulate
outcomes and by the way this was all
done privately and it still failed that
his private charity doesn't change the
incen structures the incentives with
regard to with regard to welfare the the
incentives with regard to uh something
like Ubi remain even if it is done
privately it's just a private
private
programs I'm much more likely to learn
from the mistakes I'm much more likely
to look at what happened that look at
outcomes and and and change or stop or
shift in other words much more likely to
ultimately find a formula for
successfully providing help to people
who let's say need help whereas
government has no incentive built in to
optimize and to to improve uh in any
kind of way
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