At least five interesting things: You Can't Just Do Things edition (#69)

Sorry for the slow publishing this week…my rabbit had some health issues! But he’s fine now, thankfully.

Anyway, I have a fun video debate for you today! It’s me versus Oren Cass, on the topic of tariffs!

I also have an episode of Econ 102, where Erik and I discuss the question of who will ultimately profit from the AI boom (something I plan to write more about in the coming months):

Who Profits from AI? Turpentine Episode

Anyway, on to this week’s list of interesting things! This week’s theme is reality interfering with the best-laid plans of policy wonks and populists alike…

1. Cash won’t solve all of poor people’s problems

For years, I’ve been a big advocate of the “just give people cash” theory of the welfare state. I’ve written a bunch of articles in support of the idea. My reasons are:

1. Cash benefits are much easier to administer than other kinds of benefits.

2. A lot of economic research found that unconditional cash benefits don’t do much harm to the labor market — i.e., people generally don’t stop working when they start getting checks in the mail. The research also found that people don’t tend to fritter away the cash on drugs and alcohol, as many conservatives fear.

3. Unconditional cash benefits can reach a lot of people who fall through the cracks of other welfare programs — for example, people who can’t earn any income (and so can’t get the EITC) or don’t have kids (and so can’t get the Child Tax Credit).

4. In the late 1990s, America mostly canceled a traditional welfare program (AFDC/TANF) and replaced it with some cash-type programs (EITC and CTC), and the experiment went very well.

However, in recent years, some new research has come out that tempered my enthusiasm for the cash benefit revolution. First, a basic income trial in Denver failed to decrease homelessness, which is one thing you’d really like to see basic income do. Then, an even bigger basic income trial in Texas and Illinois found that just $1000 a month caused 2% of people to stop working — a very big disemployment effect, contradicting the results of earlier studies. Worryingly, this study is much more believable than any of the more optimistic studies, since it’s a very large randomized controlled trial. (Of course, it’s just one study; the papers showing little effect are still more numerous, even if no single one is as reliable.)

Meanwhile, a lot of these studies are finding that cash benefits aren’t really doing much to improve quality of life for the people who get the cash. You can measure various things we think curing poverty ought to improve, like health, education, employment, housing, etc. And unfortunately, these recent studies show that cash benefits aren’t making those indicators look much better. Kelsey Piper recently wrote an article in The Argument summing up some of this evidence. Some key excerpts:

The team behind Baby’s First Years…gave their control group $20 per month and their experimental group $333 per month. They recruited low-income mothers…The experimental group had more money (as you would expect) and worked a little less (but it’s probably good if mothers of young babies can cut back on hours slightly). They also spent slightly more money on stuff for their kids.

But there was not much else. The cash transfers did not improve maternal health outcomes or child health outcomes. They had no effect on stress, depression, body mass index, how often children got sick or the children’s overall health. They did not improve mothers’ self-reported relationship quality or measures of psychological distress. There was no effect on child development…

A Compton, California, RCT tried $500 per month for two years. They found “no significant effects of the transfers on labor supply; assets; psychological well-being; financial security; or food insecurity.” The biggest effect they found was on other income sources: The groups receiving transfers worked fewer hours or got paid less than people in the control group. The lost nontransfer income averaged $333 a month…

The OpenResearch unconditional income study tried $1,000 per month for three years, while the control group got $50 per month. They found that participants worked less — but nothing else improved. Not their health, not their sleep, not their jobs, not their education, and not even time spent with their children. They did experience a reduction in stress at the start of the study, but it quickly went away…

Direct cash payments not making people better off is a surprising finding — and while Baby’s First Years and Compton are relatively small sums of money, OpenResearch is larger.

This is all extremely disappointing. In these well-designed real-world experiments, cash benefits are making people produce less in the market, while not really making their lives much better. And as Piper goes on to explain, nobody can really figure out why. People aren’t using the cash to buy drugs or gamble or whatever; they’re working a bit less, but mostly they’re just spending the cash on things they need. It just doesn’t make their lives look less like the lives of poor people.

Matt Bruenig, a prominent socialist advocate of cash benefits, attempted to write a rebuttal of Piper’s piece, but it wasn’t up to his usual standard of quality. Other than pointing out a study from Finland that shows more optimistic results, he didn’t really rebut the evidence that Piper brought to bear. Bruenig talks about the historical importance of Social Security and the success of Nordic countries. But these arguments miss the mark, because they don’t address the question of what additional cash benefits can do for Americans in the present day.

A more valid counterargument — and one that Bruenig touches on, but could have been a lot more explicit about — is that poor people having more cash is simply a good thing in and of itself, whether or not their kids become healthier or they get a better education or they report less depression. Being able to afford more food, more transportation, more housing, etc. makes your life better, even if it doesn’t make you lead a healthier