What Would Happen If We Just Gave People Money?

How do the economics of providing Basic Income work?

I guess you would have increase taxes or provide lesser services? e.g., expect that basic income will cover some parts of the medical costs and provide a lesser health care for the average person. I'm guessing an implementation will be somewhere in between.

Money has gotta come from somewhere.

I was thinking about this issue when I attended a meet up for independent game developers. I was shocked at the number of people I had met that just develop games full time. I met an entire team of 4 people that have been working full time over the last year designing and developing a mobile game. They have a playable prototype and it's fairly entertaining but nothing ground-breaking in my opinion. Running the numbers in my head, I thought that this game would have to clear over a million dollars for it to even be considered a break-even for 4 well educated, hard working young people working over a year on the venture. I didn't know their personal financial situations, but I couldn't help but be both envious and terrified.

I met another person who worked on indie game development for two years and now works for a company designs games for others for money up front. He told me he hadn't made any money in the years working for himself.

It's incredible how many young people devote their time to passion projects with the very limited social safety net of the US. Surely a basic income will increase the allure. The question is, does the world need more indie mobile game developers?

Young people who are middle- and upper-class have the mom and dad safety net. That's often why they can afford the kind of passion project you're talking about. It would be very interesting to see what people of other ages and classes could come up with, given the chance. I bet it wouldn't all be indie games.

> Money has gotta come from somewhere.

Well yes and no. The issues are complex and my economic schooling is woefully limited (merely Bachelor's level), but I recall the idea of a money multiplier [https://en.wikipedia.org/wiki/Money_multiplier] derived by MPC (Marginal Propensity to Consume) and MPS (Marginal Propensity to Save).

Take the following relatively contrived example. You insert a $1 into a vending machine and get a soda. The vending machine company takes that dollar and uses some to pay the soda company to replace the soda. The soda company uses the money to pay it's factory workers to make more soda. The factory workers use that money to buy other goods.

So you can see that on a whole, the $1 dollar you chose to spend actually had an impact on the economy of more than a dollar.

You can also see that depending on each what the "leakage" is at every level (or how much each entity, vending company, soda company, etc. choose to save instead of pass on) can drastically reduce the money multiplier effect leading to undesirable market outcomes (such as stagflation).

Perhaps this professor does a better job illustrating: http://aces.nmsu.edu/pubs/_z/Z108.pdf

Bottom line (I think is), empowering the impoverished to be able to consume should drive market growth. So the initial investment of a basic income should pay for itself many times over.

Anyway there is more to this obviously, and this same interaction has implications regarding income-inequality, but I'll just leave this here as FFT.

These people are the exception not the rule, for every person like this there are many times more of those who would take the dole and do nothing with themselves. Basic income might increase the allure of risky proposition, I think in most cases these groups of people estimated some risk/reward function of their endeavours, considering the reward more so than the risk, but there is a healthy combination of the carrot and the stick. Basic income is to do away with the stick, most people need the stick to get out of bed in the morning, admittedly myself included, at least to some extent.