- REUTERS/Las Vegas Sun/Steve Marcus
There’s a debate swirling in certain economic circles over a thought experiment: If you give free money to people in poor Kenyan villages and they use it improve their lives, can you expect the same outcome in a random sampling of people in the United States?
After all, impoverished villages differ wildly from a grab bag of Americans, and what might work in poorer villages might not apply elsewhere.
Dan Ariely, a behavioral economist at Duke University and author of several books on decision-making, doesn’t buy it.
“If you think about the fundamental aspect that you’re testing, people are people,” Ariely tells Business Insider. “If you think about information overload, too much choice … getting the family involved, long-term thinking, short-term thinking – there’s no difference in those things.”
The free-money thought experiment is grounded in a set of experiments taking place in Kenya at this very moment. The trials are testing a concept known as basic income, a system in which citizens receive regular payments to cover basic living costs in the hopes of reducing poverty.
The charity GiveDirectly launched a pilot version of the experiment in October of 2016. A full-scale trial lasting 12 years and involving thousands more people will begin later this year. Already, data has come back finding people are spending the money on things like home repair, education, and starting new businesses. Spending on drugs and alcohol has held steady or even gone down in certain cases.
People who argue those results won’t translate to wealthier countries might claim it’s a comparison between apples and oranges: People in Kenya behave fundamentally different than people in America. But Ariely says the circumstances merely change how the experiment should be designed; they don’t affect basic income’s baseline potential to lift people from poverty – more money is more money.
What changes from place to place are things like culture and socioeconomics, both of which create different incentives for people to spend money. Any experiment that attempts to work inside those constraints has to change its approach accordingly, Ariely says.
He offers the example of gender roles. In Kenya, women have far less freedom of choice – especially in financial matters, Ariely says – than women in the US. That kind of variable is particular to the region. It’s not something an American basic income experiment would need to grapple with as much.
But this isn’t an indictment on basic income as a policy solution. He believes that if an experiment – or resulting policy, perhaps – fails in the US, it may not be because basic income is flawed, but because the design didn’t create the right nudges and incentives for it succeed.
For Ariely, who has spent much of his career unearthing the hidden ways outside forces can affect how we choose to live our lives, those factors will matter much more.
“It’s not about how people work,” he says. “It’s about how do you take an idea and make a translation in the particular intervention that makes sense for the culture.”