Think tank Tänk: a field experiment is the best way to test basic income

1 December 2014 20:46

If Finland wanted to test universal basic income, this would be best done using a field experiment. A field experiment applies a scientific method to the experimental examination of an intervention in a practical setting. The key would be to randomly select participants from all over Finland. The following are the findings of Tänk’s basic income report (in Finnish only). The report was funded by the Finnish Pension Alliance Tela and Sitra.

According to the report, a field experiment would be the best way of examining whether the introduction of a basic income would reduce or increase employment among low-income workers. Tänk has used experimental economics to examine the basic income model. 

“The effects of a holistic social security reform, such as the basic income, cannot be predicted. A field experiment would provide evidence of whether the controversial basic income model could be used to reshape the social security system,” says Senior Researcher Ohto Kanninen, one of the authors of the report.

According to the report, a basic income field experiment would be subject to several constitutional, economic, political and experimental limitations. A key limitation is that the constitution guarantees equal treatment of all citizens.

“Social field experiments would momentarily put citizens in an unequal position. Implementing the basic income field experiment would require determining whether momentary inequality of this kind was acceptable,” says Mikko Forss, Director of Research at Tänk and a co-author of the report.

“Implementing the basic income field experiment would require a special law and a statement issued by the Constitutional Law Committee regarding random selection of participants for the experiment, the first statement of this kind to be issued by the committee. Randomisation would guarantee that information obtained on the effects of the basic income model was of a high standard and could be generalised. This would not be the case in a practical trial conducted in a specific region.”

Negative income tax is the most viable model

According to the basic income report, the most viable model for Finland would be negative income tax. Negative income tax is a progressive income tax system in which income subsidies based on earned income are provided to individuals whose income falls below a certain level. This model would replace primary social benefits, apart from social assistance and child benefits, up to a certain level.

According to the report, the minimum duration of the field experiment should be two years and the minimum number of participants should be 8,000 individuals between the ages of 18 and 62. The participants would be selected through a draw. The participants’ tax system should be changed to a monthly system to enable the use of monthly income data. The report proposes using several levels of guaranteed income, between 400 and 700 euros, in the experiment.

“The key is to use a broad set of metrics to monitor the effects; the effects on the labour market participation of the individuals involved, as well as their perceived well-being and control over their own lives, should be measured,” says Kanninen.

Smoother path to employment

Finnish values are strongly grounded in the country’s work ethic. “Work is not only a source of livelihood; it is also important to defining who we are as individuals,” says Suvi-Anne Siimes, Managing Director of Tela.

She continues: “It would therefore be a good idea to examine all means available of helping individuals to find employment. What we need is a less confrontational and more constructive and solution-driven discussion.”

Sitra’s interest in the basic income model stems from the possibility of ensuring that work pays off for the worker; the appropriate compensation should be paid for each hour worked. Apart from having a huge impact on individual well-being, this is also an economic necessity.

“Finland runs a huge deficit in terms of its human capital,” says Sitra’s President Mikko Kosonen.

According to Sitra, a field experiment is the best way of moving forward in testing the controversial basic income model in practice.

“Our unpredictable world is challenging our social policy operating models. We cannot engage in major structural change if we begin building before we know whether each piece of the puzzle works,” Kosonen concludes.

Basic income field experiment in brief

  • Minimum duration of two years
  • At least 8,000 participants from all over Finland
  • Participants will be selected at random from all those aged between 18 and 62 whose income falls below the median level
  • Monthly tax system for participants
  • Special legislation and approval of the method by the Constitutional Law Committee 

Comments (2)

A few of the games on Steam have a type of universal basic income with free drops for playing the free games that can then be traded for other items.

These games have millions of players and have been running for years.
Team Fortress 2 1 year 9 months ago

Perhaps they would consider this:

Sovereign debt required to be backed with Commons shares.

Commons shares may be claimed by each adult human, one only, that will cease to exist on the humans death, shall be deposited in trust with local financial institution with acceptance of a social contract.

In this way each human will receive equal interest payments from sovereign debt. This establishes the sovereignty of each human. As a sovereign entity, each individual would have access to sovereign debt for home, farm, or secure interest in employment.

In round numbers, a share with a value of $1 million would return about $1 thousand/month, if it all was borrowed. Current sovereign debt would return about $10/month, $20 if corporate government debt is included, which would be significant in many parts of the world, and would provide a valid field test.

Individuals could borrow a significant fraction, but maximum return would likely require states to borrow all remaining shares.

I suspect that a nation, and its subordinate governments, with 1 million residents could borrow the entire $1 trillion (equivalent) of resident shares as reserve cash/working capital and devise a plan to increase revenue by the $12 billion/yr (equivalent) required to pay the interest. (working with 1,25% to be under the generally accepted 2% sustainable growth)

With all currencies tied to the Commons, and the proportional increase in wealth flow in all states, exchange rates and trade can stabilize.

The increased spending on basic needs will necessarily reduce the cost of providing them.

Since the spending of money is restricted by the availability of materials and labor, and “full employment” is restricted by the availability of money, recognizing and distributing the value of the Commons in this way would simply “fill the reservoir” so the world economic system may act more like the fabled “Free Market” that so many hope for.

Please consider the notion, and as you view the worlds problems, and crises, imagine how this would alter those conditions, and most likely economic effects.

Thanks so much for your kind indulgence,

Stephen Stillwell 1 year 3 months ago

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