UBI and collectively provided goods

In a recent broadcast of Econ Talk with Russ Roberts, economist Diane Coyle (Cogs and Monsters: What Economics Is, and What It Should Be) expresses dissatisfaction with universal basic income, or UBI, as a policy solution. She reasons that the $10-$15K a year could not be used to purchase collective goods:

But what you can’t do with an Universal Basic Income is buy collective goods. And, to the extent you care about communities and improving the chances of those who are the least well off, then it’s often those collectively-provided goods that matter a good deal–the transport network, the quality of the public schools, the quality of the healthcare that you can access.

So, a lot of these classic public goods or traditionally collectively-provided goods are very important; and you can’t, with your individual $10,000 or $15,000 dollars, go and purchase those.

Econ Talk

I too feel that UBI is an unsatisfactory policy intervention.

When I was a few years past out of college, one of my classmates had used some family money to purchase a vehicle most would say was beyond her income level. I don’t remember if it was an Audi or a mid-range convertible. She admitted straight out she enjoyed how she was treated differently when she pulled up in a luxury vehicle versus a second-hand compact. She claimed she received better service. In other words, she felt a disproportionate outlay of her monthly income on a vehicle bought her into a higher level of service network.

Indeed, you can’t buy your way into, say, a network of moms who trade-off watching each other’s kids. Similarly, one of the moms can’t just decide to sell all the reciprocal arrangements she has stored away through her mom friendships. Money is mostly used for unfettered transactions, whereas chits of return favors are the currency of collective goods. But money can buy you the Lulu Lemon leggings that all the moms wear, or a membership to the gym where they work out and spend time by the pool in the summer months. Money helps get to the networks even if you can’t use it to buy your way all the way in.

My reason for disliking UBI is slightly different, yet similar. I too think that people who are not wealthy could benefit more from social structures than cash. UBI is just half a transaction. Giving people a monthly stipend does nothing to teach them how the social side of the economy works: exchanges, reciprocity, feedback, and the like. Simply transferring money to people, without having them think through and evaluate a selection of options, without experiencing the pros and cons of various relationships and outcomes, robs them of the experience of the market.

If you really want people to become wealthy, you would take the time to show them how.