Category: Medicine

A Basic Income Guarantee Can Work if it Replaces State Education and Medicine

money

Classical liberals like Milton Friedman and Friedrich Hayek have supported the idea of a basic income guarantee as an improvement on the current patchwork of welfare programs. The welfare systems in most countries are the product of a century of piecemeal reforms, where politicians have created many overlapping programs targeting different problems and interest groups. This makes perfect sense from the politicians’ perspective; creating a new program allows one to attach one’s name to a high-profile bill, thus winning favorable media attention and votes. It’s the same reason governments often create shiny new highways rather than filling in the potholes on old ones. Where’s the glory in marginally improving something with someone else’s name on it?

As a result of this political process, welfare systems have dramatically higher administrative costs than they need to have. Rather than having separate (and often multiple!) bureaucracies to administer welfare programs for the homeless, the temporarily unemployed, seniors, disabled workers, single mothers, etc., why not fold them all into one? In fact, Milton Friedman’s negative income tax would fold them all into the agency responsible for administering taxes. Replacing a hundred parallel agencies with one agency tasked with administering a simpler system would clearly reduce overhead costs.

The other consequence of the patchwork welfare system is that it creates more severe unintended consequences than it needs to. All redistribution schemes affect incentives, but a basic income guarantee paired with a reasonable tax scheme (maybe a flat tax or a progressive consumption tax) would avoid the worst of the perverse incentives. Current welfare systems feature “welfare cliffs,” where many programs abruptly cut off at the same income level, leading to absurdly high implicit marginal tax rates. The examples I’ve seen have situations where earning $1,000 more income can make one ineligible for $10,000 in benefits from various programs. That’s an implicit marginal tax rate of 1000%, far higher than the tax rate paid by the highest of high earners!

An example of welfare cliffs for single mothers in Pennsylvania. (Source)
An example of welfare cliffs for single mothers in Pennsylvania. (Source)

Since a basic income guarantee is a lump sum paid to all citizens, it doesn’t have this feature. Marginal tax rates still have to be positive to pay for it, but they would never be higher than 100%.

This all sounds great so far, but as David Henderson points out, the math doesn’t really check out. The way the basic income guarantee is typically sold implies that we could replace current welfare programs with a basic income guarantee and remain revenue neutral.

Here are some back-of-the-envelope calculations to show this wouldn’t work. I’ll look at the Canadian case because I live in Canada, but the results should be similar for other developed economies.

As of the 2013-2014 fiscal year, the Federal Government of Canada spent $72.2 billion on transfers to individuals (including old age security, employment insurance, childcare benefits, etc.). At a population of 35.5 million, that comes out to just over $2000 per person per year. Not enough to live on. I’ve heard proponents of the basic income use $10,000 per person per year as an estimate of how high the basic income would have to be, so calls for a basic income to replace other welfare transfers amount to calls to expand government transfers by a factor of five.

The Basic Income Guarantee Can Replace More Than Just Welfare

Canada and other countries can have a revenue-neutral basic income if we realize just how many government programs are thinly veiled redistribution schemes. The biggest examples are education and medical care.

I think if you ask the supporters of public education and public healthcare why they support these policies, it’s primarily because of equity concerns. What would poor people do if they couldn’t afford education or medicine?

Sometimes you hear efficiency arguments, but a lot of them sound more like ex post rationalizations of the status quo rather than serious justifications for public provision. If you can point to a market failure present in either the market for education or for medicine, that is not sufficient to justify public provision. You also have to show that there is no feasible policy that can fix that market failure without sacrificing the efficiency benefits of markets.

So, for instance, if you think education has positive spillover effects, that justifies at most a Pigouvian subsidy to schools.

For Canada, education and healthcare cost the government about $3000 and $6000 per person per year, respectively. So that’s enough to finance $9000 per person per year of a basic income guarantee. If we abolished public schools, public hospitals, and existing welfare programs, we could pay every single person $10,000 per year for their entire lives and still have money left over.

Ask yourself if you would rather have public education, public healthcare, and whatever transfers you currently receive from the government, or $10,000 every year for your entire life.

Yes, you would have to pay for school and health insurance yourself. But we would expect the prices of both those services to fall with market competition. I know what I would choose.

The post A Basic Income Guarantee Can Work if it Replaces State Education and Medicine appeared first on The Economics Detective.

A Basic Income Guarantee Can Work if it Replaces State Education and Medicine

Classical liberals like Milton Friedman and Friedrich Hayek have supported the idea of a basic income guarantee as an improvement on the current patchwork of welfare programs. The welfare systems in most countries are the product of a century of piecemeal reforms, where politicians have created many overlapping programs targeting different problems and interest groups. This makes perfect sense from the politicians’ perspective; creating a new program allows one to attach one’s name to a high-profile bill, thus winning favorable media attention and votes. It’s the same reason governments often create shiny new highways rather than filling in the potholes on old ones. Where’s the glory in marginally improving something with someone else’s name on it?

As a result of this political process, welfare systems have dramatically higher administrative costs than they need to have. Rather than having separate (and often multiple!) bureaucracies to administer welfare programs for the homeless, the temporarily unemployed, seniors, disabled workers, single mothers, etc., why not fold them all into one? In fact, Milton Friedman’s negative income tax would fold them all into the agency responsible for administering taxes. Replacing a hundred parallel agencies with one agency tasked with administering a simpler system would clearly reduce overhead costs.

The other consequence of the patchwork welfare system is that it creates more severe unintended consequences than it needs to. All redistribution schemes affect incentives, but a basic income guarantee paired with a reasonable tax scheme (maybe a flat tax or a progressive consumption tax) would avoid the worst of the perverse incentives. Current welfare systems feature “welfare cliffs,” where many programs abruptly cut off at the same income level, leading to absurdly high implicit marginal tax rates. The examples I’ve seen have situations where earning $1,000 more income can make one ineligible for $10,000 in benefits from various programs. That’s an implicit marginal tax rate of 1000%, far higher than the tax rate paid by the highest of high earners! (more…)

The post A Basic Income Guarantee Can Work if it Replaces State Education and Medicine appeared first on The Economics Detective.

New Study Finds Strong Evidence of Male-Female Brain Differences

Use Your Brain

Perhaps you’ve heard about a precocious study making the rounds about the differences between male and female brains. Perhaps you’ve noticed it reported under headlines like, “Stereotypically ‘male and female brains’ aren’t real, say scientists” or “Brains aren’t actually ‘male’ or ‘female,’ new study suggests” or “Scans prove there’s no such thing as a ‘male’ or ‘female’ brain” or “Male brain vs. female brain? Research says they’re unisex” or “There Is No Difference Between Male and Female Brains, Study Finds” or “There’s no such thing as a ‘male brain’ or ‘female brain,’ and scientists have the scans to prove it” or “Men are from Mars….and so are women! Scans reveal there is NO overall difference between the brains of the sexes” or “A welcome blow to the myth of distinct male and female brains.”

I could go on, but I won’t. Given all these headlines, it might surprise you that the study all these journalists are reporting on actually finds strong evidence of differences between male and female brains. The study is “Sex beyond the genitalia: The human brain mosaic” by Daphna Joel et al. (and that’s a big et al!). It’s sadly behind a paywall, but here’s its abstract in full:

Whereas a categorical difference in the genitals has always been acknowledged, the question of how far these categories extend into human biology is still not resolved. Documented sex/gender differences in the brain are often taken as support of a sexually dimorphic view of human brains (“female brain” or “male brain”). However, such a distinction would be possible only if sex/gender differences in brain features were highly dimorphic (i.e., little overlap between the forms of these features in males and females) and internally consistent (i.e., a brain has only “male” or only “female” features). Here, analysis of MRIs of more than 1,400 human brains from four datasets reveals extensive overlap between the distributions of females and males for all gray matter, white matter, and connections assessed. Moreover, analyses of internal consistency reveal that brains with features that are consistently at one end of the “maleness-femaleness” continuum are rare. Rather, most brains are comprised of unique “mosaics” of features, some more common in females compared with males, some more common in males compared with females, and some common in both females and males. Our findings are robust across sample, age, type of MRI, and method of analysis. These findings are corroborated by a similar analysis of personality traits, attitudes, interests, and behaviors of more than 5,500 individuals, which reveals that internal consistency is extremely rare. Our study demonstrates that, although there are sex/gender differences in the brain, human brains do not belong to one of two distinct categories: male brain/female brain.

To paraphrase that last sentence, while male and female brains are different, they’re not different in the strong sense of having some exclusive traits. All those headlines saying that “Scans reveal there is NO overall difference between the brains of the sexes” are just wrong. The scans revealed that there were differences, but that these differences weren’t shared by 100% of one gender and 0% of the other. In ordinary life, 80-20 or 60-40 is considered a difference.

Let’s be honest about why this study is of so much interest to all these journalists and the people who read them: We want to know about mental differences between men and women that manifest in different behaviour in everyday life. We also want to know if these differences are the result of nature or nurture. So when the study says that the “findings are corroborated by a similar analysis of personality traits, attitudes, interests, and behaviors of more than 5,500 individuals, which reveals that internal consistency is extremely rare,” what they mean is that they tested the thing we’re really interested in. And by golly, they found that some women enjoy football and some men enjoy romantic comedies. They didn’t find that men and women were equally likely to enjoy football or rom coms, a claim even science journalists were wise enough not to make.

The claim I take issue with is summarized in this sentence:

Documented sex/gender differences in the brain are often taken as support of a sexually dimorphic view of human brains (“female brain” or “male brain”). However, such a distinction would be possible only if sex/gender differences in brain features were highly dimorphic (i.e., little overlap between the forms of these features in males and females) and internally consistent (i.e., a brain has only “male” or only “female” features).

This really seems like a straw man, or at the very least a weak man. Who precisely is making this distinction? The “significance” blurb gives us a hint:

Sex/gender differences in the brain are of high social interest because their presence is typically assumed to prove that humans belong to two distinct categories not only in terms of their genitalia, and thus justify differential treatment of males and females.

Again, the passive voice prevents us from finding out who these mysterious people are that are making this false assumption. However, because this is of “social interest” rather than scientific interest tells us that it’s regular people, rather than neuroscientists, who the authors think are using neurological evidence to justify differential treatment of men and women.

When people talk about “male brains” and “female brains,” are they really assuming a stark distinction? I don’t think so. If I say “men are taller than women,” I don’t mean that literally every man is literally taller than every woman. I mean that if we looked at the distribution of heights for men and for women, we would see that the male distribution has a higher mean and median than the female distribution.

What this study proves is that the male and female neurological differences that they measured were more like height than like some other sexually distinct characteristics such as “having a penis” or “having a uterus.” Drawn from different distributions, but not categorically different with near-100% accuracy.

I think both the researchers and the journalists are responsible for the misleading nature of the reporting on this study. The researchers did a good piece of science that incrementally added to our knowledge about gender and the brain. They didn’t overturn the apple cart by radically departing from some well-established theory, they merely added to what we already knew.However, to promote their paper and get worldwide media attention and invitations to TED talks for life, they set up a straw man theory that they could easily knock down; setting it up in such a way as to play to journalists’ obvious biases. The journalists, and their editors, jumped at the opportunity to confirm their biases while sparking controversy and driving clicks. They wrote their titles and opening paragraphs in such a way as to make it seem that the idea of male-female brain differences had been debunked, while hiding a few sentences about the study’s actual findings further down the page.

This pattern is all too familiar, as documented in the Slate Star Codex article on “Reporter Degrees of Freedom.” The message we should all be taking is that science journalists, and especially the editors who write their headlines, cannot be trusted. This is especially the case when their stories have political implications  that flatter their biases.

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