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Guaranteed Basic Income Is Not Worth the Risks of Experimentation As with all economic policies, basic income needs to be based on the balance sheet not the good intentions of Silicon Valley.

By Ray Hennessey

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Voters in Switzerland this week overwhelmingly rejected an economic plan to offer all citizens an unconditional monthly payment, in what was to be the first major country to adopt a guaranteed basic income.

But that's unlikely to stop the debate or, worse, the experimentation here in the U.S.

That's too bad.

Guaranteed basic income is a straightforward concept: All citizens of a nation are guaranteed an unconditional payment to improve their lives. They can use it for whatever they choose. That could be buying drugs, taking violin lessons or making sure their kids have diapers. No strings attached.

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Interestingly, there are both liberal/socialist and conservative/libertarian arguments supporting basic income. The liberal side puts this in the same broad category of other social-welfare programs. As a nation, we have a responsibility to our most vulnerable, and the richest of our citizens and the most profitable of our institutions should give more of their wealth to help those who don't have it. Entrepreneurial technology companies, under this argument, have even more responsibility to back this kind of social program, since advances in technology and productivity -- especially the growth of artificial-intelligence products -- threaten to put even more people out of work in the coming years.

The conservative argument rests on the fairness and simplicity of the program. Instead of spending tax dollars on programs such as welfare, food stamps, Medicare and Social Security for some of the population, give an equal amount to everyone and be done with it. Everyone starts at the same point, and if you choose to buy heroin with your basic income, it's no one's fault but your own. Entrepreneurial technology companies can actually innovate further on products and services that put people out of work, since they are funding basic income and fueling the overall economy with the efficiencies their technologies provide.

Switzerland was always a lousy lab for this. It has very generous social-welfare programs already, and the country, thanks in large part to its banking heritage, is very wealthy to begin with.

The U.S. is a different matter, with a crushing deficit, rising debt, decaying cities and a population already hooked on government payments. What's more, as the current election season shows, there's a sharp political divide (even within the two major parties) that makes the idea difficult to ever come to a vote. One can see Bernie Sanders supporting it as a socialist add-on to current entitlements, Donald Trump not understanding the subtleties, the #NeverTrump conservatives fighting it on misguided principle and Hillary Clinton equally championing the idea and fighting it, depending on the event or fundraiser. None of that furthers the discussion.

The private sector is trying its own experiments. Y Combinator, the fabled accelerator program, is moving ahead with a plan to do a trial-run of basic income in a U.S. city, specifically Oakland, right in Silicon Valley's backyard. The goal, according to Y Combinator, is to "to answer a few key questions: how people's happiness, well-being and financial health are affected by basic income, as well as how people might spend their time."

Obviously, there's something meritorious in a private-sector experiment for a societal need. After all, that's what entrepreneurship is all about: finding an innovative solution to a hard-to-crack problem.

But the Y Combinator study is flawed -- and potentially dangerous -- and, like the move in Switzerland, should be abandoned before it ever gets off the ground.

Y Combinator plans to take a test group in Oakland and give them income "for the duration of the study, no matter what," the company says. "People will be able to volunteer, work, not work, move to another country -- anything. We hope basic income promotes freedom, and we want to see how people experience that freedom."

In short, for however long the test lasts -- it has floated a test period of five years -- Y Combinator will be guaranteeing some income and seeing what people do with it.

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But then what?

That's a question worth asking, because, make no mistake, this is a human experiment. Y Combinator will be artificially propping up people's incomes for a short period of time and seeing what folks do with it. Y Combinator is only looking to see if this makes people happier or "better," as if that's some reasonable endpoint. Then, presumably, it will take this income away. For scientific purity, it has to: The only way to judge the impact of this new income on families is to test them over the same time period and same conditions with the absence of it. Y Combinator also has to study a control group, and gauge whether that group's happiness level is lower in the absence of income, if it truly wants scientific data.

You can see the ethical dilemma in a basic-income experiment: You're toying with people's financial health, and, by judging your endpoints based on feelings, you're tinkering with and assessing human behavior. Y Combinator isn't conducting an economic experiment. It's conducting a psychological one, and that can go disastrously wrong if it's not careful. It needs to message to the marketplace that all the safeguards inherent in any health-related or psychological study of humans are being followed.

The researcher Y Combinator hired, Elizabeth Rhodes, just got her doctorate in social work and political science from the University of Michigan, where she studied slum communities in Nairobi, Kenya. This is a very different engagement, though, one with dangers that can't be downplayed. What seems like a harmless and innovative assessment of basic income could end up being an economic Tuskegee, scarring the people who came to rely on the basic income offered during the study.

And to what end? This experiment can't possibly determine whether the country could support basic income. For one thing, Oakland is not an ideal test city. Y Combinator said it selected Oakland because of its economic diversity, but it also chose it because it's "close to where we live, which means we'll be closer to the people involved." But that could equally skew the results. Having relationships with subjects means researchers cannot be dispassionate, something essential in scientific rigor.

What's more, the endpoints are simply disappointing: "Do people sit around and play video games, or do they create new things? Are people happy and fulfilled? Do people, without the fear of not being able to eat, accomplish far more and benefit society far more? And do recipients, on the whole, create more economic value than they receive?"

Fascinating, yes, but the success or failure of basic income won't necessarily rest on its benefit -- people with more money will either spend it or save it -- but how it will be paid for. Switzerland's voters -- 77 percent of whom rejected basic income -- didn't like the moral impact of handing someone a check, but also couldn't figure out where the money would come from. It was just one generation removed from the New Deal that our own government found it couldn't pay for.

Ultimately, policy needs to be based on the balance sheet, not good intentions. Just ask the Soviet Union and, more recently, Venezuela, how their economic utopias worked out for them.

Y Combinator fully admits the cost -- and therefore the feasibility -- won't be addressed. "We don't yet know how it should look or how to pay for it," it says. That's a big omission, one that, if this were a startup pitching to join Y Combinator, its partners would shoot down immediately.

Related: Regardless of Outcome, Sanders Has Shed Light on the Problem of Income Inequality

With technology and innovation, there may come a day when the economy can support guaranteed basic income, but that time isn't now, and, despite Silicon Valley's God-playing enthusiasm, that time remains far, far off. It may never come. The irony of basic income is that, if an economy can support such a program, it probably doesn't need it anyway.

One way or another, now isn't the time to make lab rats of human beings whose lives, whose hopes and dreams, whose health and welfare relies on capital derived from more predictable sources than the all-too-visible tinkering hand of a well-meaning technology accelerator.

The Swiss got it right. So should Silicon Valley.

Ray Hennessey

Former Editorial Director at Entrepreneur Media

Ray Hennessey is the former editorial director of Entrepreneur.

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