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0:00
I was watching TV this morning before I came on and I saw one group advert you know advocating free hearing tests for the 40s and 50s and another group adve- advocating free uh bereavement counseling in schools. Nobody's kind of against those things but we when we are spending and taxing and accumulating debt so much we've got to stop uh all trying to give each other free stuff. A West Virginia senator Joe Manchin says we cannot spend our way to a balanced,
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healthy economy and continue adding to our 30 trillion dollar national debt. Getting inflation under control will require more aggressive action. The bigger the government, the smaller the citizen. Because welfare is anti-work and anti-marriage, it inherently harms the very people it was supposed to help.
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What the welfare system and other kinds of governmental programs are doing is paying people to fail. Insofar as they fail, they receive the money. Insofar as they succeed, even to a moderate extent, the money is taken away. Education and healthcare are some of the most important values we have in the world. The last people you want running it is the government. They have no incentive to make it work well. They don't- you don't have a customer relationship.
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There's no competition, there's no innovation. The next time a politician proposes a generous new government benefits program, the first question should be: where is the money going to come from to pay for it? It seems all people want these days is free stuff. They expect the government to solve all their problems. Health, education, housing, jobs, bills, food - there's no area of life government spending
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hasn't touched. This means lazy and inefficient bureaucrats deciding where your money goes instead of believing in the power of individuals and the free market. But you're in luck, because here at Unlearning Economics we've put all the evidence together and found that spending by governments is guilty of: first, making long-term investments in things like universal education, child care, and
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health care. Second, insuring the population against risks to their health and standard of living. Wait a minute.... That sounds quite good actually [Music]
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Hey everyone. Let's talk a little bit about social spending and 'free stuff'. When I say 'free stuff' I mean 'social spending which is funded by governments and is free at the point of use'. But that's less catchy. It's not uncommon for the notion of free stuff to be mocked. During Bernie Sanders' presidential campaign, you probably heard a lot of "oh yeah and maybe everyone should get a pony, too!" Let's put
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aside that buying everyone a pony is relatively affordable, coming to at most 15 percent of existing government spending in the USA, or one-third of the defense budget. The question being asked here is a fair one: how will we pay for it? The argument against social spending goes something like this: surely we can't just promise free stuff to people because it has to be paid for somewhere with taxes - which will only drag down growth - or with government borrowing - which will only
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indebt future generations. Getting free stuff will also engineer a culture of dependency where no one works for anything any goddamn more. Plus, it's just like the Soviet Union, or something. If this were true you would expect spending on things like education, health, welfare, housing, and childcare to be associated with a whole host of negative outcomes. It could be that social spending is a drag on GDP
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growth because governments are so wasteful and inefficient and taxes are so high. It could be that social spending reduces employment because people are incentivised not to work by all the free money. Ultimately, high government spending might lead to shorter, stupider, and unhappier lives for everyone down the line. In his book Making Social Spending Work, Peter Lindert reviews the evidence and finds
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virtually nothing to support these contentions. Social spending has achieved massive gains in literacy, health, and reducing poverty the world over. In almost every case there is a notable absence of negative effects on growth, employment, life, and happiness. Let's take a look at this data in more depth and I guess this is where things get a bit intense. This is what my videos are like, okay? This table shows how various measures of GDP growth correlate with social spending over
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different time periods in 21 OECD countries - that is, rich countries. The rows show the time period: for example, the first row is the 1960s and the second is the 1970s. The columns show the three different measures: first, growth rates of GDP per person each year; second, the overall level of GDP per person each year; and third, the overall level of GDP per person at the end of the decade. While
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the first column measures changes in GDP, the latter two columns measure the total amount. And while the first two columns are done on a year-by-year basis, the third one is supposed to measure the cumulative effect over a decade. The little A's and B's are important because they indicate if the correlations are statistically significant. For instance, the correlation between social spending and the GDP level in the same year for the 1990s is plus 0.47 and is statistically
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significant with 95 percent confidence. For the 1960s, the correlation between social spending and the GDP level by the end of the decade is plus 0.65 and is again statistically significant, this time with 99 percent confidence. The correlation between GDP growth and social spending from 2007 to 2014 is minus 0.09 and is not statistically significant. In fact, looking first at the column for GDP growth rates you can see that none of the correlations are statistically significant.
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The values are slightly negative on average but this is likely just noise. It seems that the growth of GDP and social spending do not have an obvious relationship from this data. Looking at the second and third columns we can see that the correlations are universally positive and many of them are statistically significant. This implies that social spending has a positive relationship with the overall GDP level, both on the year by year basis and on a decade by decade basis. I
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wouldn't read too much into this positive effect, though, the important point is that the purported catastrophic negative effects of social spending just aren't easily visible. These are just simple correlations, but if there were a negative correlation between GDP and social spending I could at least see where critics of social spending got their views from. Even with this low bar there are just no obvious negative effects or examples of it holding countries back. This remains
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true if you try to correlate social spending with employment levels, self-reported happiness, or play with other measures. Yet investment in healthcare and education has led to longer, happier, and more productive lives for millions of people the world over. Still, this is just a starting point. We'll need to look at more in-depth evidence before we conclude that 'free stuff is good, actually'. By the
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way, I'll be using free stuff, social spending, and government spending somewhat interchangeably in this video. Governments have a unique role within economies. Unlike private companies, individuals, unions, or even local governments, national governments have a stake in a wide range of social and economic outcomes. This means that spending on education, health and welfare can have knock-on effects which ultimately benefit society and the government down the line. In some
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cases, the eventual benefits will even outweigh the costs of the original spending. Governments are also uniquely positioned to fund such programs and distribute them to the entire population, free at the point of use. At the start of the video, I said there are two main reasons to love social spending. First, it makes long-term investments in things like universal education, childcare, and
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healthcare on a scale that the private sector won't. Secondly, it provides social insurance for the population against risks to their health and standard of living more generally. It does this in a more efficient and comprehensive way than the private sector can. Let's explore each of these in turn. I'm going to use three main examples of social spending: education, healthcare, and welfare
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payments like Universal Basic Income, and we're going to do things in that order. So yes, this video has quite a lot of content...but there are plenty of Simpsons Clips to break it up. "Have some money"
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In 1807, a bill to extend education to the poor was proposed in UK Parliament. The Tory MP Davies Giddy spoke out against it:
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I like how this guy's portrait perfectly fits his political views "That feeling when you take things from the poor lol" Giddy was right about- Giddy was right about some things: education allowed workers to leave agriculture and get jobs in manufacturing. It tended to reduce support for Tories. And it probably aided the decline of religion. But he was wrong when he said:
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Firstly, the taxis themselves were only 0.2 percent of national income, an eminently affordable sum. Secondly, estimates from back then show that educating the poor would have been a wise investment which likely paid for itself in the long run. This table shows estimates of the rates of return on schooling for the sons of laborers in Victorian England. These are in percentages: the extra money received from paying for your son's education
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through their eventual higher earnings. The columns show the different parties who might benefit from this investment. We are most interested in the second column, which shows the rate of return for a private family investing in schooling; and the fourth column, which shows the rate of return for the government investing in schooling. As the table states, the first three years of schooling
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would have achieved signature literacy. Men are called 'grooms' here for some reason and the dates on the far right are when these 'grooms' started schools as 'sons'. It's a little confusing but it's cool data so let's stick with it. A private family investing in three years of schooling for its son in 1821 yielded a 19.5 percent return by 1840 when the son was a grown-up 'groom'. For sons who
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started school in 1842, the return was 11 percent by 1868. These boys would benefit massively from having their education invested in as it increased their future earnings by over 10 percent in each case. What's also interesting here is the fourth column, which shows the fiscal return to the government. The government could expect a 21.2 percent rate of return from investing in schooling in 1821 and
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a 6.5 percent rate of return for investing in schooling in 1842. This is because higher earnings for the sons meant higher tax income for the government once the sons grew up and became grooms. As the fifth column shows, these rates of return were much higher than government borrowing costs education paid for itself - even if the government had to borrow to invest in that education. Education benefited the children who got it and their families and also benefited the government
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who paid for it. Davies Giddy was incorrect that this was unaffordable. that's right: a Tory MP was both callous and wrong. I'll give you a minute to process that revelation. You could even say that 'Davies' was 'Giddy' to deny education to the masses. I'll show myself out... The economist Milton Friedman used to say 'there's no such thing as a free lunch'. "It's the free lunch myth...the belief
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that somehow or other government can spend money at nobody's expense." The idea is that if you spend money on something like public education then you have to pay for it, which involves taxes, which are a drag on the economy. Friedman enjoyed quoting the 19th century Economist Friedrich Bastiat: "I don't know how many of you reme- have ever heard of a wonderful description of government that was made
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by a French Economist by the name of Fredrich Bastiat about 150 years ago. He said 'government is that fiction whereby everybody believes that he can live at the expense of everybody else'. The insight that education can pay for itself reframes our view of public spending. Public education enables people to lead better lives through learning and basic skills. It increases income for individuals
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and their families. O top of all this, from the perspective of governments, public education pays for itself through higher future taxes, contradicting Friedman's dictum. Peter Lindert presents this simple historical diagram of how investment in education yields returns. In the past, countries lacked the fiscal capacity and political will to use tax money to extend education to the
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entire population - that's link (a) on the diagram. As a race - that is, humanity - we managed this much later than we needed to. Selfish elites kept education from the masses for tens or even hundreds of years longer than necessitated by a lack of resources and knowledge. Once we began to spend money on education, the average years of schooling went up - that's link (b) on the diagram. Once years of
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schooling went up, so did the skills and knowledge of the population - or link (c). And once the skills and knowledge of the population increased, so did their productivity and earning power - that's link (d). This virtuous cycle also meant higher tax revenues for the governments that invested in the first place. We found the free lunch! All we needed to do was ensure universal provision of education to children. And if you think this only applies to early education in Victorian
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Britain, then you're going to be so embarrassed when I say what I'm about to say...right now. It doesn't only apply to early education in Victorian Britain. (Could have improved that script, didn't). There are plenty of other examples from across the globe. Lindert highlights that Eastern European countries have roughly similar average incomes to Latin American countries, but due to higher spending on education they tend to outperform Latin America on test scores. Education
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in the USA deserves singling out because it lags behind other education systems despite the high average income of the country. It may be the case that low funding is leaving a 'free lunch' on the table for America, as well as not giving many children - disproportionately poor and/or non-white - a good chance in life. The low funding per person in the USA could yield dividends if the government
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chose to invest more. To be clear, there are many other factors at play in U.S education including a lack of centralisation and standardisation, ultra religious schools, parents not having much choice beyond their local area, and that good old American spirit of...sucking. "Don't ask me, I don't know anything. I'm product of American education system. I also build poor quality cars and inferior style Electronics." "Hahaha...oh they got our number!"
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So far, I've actually understated the case for investment in education. Primary and secondary school probably pay for themselves by increasing the earnings of the children when they are adults. But they have effects beyond this. Education can improve health, reduce criminality, and generally facilitate a modern society. As a wise man once put it:
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You said it brother...wait you said that!? There are lots of ways of thinking about this but the dominant way is 'positive externalities'.. Tthese are sometimes called 'spillover effects' or 'neighborhood effects', as Friedman called them. Positive externalities are cases where there are benefits to economic activity beyond the original buyers and sellers. They may sound good because positive is a...good
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word...but actually they can lead to problems. The issue is that because so many of these benefits are spread out across society they seem invisible or impossible to calculate. As highlighted by Friedman, universal public education has myriad positive externalities. For example, knowing that anyone you try to hire or who tries to hire you you will have basic numerical skills and will speak and write fluently is invaluable. If we rely on market mechanisms, education is likely to
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be underprovided because of the invisibility of this broad social return. Historically, it just hasn't been profitable to provide a basic minimum of education for everyone. We therefore need provision or subsidisation of positive externalities like education if we want to have enough of them. There's an extremely interesting study by Hendren and Sprung-Keyser which reviews social spending policies in the USA. We're going to keep coming back to this study, so remember it
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because it demonstrates about as definitively as possible that social spending can achieve the broad benefits we're talking about in this video. Social spending like this makes long-term investments and harnesses positive externalities and one of Hendren and Sprung-Keyser's findings is that investments in education pay for themselves over a wide range of ages. Here are three examples: first, the Perry Preschool Program, which targeted young children from
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disadvantaged African-American backgrounds. This was a high quality program with a high teacher student ratio and had massive positive effects on later life outcomes including education, income, criminal activity, and health. It was also a randomised study, which means the effects were likely to be causal. Second, the increases in funding per pupil for schools at K-12 level. This is kindergarten up
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to year 12 - in other words, standard schooling years. A 70s and 80s campaign tried to equalise funding between schools by redistributing from wealthy areas to poorer areas. The results were improved school quality, teacher student ratios, and pay for teachers. The pupils went on to earn more and experience lower rates of poverty. Third, a policy which admitted an extra student to Florida
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International University instead of Community College. Seriously, no shade to Community College but we know that university probably pays off better in terms of earnings. Despite the fact that going to university increased the time before the student started earning and also cost more to teach compared to Community College, the policy had eventual benefits for the student through earnings
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and was a net positive to the government through taxes. Investing in early education, school and even some university education could have a wide range of positive benefits. There's also a broader point to be made here about the importance of investment in not just schools but in children more generally. "Think of the children" Policies to help children could include paid parental leave, child care, early
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childhood nutrition, and so on. All these programs seem to hold massive payoffs, probably even paying for themselves over the long run. As Lindert puts it:
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Feminist groups have long pointed out the analogy to investment in physical infrastructure. We have accepted for a long time that investing in roads, railways, and airports can yield long-term dividends. The initial big expenditure justifies itself through higher long-term growth and productivity. The same applies to people and especially children. If they are properly cared for, fed clothed, and educated, they will be more
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productive over the long term. I want to stress that making people more productive over the long term isn't the only reason to invest in these things. We may want education because it allows people to engage with the world around them, to grow as individuals, and to become better citizens. My claim is that the economic argument against doing these things falls apart in an extreme way, because in many cases they pay for themselves. We are leaving the free lunch on the table by
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not doing them, on top of all the other good they do. There is literally no excuse. On top of being good, it turns out free stuff is quite popular, actually. Recent polling showed that most people in the USA oppose cuts to Social Security and Medicare, two programs which are mostly geared towards helping older people. On the website Ground News, they tell you the blind spots of the left, the right, and the centre. And this story was among the blind spots for the right. Right wingers
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would have missed it entirely. Social Security and Medicare are due to run out of money in the early 2030s, a related but separate story which raises different questions about how we continue to fund free stuff. Now, this one curiously was reported by the right, but not the fact that the same poll from earlier also shows that most Americans support higher taxes to keep these programs funded. These
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polls were again a big blind spot for the right and you can see how imbalances in reporting might impact public perception on this issue you driving the left and the right further apart. This is why I use Ground News to do my research. It really helps you develop a more sophisticated understanding of media bias and manipulation by showing you who's covering a story and why. Subscribe using the link
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ground dot news forward slash unlearning economics to support this channel and to gain access to an independent news organisation which is working to address our polarised political climate.
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If I had to summarise the typical comments I get on my videos, the top few would be something like:
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So, this is me doing part of a video about one main aspect of healthcare. Specifically, we're going to spend a fair amount of time on the implications of healthcare for social spending. I'm going to tell you why it should be on the list of 'free stuff': universal, publicly funded in at least some ways, and free at the point of use. I'm not going to analyse pharmaceutical companies or solve all of the problems in the U.S health
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system, although we will talk about the latter in the next section. In a way, public health is the mother of all positive externalities. There are massive human and economic gains to governments investing in these things and individually we either can't or won't do it on a big scale. When a disease sweeps through a population, many of our actions suddenly take on new meaning because they
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affect everyone else. The pandemic has taught us how interconnected we are and how failing to have vaccines or other preventative measures will result in massive costs down the line. Hey! You know who also acknowledged this? Milton Friedman! "There is room for some public health activities to prevent uhhh- contagion". The truth is that many efforts to maintain public health are just
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better done collectively. According to Peter Lindert, people first started to realise this in the 19th Century.
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More recently, the turnaround in the country of Rwanda shows the benefits of investment in public health most starkly. As I'm talking about Rwanda, content warning for extreme violence. I'm not going to go into detail but I will describe the background history so be warned and go to here... to skip the whole thing. In 1994, Rwanda saw one of the worst genocides in history. Ethnic cleansing against the Tutsis led to the deaths of one million people while the world basically did
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nothing. As tragic as the initial violence was, the genocide had similarly awful long-lasting effects. During the genocide, 250,000 women were estimated to have been raped. There was a massive resultant spread of HIV, which was actually used as a weapon. There was also an epidemic of Cholera in the refugee camps and low rates of vaccination against measles and polio, all of which led to the highest
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infant mortality rate in the world. For years after, many saw Rwanda as a basket case. Starting in 2004, the new government created a plan called Vision 2020 to try and become a middle-income country by that date. This may have been a lofty goal but they did a pretty good job. One factor in Rwanda's success was its massive investment in health to combat the problems created during the genocide.
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Rwanda dedicated over 20 percent of government expenditure to public health, which was over 10 percent of their GDP. You can see the success of this investment most clearly from what happened with HIV and with the Anti-Retroviral Treatment ART on this graph. The red line shows the rate of age-related deaths over time, which rose just before the genocide, reached almost 300 per 100,000 people, but plateaued and started to fall following the new policy in 2004. The Blue Line shows the
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number of people on ART, which clearly starts to rise just before HIV deaths start to fall. Over this period, AIDS-related mortality fell by 80 percent, while new infections fell by 60 percent, and total prevalence of the virus halved. The gains in HIV treatment are illustrative of the success of Rwanda's public health interventions, but they're only one part of it. These days, 97 percent of Rwandan
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children are vaccinated against 10 different diseases - polio, measles, tetanus and so on. Life expectancy increased from 33 years in 1990 to 63 years in 2012. Infant mortality was the highest in the world but it has moved up 50 places in the rankings and is now a third of what it was. The important thing is not just that these things are enormous achievements in themselves, they also did not seem to come at a prohibitive cost or have negative effects on growth Rwanda's GDP
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per capita tripled during this period and public debt actually fell. Any notion that investments in health are unaffordable or bad for the economy are belied by these outcomes. If Rwanda could manage universal health care then other poor countries can do it too I'm going to go out on a limb and say that many of these policies were good for the economy because frankly, having a disease ravaged population is clearly not. The positive externalities of addressing these health issues
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will have showed up in the growth of GDP. The economist Amartya Sen calls universal health care the affordable dream and Rwanda is not the only example. Thailand expanded universal health care in the early 2000s and saw enormous progress in life expectancy and child mortality, as well as reducing inequality in these outcomes. Good health was historically for the rich in Thailand and that's no longer the case. Sen also cites the Indian state of Kerala, which was one of the
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poorest states but expanded universal health care and now has one of the highest per capita incomes in India. Sen gives several good reasons universal health care is affordable in poor countries. For a start, there's a lot of low-hanging fruit in these countries. Vaccines, regular checkups, curable diseases - these all cost relatively little for massive health gains. On the other hand, leaving
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diseases to fester among those who can't afford treatment is just going to lead to massive costs down the line. As anyone who works in health or who has ever heard a saying knows 'prevention is better than cure'. You can treat someone with cheap, standard antibiotics now, so they don't need an emergency operation to remove their leg in the future. Not having universal preventative care will
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cost the health system more in crisis care down the line, not to mention the loss in productivity which is felt elsewhere in the economy. By the way - again - I hope you don't think I'm being callous by focusing on costs and economic effects. What I'm trying to get at, as with education, is that the economic argument against universal health care in poor countries falls apart even on its own terms.
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On top of doing frankly unimaginable good for the poorest in the world, basic universal health care creates favourable conditions under which people and therefore the economy can thrive. These effects are most noticeable in poorer countries which are moving from virtually no care to basic levels of care. The poor within these countries cannot afford treatment at all, so when healthcare is extended to them there are clear and long-lasting benefits. Just catering to the
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rich within a poor country means that you miss all of this low-hanging fruit. It is actually more effective in terms of money per health outcome to redistribute some, more expensive care, away from the rich within the country towards basic care for those in need. As Sen puts it:
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The Hendren and Sprung-Keyser paper we discussed earlier in the context of education also finds that investments in healthcare for children may pay for themselves over the long run. "Won't somebody please think of the children" They look at an expansion of Medicaid in the USA to insure pregnant women and children. This cost well over three thousand dollars per person and caused some mothers to stop working, costing
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more in tax revenue. Despite these obvious initial costs to the government, over the child's lifetime they have lower health care costs due to better care when they were young. They also earn a lot more, which brings in tax revenue. The result is that the policy has paid for itself by the time the child reaches 36 years old. Along with basic care preventing contagion and public sanitation, healthcare for children and pregnant women is the free lunch for health care. To sum up
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the video so far, we can return to our reasons free stuff is good. We've seen governments can extend long-term investments in things like universal education, childcare, and health care to entire populations, including those who can't afford them. In doing so, they can achieve massive gains, improving people's lives while not overspending or endangering the economy in any way. In many cases, these investments actually pay for themselves over the long term. Caveats
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do apply: there are diminishing returns. We can't invest in education or anything else forever and hope it will always pay for itself. We shouldn't guarantee everyone a PhD and trust me, you don't want one anyway. The biggest payoffs to education occur for primary and secondary schools. We can generalise this lesson to childhood nutrition and care which pays off more the younger the child. The
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biggest payoffs to health occur for basic care, as seen in the expansion of universal health care in Thailand, Rwanda, and Kerala. Beyond these points we can't be sure that these things pay for themselves, so we are far from done with health care in richer countries. Do we still want universal health care provision beyond this basic level? This question takes us directly to the second reason we like free stuff: it insures the population against risks.
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Social insurance can refer to a wide range of different provisions governments use to ensure their citizens do not fall below a certain standard of living. These can range from unemployment insurance, social security in old age, support for the sick and disabled, child care and, of course, health care. The basic idea is that the government takes on the risks faced by the whole population and because of the government's size it is able to pool these risks more effectively
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than the private sector. The private sector would be reluctant to insure everyone against all of these eventualities, so the state has to step in. Unlike investments in basic health and education, social insurance is unlikely to pay for itself. It will definitely require higher taxes. But countries have to pay for healthcare somehow and it turns out this is better funded by governments. They can
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effectively insure the whole population in a way the private sector is unwilling or unable to do. This means that universal health care is actually the more efficient option and once again does not endanger the economy. I know the idea that public sector could be more efficient than the private sector is anathema to some people but they need to update their views because they're wrong. There are some pretty bad arguments against universal health care out there. When you
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say that everyone should have their health care covered, one of the first objections you'll hear is 'moral hazard'. Moral hazard is a common problem for insurance schemes of all kinds. If I know I'm insured, then I may be more likely to take risks as I'm covered if things go wrong - or so the argument goes. I find the moral hazard argument compelling in some cases. If banks know they're going to be
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bailed out, they'll take more risks and if things go wrong they won't face the downside of these risks. We all know that's a problem in the real world... Healthcare is different. Poor health can have permanent and irreversible effects on a person. Am I just going to walk out into the street without looking because we have universal health care in my country? "Dad no! It says don't walk!" "It doesn't matter they have free healthcare! Whoah I'm rich"
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You could argue that moral hazard applies to my use of treatment not my incurring of health risks but it's still impossible for me to just casually decide I want an MRI scan. You can't walk in off the street and buy one like a [ __ ] Big Mac. Under universal healthcare, the decision is still left in the hands of experts, known as 'doctors'. As something of a hypochondriac, though, I do have to admit there's truth to the idea that payments
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deter take up of health care. I was at the height of my health anxiety in 2017. If I'd had to pay to go see my GP I'd have done it less. Then I could have just sat at home, wracked with anxiety that I was dying. What a win for private health care that would have been. I'm making a serious point here: Higher take-up and the universal coverage could be because people were under-consuming health
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care before, rather than because they're over-consuming it now. The evidence is, in fact, mixed on over-utilisation due to moral hazard versus under-utilisation for other reasons. This is especially true if market prices are high and insurance markets are not competitive. We know from countless reports that the health insurance industry in the USA, for example, features substantial premiums
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and loading of costs onto customers. People with horrific injuries actively beg bystanders not to phone an ambulance because it's too expensive. There are increasingly ridiculous deductibles like being charged for holding your own baby. All in all, it's more likely people aren't getting health care they need than are getting health care they don't need. Let's go into a bit more depth on how the
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health insurance market works - or doesn't - so that we can avoid charging people for having babies. At the start of this video, I played a clip of Yaron Brook ranting about universal healthcare in the UK. Education and healthcare are some of the most important values we have in the world. The last people you want running it is the government. They have no incentive to make it
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work well, they don't- you don't have a customer relationship. There's no competition, there's no innovation. His rant is just a generic argument for competition and markets that in no way explores the things that make healthcare such a unique service. We can contrast Brook's view somewhat unfairly with a famous 1963 paper on health economics by Kenneth Arrow, which points out healthcare just can't be delivered by traditional market mechanisms. This is unfair because Kenneth
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Arrow was a genius whereas, well... Healthcare is what's sometimes called a Credence Good, where it's difficult to judge the quality of what you've received even after you've received it. You probably know the expression 'we did the best we could'. "Meredith was hit by a car. It happened this morning in the parking lot. I took her to the hospital and the doctors tried to save her life. They did the best that they could ....
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...and she is going to be okay." "What is wrong with you. Why did you have to phrase it like that?" There's no way for patients to evaluate whether the doctor has truly done the best they could. A good surgeon who does their best can lose the patient. A rubbish surgeon who slacks off can get lucky. A lot of the time the outcome of a treatment is outside our control the result of this is
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that patients have to trust the doctor. This trust could be attained through: professional credentials - hence Credence Good - or accountability mechanisms or reputation or ethical oaths. You know, the kind of things economists don't have. The profit motive can easily undermine trust when it conflicts with the best interests of patients. Doctors could use a treatment because they've been paid to promote it
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not because it was the best option. Or they could cut corners just to save costs and make more money. These forces have combined to give healthcare a special status. Most hospitals are non-profit and most medical professions have some form of accreditation and gatekeeping. Arrow points out that even in the absence of mass public provision, healthcare is rarely delivered solely through
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traditional capitalist companies. It just conflicts too clearly with the profit motive. So that's one reason that non-market forces are often at play in the health sector, but it's a slightly different question to ask whether the state should provide health care. My claim is that the state can provide health insurance more efficiently and universally than the private sector. Let's unpack how this
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works. Health risks are difficult to predict for an individual: you could have an accident, a stroke, or a heart attack, or be diagnosed with cancer or multiple sclerosis. You may be aware of some inherited tendencies in your family that place you at higher risk. You will also know you're at higher risk if you eat poorly and don't exercise and live near a coal power plant.
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"What are you, like, 45?" "43. I know I look a little older but that's just because I drink and smoke heavily and work with chemicals and sleep on my face". But whether and when any of these will manifest as serious health problems is virtually impossible to predict. Healthcare can be extremely expensive and when the bill arrives, most people just don't have the money out of pocket because they weren't expecting it. The market-based solution to this is insurance. You pay a certain
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amount on a regular basis and in return you are covered should anything go wrong. This converts the unpredictable nature of individual health risks into a predictable payment schedule for you. Insurance companies can budget what they spend on health care in a way individuals cannot because the pooling of large amounts of money enables them to pay the cost of treatment reliably and charge customers like you a regular amount. Risks become predictable when there is a big population
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of people, a basic feature of probabilities. The more people, the more reliable the health costs, which leads to economies of scale and is one reason insurance companies are usually pretty big. Administrative costs fall and payouts become more predictable as the companies grow. This depiction of insurance is of course quite idealised, and not just because it assumes the insurance companies
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are behaving nicely and people can afford it. But this is all related to a subtle problem known as 'adverse selection'. The people who are most likely to want health insurance are those who know they are high risk. This means that insurance companies tend to get the customers they want least - that is, those most likely to make a claim. Often companies can't screen customers directly for everything -
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we as individuals are best poised to judge our potential for health problems. Even as screening has become more advanced, overt discrimination has been prevented by law in many richer countries. But the mere fact that someone wants health insurance is a signal that they think they might need it. People who are super healthy are more likely to hold back. This is the 'adverse selection' that
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we were talking about. High-risk people select into insurance, while low-risk people select out. If the insurance company knows high-risk people are more likely to buy insurance, they will have to make more and higher payouts. This will increase the cost of insurance and therefore its price. But with the price going up, the people with the lowest health risks out of those left will drop out again,
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knowing they can't justify the price. That leaves an even riskier pool of customers buying insurance. This means more, higher claims and higher costs for the insurance company, so they put the price up again and people drop out again and the price goes up again, and so on until the market unravels entirely. This has been called the 'death spiral of adverse selection' and obviously things rarely get
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this extreme. In line with Arrow's paper, there are mechanisms checking the death spiral, including but not limited to public provision and regulation, as well as private institutions which combat the problem. The most obvious way to stop the death spiral at its nexus, though, is by providing insurance for everyone so low-risk customers aren't driven out of the market in the first place.
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You may be wondering if this is actually what happens in health insurance markets because it's a stylised model, but it turns out there is evidence for it. You see, adverse selection has an interesting implication. If low-risk people are forced out of health insurance then compelling this group to buy health insurance somehow, will reduce costs, increasing the efficiency of the sector. We can test this implication and if it's true, it's a good argument for broader - maybe even
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universal - coverage being more efficient. The more people we cover, the lower the average cost per person ,as we bring low-risk individuals in. This isn't the only argument for universal health care, but it does counteract the common argument that the state is less efficient than the private sector. As the USA is the only rich country without universal health care, it provides an opportunity
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to test what happens when we experiment with public, private, and mixed insurance. This means we can see if adverse selection is a reality. And the idea was tested properly in the U.S state of Massachusetts which introduced a reform in 2006 which made people pay a penalty for not getting health insurance. This isn't ideal from a humanitarian or distributive perspective but it should force people into the market who were not previously in it, potentially limiting adverse
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selection and therefore testing our theory. This graph shows the proportion of people enrolled in healthcare over the period of the reform. As it says at the top, the graph is for the so-called individual market which means health insurance not linked to employers. Simply put, it's people directly buying health insurance for themselves. This is a good chance to observe the kind of behavior predicted by adverse selection. 'One' on the y-axis means everyone is insured, while 0.8
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means that 80 percent of people are insured, and so on. The solid black line with dots shows the proportion who are insured outside Massachusetts and this stays at just under 70 percent over the whole period. The blue dotted line shows insurance inside Massachusetts, and you can see it increases in the period after the policy was put into law. The grey lines either side of the black and blue lines are
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just statistical confidence bounds - don't worry too much about those. As the graph implies, there was a large increase in the number of people insured. There was a 26.5 percentage Point rise or 18,500 new people with health insurance. This suggests that the reform was successful in its main aim. But while this was undoubtedly a great outcome, it's not the only thing we're interested in here.
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As this graph shows, the insurance premiums paid by people in Massachusetts declined, this time by 23 percent. This is evidence of adverse selection since price is falling implies that costs fell - exactly in line with the theory. Don't believe me that lower prices reflect lower costs? Here are the average expenditure claims following the reform. Health claims drop in Massachusetts relative to other places, suggesting lower risk individuals now have insurance. To sum up, charging
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people for not having insurance seems to have not only increased the number of people insured, but increased the efficiency of health care by bringing low risk individuals into the market, and therefore reducing costs. The Massachusetts reform was actually the precursor to the Affordable Care Act passed by Obama in 2010. The ACA used much of the same logic though it's a more complex and
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multifaceted policy. It was also thankfully a bit more cuddly, subsidising people for getting health insurance, instead of charging them for not doing so. This is more in line with what we want because it tackles the obvious issue of affordability. But by lowering costs, addressing adverse selection also tackles affordability through the indirect method we saw in Massachusetts. One review of the
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ACA seemed to conclude that it subsidy elements increased enrollment while reducing prices and costs, in line with adverse selection. To sum up, the strange incentives that plague the health insurance market mean there are good efficiency arguments for compulsory and universal health insurance. It avoids the adverse selection death spiral because low-risk individuals cannot drop out in the first place. Subsidising health care heavily makes it more accessible to the population
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while also increasing the efficiency and lowering the cost of the sector. Notice that I haven't made any arguments about whether the state should engage in research and development of pharmaceuticals, run hospitals, or train and hire doctors. All I'm talking about is how people 'buy' their health care. This has been called demand-side socialism and it's compatible with a wide range of different health systems 'underneath the hood'. The important thing is that coverage
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is universal and publicly funded to realise the benefits we've seen. Providing social insurance through healthcare is a more efficient way of delivering it to the entire population. Now, you might ask why we'd even go through the middleman of insurance. In the UK, we have the National Health Service or NHS which directly provides health care to everyone largely free of charge. This has many of the same benefits as public insurance and arguably increases efficiency further by
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eliminating one organisational layer. We don't have insurance in the UK; we just have health care. I've been watching The Sopranos recently and I really enjoyed this moment which illustrates this point. "I'm a utilization review specialist I represent your insurance carrier. It's my job - together with your physicians - to see how fast we can get you out of this place and back home."
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"Well this is good they've closed your incision and your ambulatory now and I see they've got the foley out."
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"You want to kick me out of here?" "A hospital stay costs a lot of money." "My bowels don't work. I'm in pain. "I just got operated out for Christ's sake!" Why is this woman there? Her short-termist outlook is likely to cause further complications in the long term and presumably she could be employed somewhere more productive. Anyway, I digress... There may be good historical and political reasons you
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shouldn't go from a system like the USA's to a system like the UK's. Like I said, I'm not going to get too specific about the U.S health system. There are lots of reasons that it is the way it is and I haven't touched most of them in this video. But I will say that they include that good old American Spirit of sucking. "Don't worry Marge, America's Health Care system is second only
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to Japan, Canada, Sweden, Great Britain ,well all of Europe. But you can thank your lucky stars we don't live in Paraguay!"
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To reiterate, universal healthcare would have to be financed by taxation. My claim is that universal public provision is both more efficient economically and more effective at delivering healthcare to the whole population. But extending it to the whole population would still entail more government spending in total because you'd be treating people you were not treating before. It's just that simple. Now, exactly which taxes we should increase to finance this and
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by how much is too big a question for this video. I think I'll just make that a video for my patrons....
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"At one extreme you have the laissez-faire 'let them all starve' approach and on the other hand you have the 'what if we gave everyone free money' approach. Obviously, the real solution to these issues lies somewhere in between these two extremes. But that doesn't mean that there isn't value in thinking about how something like this could play out." "I'm not even going to say anything." "Watch this Lis, you can actually pinpoint the second when his heart rips in half."
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"Between these two extremes, but that doesn't mean that there isn't value in thinking about how something li-" So. The YouTube channel Economics Explained has a video about Universal Basic Income or UBI. I thought maybe I'd do a react video to it for the first time ever but it was just too long to include in this video. So I'll upload it to my live channel. You saw a little preview just then. Social insurance can be
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for healthcare, but it can also just be insurance against unemployment, poverty, or hard times in general. The people who really need say insurance against unemployment are likely the people who are at higher risk of losing their job. This is a big factor in adverse selection and historically private employment insurance has been far less common than private health insurance. In fact, it
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doesn't really exist. Here's the thing. Literally everything we said about health insurance just now applies to welfare payments and probably even moreso. You know who else acknowledged this?
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Not Milton Friedman. But similar: the economist Robert Lucas - very much a Chicago, free market kind of guy:
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Universal Basic Income is a perfect case study because it's the epitome of 'free stuff'. It's a guaranteed amount of income per month, distributed to every citizen. It is money for nothing, for everyone, on a permanent basis. It's a guaranteed floor under your standard of living. But is it really feasible? The Economics Explained video says 'maybe not' but it doesn't really cite any evidence. It goes over some of the basics to a satisfactory standard, but there's nothing - yes,
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nothing - about the numerous experiments done with cash transfers which are at the very least close to UBI. One of EE's big concerns is that a UBI will increase inflation. Do they have any evidence to support this argument? Well, not really. At one point they seem to argue that current levels of inflation were caused by the pandemic stimulus and therefore UBI would do something similar.
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"More money in the economy means more consumption, more investment, and more employment - all other things being equal. But it also means more inflation, which I'm sure a lot of you have been thinking the entire time you've been watching this video. inflation is honestly the biggest problem with the UBI, bigger even than the problem of how to fund the damn thing. Injecting that much money into
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the economy outside of a major economic downturn is simply going to cause demand pull inflation." But - you know - maybe there were some other things going on around this time that restricted supply? The global pandemic and economic lockdowns? Ongoing supply chain issues? The Russian invasion of Ukraine and the rise in energy prices? No, no, let's just vaguely gesture at the stimulus and be
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done with it. All in all, the Economics Explained video is characterized by fear-mongering about inflation, a complete lack of evidence, and also misses many of the most important and interesting debates surrounding UBI. if you're watching, EE, which you probably aren't, then let me show you how to discuss a question like this with honest reference to empirical evidence. One of the big controversies with cash transfers like UBI is whether or not they disincentivise work. The
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argument's straightforward: if you're paid not to work you'll do it less. There is less of a need to gain income because you already have it. If working people are taxed more to pay for the UBI, this effect compounds. Now, not only are you getting paid for not working; you're getting paid less if you do work. Why bother working at all? This argument is crucial to the idea that we can't give people free
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stuff in the form of welfare. If the incentives to work unravel completely, then, the argument goes, we won't have an economy anymore. The counter argument is that people work for reasons other than money. People work to get a sense of purpose and meaning, as well as to contribute to society and not be lazy layabouts. There are intrinsic gains that people get from their jobs apart from the
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extrinsic gain of income. In fact, giving people a floor and stability of living standards may enable them to pursue higher callings, which ultimately benefits them and the economy. This could include education, career changes, childcare, and of course playing Mario Kart. Hey everyone, editing UE here. I should say that while everything I've said here is right: there are pro-social motivations to working
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and UBI will provide a basic floor under people's standard of living - you still get extra money from working under this scheme team, right - if you've got a UBI but you've still got you know, wages or whatever other payment you get for working, uh then there is still an incentive a financial incentive to work more. So it's just worth underscoring that and I will talk about that in a little
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bit in the video when I talk about Thomas Sowell, so we're not talking about no incentives to work, whatsoever. There may be positive externalities from these changes so welfare payments will be good for the economy. Especially if everyone learns to mushroom a blue shell.
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So: there are two main arguments which make two different empirical predictions. If the first is true and UBI enables everyone to be lazy layabouts then we should see people who receive UBI or similar cash benefits working fewer hours or even dropping out of work altogether. If the second is true and UBI enables people to pursue their real passions which extend beyond just being paid, then people will not work fewer hours or drop out of their jobs. In this case, there
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may be positive effects of UBI, such as those on schooling, entrepreneurship, and long-term earnings.
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[drum roll] The evidence is clear: the second argument is right. A 2018 review of 16 trial programs in countries across the world concluded that 93 percent showed no meaningful reduction in working hours. Another review of 38 studies of 18 trial programs of UBI found overall increases in hours worked. There were some reductions among groups like the sick and disabled, the old, and women with young children, but these were offset entirely by the increase from everyone else. In other
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words, there was more work overall but those who arguably needed to were able to step out of employment. This kind of general overview can hide important nuances in policies and studies so let's go into more depth. You may have heard of the charity GiveDirectly, which gives sizable cash transfers to people in poorer countries with no strings attached. They argue that this approach is less paternalistic than other charities, allowing people to do what they want with the money. They
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also boast that their approach is efficient with 90 cents going to the people in these countries for every one dollar donated. GiveDirectly randomly choose who gets the money out of their eligible households, which they argue is fair. It also means that statistically, the outcomes of the trial are ideal to study. The only difference between the households that got the money and those that didn't is the money itself, which allows us to know the cause or impact
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the money had with a good degree of certainty. In this case, GiveDirectly gave the equivalent of one thousand US Dollars to ten thousand poor households in rural Kenya. In total, this was about 15 percent of village income, a massive cash injection. So, there can be no complaints that this wasn't enough money to really have an impact, though I stress that it was a one-off payment rather than a true
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income. A comprehensive study of the Kenyan cash transfers investigates their impacts on a wide range of outcomes. One of the first things people say about these transfers is similar to the moral hazard argument with healthcare. 'You can't just give people free money, they'll spend it on alcohol and cigarettes.' "Well that's their big moral high ground a lot of time you know. You don't give
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these people money, no, they'll just spend it on drink and drugs." "What do you think I was going to spend it on?" Actually, there was no impact on what the authors of the study call Temptation Goods. They did find large increases in spending but this was mostly on food. The irresponsible bastards. There was also more spending on durables like home maintenance and furniture and vehicles.
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In line with the studies we discussed earlier, there was an increase in hourly wages but no decrease in hours worked. And...for Economics Explained: little to no impact on inflation. There may be some slight increases for specific goods in specific locations but these are 0.2 to 0.3 percent price increases on average. Remember that the transfer itself was 15 percent of income for a given village, so any notion
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that this tiny amount of inflation completely cancels out this gain is hard to believe. These are average results: did they hide a group of people who massively reduced work or spent all their money on cigarettes? It doesn't seem so; the cash transfer had roughly similar effects on people of different ages, genders, employment status, and so on. There are actually such large effects on the local
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area that even those who didn't receive the cash transfers experienced comparable gains in income and spending. These quite remarkable positive effects seemed to do the village as good as there were positive impacts on the psychological well-being, food security, education, and security from crime. I want to pause here and note the significance of this finding. We are talking about people who
1:00:08
are in absolute poverty. We found that there are virtually no negative effects of providing them with the basic money to lift them out of poverty. Evidence-free carping from massive channels like Economics Explained about inflation or whatever else isn't just wrong; it's deeply irresponsible. There is literally no excuse for not having something at least resembling a UBI in poorer countries at this stage, just as there is no excuse for not having basic universal health
1:00:35
care provision. Things may be different in richer economies though so let's turn to Canada. Canada has long been a pioneer in experiments with UBI, having carried some out in the 1970s in the City of Manitoba. In typical Canadian style, they did all the legwork of the experiment and then...forgot to analyse the results. At least until several decades later when they were dug up by an organisation
1:00:58
called Forget. Forget's study showed large positive effects on health outcomes which in turn saved the government money, in line with what we were talking about earlier. In 2017, the province of Ontario experimented with a basic income pilot, giving 4,000 working age people varying amounts which were usually over 1,000 Canadian dollars. Then, in 2019 they abandoned the policy and also disallowed
1:01:24
all evaluation of it. What's going on Canada? Oh, uh never mind. Once more, some researchers rescued the pilot by finding the people who received the money and asking them about the effects it had. This may not be quite the shiny causal evidence we had in Kenya but I like to use different types of evidence. Again the results were pretty clear: people didn't really drop out of work unless
1:01:46
they had a good reason like disability or child rearing. People reported numerous positive effects on physical and mental health. In many cases, the money enabled the recipients to pursue long-term goals like education and training which resulted in them earning more eventually. One 57 year old man who had previously been illiterate enrolled in adult education:
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The idea a floor under peoples' standard of living will sap their motivation seems exactly backwards. Another recipient said that before the Ontario UBI, her mental illness would really cause me to stay in bed or drain me of any will to do anything:
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It's no exaggeration to say that being lifted out of poverty is a transformative event which affects people's lives positively in all sorts of ways. To quote one more participant:
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Unfortunately, these experiments - while not one-off payments - were still short-term and were cut off sooner than hoped. It's difficult to find truly long-term experiments with UBI. Alaska, which is also a province of Canada, has had a basic income for a long time, funded by oil revenues. This is small just over one thousand dollars per person per year, but is effectively permanent and has been running for almost 50 years. Studies have found if
1:03:50
anything positive effects on employment as well as positive effects on poverty. We do not have ideal evidence. If we had ideal evidence, we'd already have a Universal Basic Income. Among the issues with the existing evidence are: many studies are on small transfers. Many studies are on temporary or one-off transfers. What's more, the transfers that are large are often temporary or one-off,
1:04:12
like Kenya, and the ones that are permanent are often small, like Alaska. UBI would be both large and permanent, but this is rare. Many studies of cash transfers are conditional and require means testing by education, income, marriage status or whatever. And studies which are unconditional are not truly universal and only give to certain segments of the population, whether certain regions or just randomly selected households - as in Kenya. On the other hand, we've got no reason to
1:04:41
believe that transferring people money actually discourages work or causes inflation. We get small or non-existent effects on these things across a wide range of types and sizes of cash transfers. We get a wide range of positive effects on education, health, and the local community. Even if your standard of evidence is super high - and that does not seem to be the case for Economics Explained - you'd at least have to admit that it's time for us to experiment more with these
1:05:10
highly successful policies at the beginning of this video. I played a clip of Thomas Sowell on welfare who, to remind you, said: "what the welfare system and other kinds of governmental programs are doing is paying people to fail. Insofar as they fail, they receive the money and insofar as they succeed, even to a minor extent the money is taken away." I actually agree with the second half of this if you provide a basic floor of income but sharply reduce payments when people
1:05:35
start to work, you create terrible incentives. Some earlier welfare programs in the USA did have genuine problems because of this. Policies aimed at single mothers effectively had a 100 percent marginal tax rate. That meant that anything earned above the benefits would immediately be withdrawn, leaving a net gain for the single mothers of precisely zero dollars from working. It's fair to say that this disincentivises work. Yet just because these were badly designed welfare policies,
1:06:03
doesn't mean that support for single mothers is itself bad. Which leads me to my last point. "Ohhh, won't somebody please think of the children."
1:06:12
We can think about unpaid childcare as a pure positive externality. Parents - mostly women - raise children for no direct pay and the grown child - hopefully - has numerous positive impacts on society when they're an adult. Having children is clearly one of the most fundamental contributions you can make, yet we do not reward it. UBI is a way of subsidising this work, as well as the other unpaid labour women do, which is both fair and should generally improve the provision of
1:06:39
that work. Let's turn to one final welfare policy food stamps in the USA. These are vouchers provided by the government which can only be exchanged for food. I'd prefer cash transfers of course but food stamps are still effective at reducing poverty. Hendren and Sprung-Keyser, who we've met a couple of times already, took a look at the adult earnings of children whose parents received food
1:06:59
stamps. They found that the policy does reduce parents' earnings, presumably because it enables the parent to stay at home and care for the child. But the initial cost both of the policy itself and the lost tax revenue from parents not working is almost entirely offset by the child having higher earnings as an adult. Hendren and Sprung-Keyser also note that they leave out other impacts of food stamps, such as the child's eventual health and associated costs, so the benefits
1:07:26
could actually be higher. The policy almost pays for itself but it could pay for itself completely. Again I want to stress that Universal Basic Income and welfare transfers in general won't pay for themselves. Like universal health care in rich countries, they would require higher taxation but in the cases where they support children they may well pay for themselves over the long term.
1:07:51
Now, if you're of libertarian or centrist sympathies and you've made it this far through the video then first: thanks. But you may be thinking something along the lines of "sure, Unlearning, I accept that things like health and education are unique. They probably have more fundamental effects for people than, say, buying a pack of Pom Bears. Or eating 11 of them. But the Government shouldn't always provide
1:08:15
these things. That's unsustainable and is only going to lead to problems down the line. Well, that's a nicely put argument viewer, and that's a lot of packets of Pom Bears to eat in one sitting. This argument actually reminds me of a lecture I saw by Milton Friedman on the welfare state. "The thing that about the welfare state is that when you start on this route, everything goes fine. To begin with, you are imposing taxes on ninety percent of the people. Small taxes.
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And are able to gift considerable benefits to 10 percent of the people. But the problem is that as time goes on, more and more people come in.. ...and either express a desire or given a chance at a part of the proceeds. So you gradually get to the position where fifty percent of the people are providing benefits to other fifty percent of the people and then you ultimately get to the position where a hundred percent of the people are paying
1:09:11
taxes in order to provide benefits to 100 of the people." I believe that state provision can create virtuous cycles. We've seen time and again in this video that provision of needs in one area has knock on positive effects on other areas through the harnessing of positive externalities. Funding education increases earnings but can also reduce crime and improve health problems. Funding health
1:09:33
enables people to pursue education and employment, reducing the cost of worse health problems down the line. Alleviating poverty, or even the threat of poverty, through welfare such as Universal Basic Income, seemed to have positive knock-on effects on education, health, and the rest of the economy. And of course, helping children on these dimensions yields large dividends, often fully paying for itself. "Think of the children. Won't somebody please think of the children!?"
1:10:02
These dynamics counteract the kind of vicious spiral Friedman was talking about. Enabling people to do better reduces the chance they'll rely on other government spending while also increasing their earnings and therefore their taxes. We see this most clearly when governments try to implement austerity and the virtuous cycle goes into reverse. Because social problems do not go away when you
1:10:23
withdraw funding for them society and often the government itself ends up picking up the bill. I like to think of this as the 'lump in the carpet' problem. If you push down on a lump in the carpet then it will simply pop up elsewhere. Likewise. if you reduce government expenditure in certain areas it will feed back negatively into the rest of the economy and may end up costing the
1:10:44
government more. Peter Lindert summarises how past attempts to withdraw support for the poor failed even on their own terms:
1:12:15
This was true in the 19th century and it's true now, with austerity in the UK failing to reduce public debt while creating a whole host of other problems. It has been estimated that cutting 200 million pounds from local public health budgets cost the NHS one billion pounds in the long run. Healthcare also spills over into other areas, mental health has been estimated by the World Health Organization to return spending fourfold,
1:12:40
because spending now reduces health costs down the line, increases employment rates, reduces crime, and increases productivity. Again, the state is uniquely positioned to harness the benefits of these things while incurring the costs when they are withdrawn. Because I haven't taken on enough controversial topics in this video, I want to mention the police and content warning for distressing images.
1:13:02
Some of you may have seen this video. It shows a disabled woman in the USA who was deemed to be trespassing in a hospital. The hospital phoned the police on her so they came to remove her from the grounds. She is clearly in distress and is, in fact, having a stroke. The police repeatedly ignore her pleas, even though she was well aware of what was happening. They just didn't believe her. She was
1:13:26
removed from the hospital despite her condition and later died in the back of the police van.
1:13:32
I'm not saying direct replicas of this one story are happening all over America, but this illustrates starkly a point I want to make. In The End of Policing, Alex Vitale talks about police being in areas they shouldn't. Schools, hospitals, and the like. 'Defund the Police' may be a controversial slogan but in my opinion this part shouldn't. You may see this as displacing police from doing more beneficial activities. You may think the money for this policeman could have
1:13:59
gone into other public services. Either way, it's difficult to ignore the absurdity of the police being called to escort a woman who is literally having a stroke off hospital grounds instead of her being treated. This speaks to my point that social problems do not go away just because you withdraw funding for them. They end up creating problems down the line. It's horrible...but it's
1:14:22
also a false economy. To finish on a more positive note, I want to say that investing in a wide range of human endeavours - even those that don't see an immediate economic return, such as The Arts - may have less obvious benefits down the road. This is the invisible and diffuse nature of positive externalities. In UK universities, there has been a big shift away from The Arts and towards subject
1:14:44
areas like STEM. Every so often, there's a big push to get rid of these subjects which are known as 'Mickey Mouse degrees' in the UK. But as blogger Daniel Davies points out, looking at the return on investment to these programs or the median Arts student isn't going to do these programs justice because every so often, someone comes along who transforms the scene completely:
1:15:46
Nick Park also created Creature Comforts. "Er, well the zoos are very important to animals, they're a bit like
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homes, like nursing homes, and uhm, people like old people." "Yeah well it's reasonably comfortable I suppose there's space but uh- uh- I mean I've been in more comfortable rooms, yes." "If you try to compare the situations and the environment that you live here with the environment that you live in Brazil, there is a big difference. Here, you live in a very small place with all the technological advances possible.
1:16:24
You have everything sorted out: double glazing, you know you're you're eating, and everything - in Brazil - but you don't have space - in Brazil you have space." You want to take that away? You monster> With all that said, I'm not arguing for 100 percent state provision across everything in this video. You can still be kind of 'right wing' about the free stuff if you like. I've ironically quoted
1:16:48
Milton Friedman a few times in this video but of course, he wanted to bring market mechanisms into health and education wherever possible, even if the funding ultimately came from the state. Friedman wanted the government to subsidise school vouchers which allow parents to basically buy their child's education like any other commodity, using the vouchers to make choices about which schools
1:17:08
they would go to. The schools would be partially or wholly run by non-state entities. Evidence on the effectiveness of this policy is mixed but that's not my point. You can like this more pro-market policy while retaining the idea that education should be funded by the state, as Friedman did. Remember: demand side socialism. I've also drawn heavily from Peter Lindert's book Making Social
1:17:29
Spending Work. (Actually I found it about a third of the way into the scripting process and was like 'this is literally the video making' so thank you Peter!) Lindert is very pro-social spending, maybe even moreso than me, but he's not closed off to pro-market approaches to public services. He seems to think that Friedman's school vouchers proposal can work when implemented correctly. He
1:17:50
also really [ __ ] hates teachers unions in the USA and maybe just unions in general. He partially blames unions for the fact that health care is tied to employment in the USA and historically, he may well be right. This video is not about exactly how we deliver the free stuff. It matters first and foremost that the stuff is free. It would be funded and overseen by governments but could be delivered by a combination of national governments, local governments, the private sector
1:18:18
the charity sector, and the cooperative sector. The exact mixture of these will depend on the time and place (although over time the cooperative sector and therefore socialism will triumph). The UK is a case study in how not to utilize the private sector in the delivery of public services. Giving lucrative contracts away to your posh mates only for them to completely fail to deliver the service
1:18:39
in question is unsurprisingly not what I'm going for here. On the other hand, Mariana Mazuccato has long spoken about the benefits of public-private partnerships in research and development. A good example is the coronavirus vaccine in The West, which saw successful cooperation of companies like Pfizer and Moderna with governments like the US and UK and even the EU. Anyway. let's do one last
1:19:02
recap. There are two main reasons social spending by governments is affordable, does not have noticeable negative effects on the economy, and also delivers huge social gains. First, governments make long-term Investments that the private sector doesn't. We saw this in detail with education and with investment in children in general. We saw it with the provision of basic universal health care
1:19:23
in poorer countries. It also applies to physical infrastructure and to research and development, which we've barely touched on. Second, governments provide social insurance more efficiently than the private sector can. Universal provision against health or employee risks stops the adverse selection death spiral in its tracks, increasing efficiency. It also guarantees people can stay out
1:19:43
of poverty and deal with hard times, enabling them to pursue the things they really want, often to the long-term benefit of society and the economy. This applies to welfare payments to health care and could also apply to other benefits like free housing, which again we didn't have time to touch. These dynamics are why, despite my anarchist sympathies, I've never been able to come out completely against states. We know that states and state-like entities can do horrible things
1:20:09
but I do not see how else to achieve this level of universal provision, which marshals huge amounts of resources, to massively improve peoples' lives. If you've got examples of non-state entities making similar achievements in the past in a way that we can apply now then I'd genuinely love to hear them. Now, not all government spending is good, clearly, and sometimes austerity in specific areas is needed. Pensions and aging populations represent a genuine fiscal challenge for most
1:20:36
countries in the future. The number of people working is going to fall relative to the number of people dependent on people who are working. The ideal approach to and level of government spending is impossible to say outright. It will vary across time and space and there's ultimately something that each country needs to decide democratically. Oh wait sorry - Ben Shapiro's figured out the correct equation for government spending.
1:20:58
"so here is the equation: L equals, and the numerator is S plus and then it's R times A plus I. Okay so S in this particular equation represents social solidarity." We need to stop accepting bad economic arguments against social spending. It is both socially and economically desirable to ensure universal provision of human needs to the whole population. And most importantly: free Pom Bears for all.
1:21:33
[Music] thanks for watching everybody and I hope you enjoyed the video uh I certainly enjoyed making it I have a bit of a cold at the time of recording this which is about a month after I recorded the actual video uh you know thank you so much to my patrons who as usual being very patient with me while I get this video out I am getting closer and closer to the day that I do this full time I'm
1:21:59
gonna quit my job at some point over summer when exactly that is depends on a few uh idiosyncratic factors which are not worth mentioning here but you know if you if you can spare a cup of coffee every month then please do consider supporting the channel thanks to my producer hobby for all his very hard work on this video as usual uh is an excellent editor and supports me in in numerous
1:22:23
ways that many of you uh well none of you really see uh thanks also to my animator Grim he had one animation in this about adverse select action uh but it was a long one and a really helpful one I think that's a key concept adverse selection on reflection I have to critique myself on I feel like I could have communicated a little bit better in the video um but at the end of the day you know it's never going to be perfect uh but just it's an interesting I think efficiency-based
1:22:53
argument for universality so if you want to look into adverse selection then please be my guest
1:23:00
um so yeah I think uh I think that's everything and I just
1:23:05
uh saw the in my work a democracy video if you remember that because I rewatched it just now for for some reason I don't usually watch my own videos but I re-watch that one uh I mentioned that I was gonna do a video on free stuff so that was uh that was a year and a half ago and uh here's the video on free stuff and you may remember that one once I mentioned that I was going to do a video on Thomas so and I am it's not next but it's after the next one and the next one's
1:23:33
going to be a bit shorter I'm going to do a little one about planned obsolescence which I think is quite a a fun topic um and it will be a relatively short video that one so anyway uh uh now you uh you may want to enjoy the outtake uh from just after the end of uh of this video which uh was where we didn't realize that the camera was still running the mics turned off so it's the it's the camera's own mic which is why it's such bad audio quality but basically it's
1:24:00
just me and hobbie eating pome bears so you know if you want to watch that then stay tuned in
1:24:08
god damn these pom bears are good.
1:24:12
tiny little bears they have no business being that good.
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