By their own admission, Freakonomics doesn’t typically focus on straight up economics, the episode entitled, “Is the World Ready for a Guaranteed Basic Income?” goes against their normal grain. This episode looks at two problems that might be solved by a guaranteed basic income, the fact that many full-time jobs do not pay a living wage and that some of those jobs will soon be obsolete. Freakonomics is aided by U-M Associate Professor Hoyt Bleakley and his work on human capital across generations.
Hoyt’s paper, “Shocking behavior, random wealth in antebellum Georgia and human capital across generations,” coauthored with Joseph P. Ferrie (Northwestern University), looks at how a land lottery in Georgia affected the wealth of the individual winners of the lottery as well as how their families were affected throughout generations. “We see a huge change in the wealth of the individuals but we don’t see any difference in the human capital. If your father won or lost the lottery, the school attendance rates and literacy rates are pretty much the same. As we follow those sons into adulthood, their wealth and occupation looks the same whether their father won or lost the lottery. The grandchildren aren’t going to school more, the grandchildren aren’t more literate. I was surprised, I wouldn’t have expected this,” explains Hoyt.
“It still comes back to the question of whether the disadvantages that might be present for children that are in poor households are present because there is not enough resources or because there is not enough of something else. Poverty is not solved by simply giving them money. When you select a segment of the population, you have to ask, is there another set of characteristics that they have that makes it hard for them to take advantage of those opportunities? Maybe there is an intervention that helps them better manage other characteristics that makes it less of a disadvantage for them,” explains Hoyt.
The authors found that the resulting analysis is comparable to modern estimates of persistence of wealth, education, and literacy, making these lotteries in Georgia and the resulting affects on winners and their families, not a particularly exceptional thing when analyzing the effects of unconditional cash transfers.
Find out more about Hoyt and his research on his homepage!