{"items": [{"author": "David German", "source_link": "https://plus.google.com/111229345142780712481", "anchor": "gp-1358889720009", "service": "gp", "text": "Also, moral hazard. ", "timestamp": 1358889720}, {"author": "Todd", "source_link": "https://plus.google.com/112947709146257842066", "anchor": "gp-1358890168564", "service": "gp", "text": "\"The 'give people money and they will be better off' approach is a good one...\"\n
\n
\nThat's debatable... I suppose not taken literally, but in the meaningful sense of 'better off'...\n
\n
\nBut yeah, moral hazard, as David said. Debt is fundamentally optional, so debt forgiveness creates major problems.", "timestamp": 1358890168}, {"author": "Jeff Kaufman", "source_link": "https://plus.google.com/103013777355236494008", "anchor": "gp-1358896754425", "service": "gp", "text": "@Todd\n\u00a0\"That's debatable... I suppose not taken literally, but in the meaningful sense of 'better off'\"\n
\n
\nIs it? \u00a0I mean, lottery-sized transfers are probably bad (and lottery winners don't do so well), and when combined with means testing they can create perverse incentives, but my understanding is that \"give people cash\" is mostly beneficial. \u00a0What makes you think otherwise?", "timestamp": 1358896754}, {"author": "Jeff Kaufman", "source_link": "https://plus.google.com/103013777355236494008", "anchor": "gp-1358901612801", "service": "gp", "text": "@David German\n\u00a0So is insurance. \u00a0How much of a problem that is depends on how much people's behavior changes from the perverse incentive.", "timestamp": 1358901612}, {"author": "David Chudzicki", "source_link": "https://plus.google.com/106120852580068301475", "anchor": "gp-1358902148756", "service": "gp", "text": "I think it's pretty different from insurance. Unless you're committing insurance fraud, an event that causes the insurance to pay you shouldn't leave you better off. (And in fact, they work in specific mechanisms like deductibles so as not to leave you better off.)\n
\n
\n(Whereas, if your loan is forgiven, you still have the benefit of the money that was loaned to you.)", "timestamp": 1358902148}, {"author": "David Chudzicki", "source_link": "https://plus.google.com/106120852580068301475", "anchor": "gp-1358902327312", "service": "gp", "text": "I mean, insurance does have a moral hazard issue--- but it just seems so much less severe.", "timestamp": 1358902327}, {"author": "Todd", "source_link": "https://plus.google.com/112947709146257842066", "anchor": "gp-1358910340480", "service": "gp", "text": "@Jeff Kaufman\n\u00a0The history of the welfare program. Lots of giving people money, very little in the way of results from doing that. And I thought one of the lessons learned from charitable evaluations is that simple cash handouts tend to merely tread water, versus strategies that focus more on investment in something specific.", "timestamp": 1358910340}, {"author": "David Chudzicki", "source_link": "https://plus.google.com/106120852580068301475", "anchor": "gp-1358925780576", "service": "gp", "text": "Worth a look: \nhttp://www.givewell.org/international/technical/programs/cash-transfers", "timestamp": 1358925780}, {"author": "Jeff Kaufman", "source_link": "https://plus.google.com/103013777355236494008", "anchor": "gp-1358945923357", "service": "gp", "text": "@Todd\n\u00a0The welfare program suffers from mostly not being cash, combined with excessive means testing, which manages to make the implicit marginal tax rate go above 100% for many poor people:\u00a0\nhttp://www.jefftk.com/news/2011-08-08\n \u00a0\n@David Chudzicki\n's link is good, as is work on remittances.", "timestamp": 1358945923}, {"author": "Todd", "source_link": "https://plus.google.com/112947709146257842066", "anchor": "gp-1358955402611", "service": "gp", "text": "I don't have time to do proper research on this, so apologies if I'm off-base, but I have a couple thoughts on this:\n
\n1. Wasn't welfare performing worse under fewer restrictions prior to Clinton's welfare reform?\n
\n2. Suppose we implemented the system you propose in that link (which I agree is preferable to our current welfare program). If I then decided to live cheaply and never work a day in my life, I could presumably manage to do so. In such a scenario, would I be better off? And would we consider this a 'good approach'?", "timestamp": 1358955402}, {"author": "Jeff Kaufman", "source_link": "https://plus.google.com/103013777355236494008", "anchor": "gp-1358956198340", "service": "gp", "text": "@Todd\n\u00a0\"If I then decided to live cheaply and never work a day in my life\"\n
\n
\nI wouldn't consider that a good outcome. \u00a0I think it's important to set the base transfer ($10K in that case) low enough that not many people are doing this. \u00a0We should run more experiments on guaranteed minimum incomes; the only ones I can find are from the 60s.\n
\n
\n\"Wasn't welfare performing worse under fewer restrictions prior to Clinton's welfare reform?\"\n
\n
\nThe main changes with the 1996 welfare reforms were work requirements and a maximum of 5 years of benefits. \u00a0I don't think it changed the composition, in terms of cash vs vouchers. \u00a0But what makes you think the 1996 changes improved things? (I don't know either way.)", "timestamp": 1358956198}, {"author": "Todd", "source_link": "https://plus.google.com/112947709146257842066", "anchor": "gp-1358956732220", "service": "gp", "text": "\"But what makes you think the 1996 changes improved things?\" Nothing data-driven, hence my note about not having time to do research.", "timestamp": 1358956732}, {"author": "Marcus", "source_link": "https://plus.google.com/115811589251174483775", "anchor": "gp-1358957438298", "service": "gp", "text": "I'm more concerned about the societal effects of an entire generation having high debt load.\u00a0 In times past, and in other places where college education is significantly cheaper or entirely free, it used to be that one's youth was when one could explore and experiment and figure out what one wanted in life.\u00a0 My own parents, both college educated, spend several years living cheaply in different parts of the country before settling, getting masters degrees and starting careers. (This was before they met.)\u00a0 It would not be possible for most Americans to do that anymore, as we immediately start having to pay large monthly bills.\n
\n
\nSimilarly, high housing costs and the necessity of borrowing large sums to cover them, drive people into a similar dependence on steady, high income work, limiting their life and career choices.\u00a0 Our greatly escalating cost of education and housing as brought us into a new age of debt peonage, while less restrictive than the company towns of old, still forcing us collectively into labor that we may not find fulfilling or satisfying.", "timestamp": 1358957438}, {"author": "Marcus", "source_link": "https://plus.google.com/111675838261170541573", "anchor": "gp-1358957971699", "service": "gp", "text": "As a general rule, randomly forgiving loans is not a good way for an economy to work. Having said that, I could see times when loan forgiveness could be a good idea. The recent recession might be one example: large scale restructuring of foreclosures might have had positive effects on the entire economy [I say \"might\" for a reason: I think macroeconomics is a poorly understood field, but one with large implications for optimal use of funds]. One could also argue for debt forgiveness in cases where there is evidence for improper loan manipulation - eg, in a hypothetical situation where banks were knowingly extending loans to people who probably shouldn't be asking for them, and/or writing in bad terms, especially where minorities were systematically getting worse conditions, one could argue that the loan-maker should be forced to forgive some part of the loan.", "timestamp": 1358957971}, {"author": "Lex", "source_link": "https://plus.google.com/111102660583646544610", "anchor": "gp-1358959231628", "service": "gp", "text": "Worth noting is that Western society already has a reasonable framework for dealing with individual debt.\n
\n
\nEssentially,\u00a0people are born with a certain amount of benefit of the doubt. Everyone starts out with the ability to get loans.\u00a0If they don't pay those loans back, then gradually their loan opportunities dry up.\u00a0I think this is about as good as it can get.\u00a0To contrast, in medieval England, people who didn't pay loans could easily go to jail or become indentured servants. Bankruptcy is a better approach, even if it is not the best thing for economic efficiency.\n
\n
\nAdmittedly, student loans are hard to fit into this framework, and indeed they are treated differently. My dim understanding is that if you go bankrupt in the U.S., you typically have to hold onto your student loan.", "timestamp": 1358959231}, {"author": "David Chudzicki", "source_link": "https://plus.google.com/106120852580068301475", "anchor": "gp-1358960372662", "service": "gp", "text": "Lex, I don't think everyone does start out with the ability to get loans. You have to do various things to get a credit score. I guess most middle class people do those things by default, but not everyone does. ", "timestamp": 1358960372}, {"author": "Marcus", "source_link": "https://plus.google.com/115811589251174483775", "anchor": "gp-1358969724277", "service": "gp", "text": "It's extremely difficult to get a credit card without a credit record. I know this from experience.", "timestamp": 1358969724}, {"author": "Lex", "source_link": "https://plus.google.com/111102660583646544610", "anchor": "gp-1358969978020", "service": "gp", "text": "A good point, \n@David Chudzicki\n\u00a0. I should have said that people start out with \nsome\n ability to get credit.", "timestamp": 1358969978}, {"author": "David Chudzicki", "source_link": "https://plus.google.com/106120852580068301475", "anchor": "gp-1358970562937", "service": "gp", "text": "Really? I think even paypday loan companies reject about 80%. I \u00a0strongly suspect that someone just turning 18 with no record of any past history of loans, payments, etc. would be in the 80%.", "timestamp": 1358970562}, {"author": "Jeff Kaufman", "source_link": "https://plus.google.com/103013777355236494008", "anchor": "gp-1358970845265", "service": "gp", "text": "@David Chudzicki\n\u00a0\"even paypday loan companies reject about 80%\"\n
\n
\nI don't think your use of \"even\" makes sense. \u00a0Aren't the people who go to payday loan companies disproportionately likely to default? \u00a0People less likely to default can get better terms elsewhere.", "timestamp": 1358970845}, {"author": "Marcus", "source_link": "https://plus.google.com/115811589251174483775", "anchor": "gp-1358971008935", "service": "gp", "text": "If you are employed, have a good income and savings, but no credit history, it is still extremely difficult to get credit.\u00a0 As I said before, I know this from experience.", "timestamp": 1358971008}, {"author": "David Chudzicki", "source_link": "https://plus.google.com/106120852580068301475", "anchor": "gp-1358971228291", "service": "gp", "text": "@Jeff Kaufman\n\u00a0yeah, you're right. I guess I meant something more like: \"If you can't get a loan anywhere else, you'll go to a payday lender, and even then your odds may not be good...\"", "timestamp": 1358971228}]}