1) Lenders probably shouldn't be lending money to people they know cannot repay the debts. This is also why APRs are so high - most people simply don't.
2) People who know they can't repay the debts shouldn't be borrowing in the first place. This is also why lenders have to go to such extremes to collect their debts.
This is a function of being poor in a country like America with zero social safety net. If you're desperate and on the ropes and have nothing to fall back on you'll do whatever it takes to get by including take out loans that you can't afford, from lenders who know you can't repay them.
The problem isn't predatory lending, or deadbeat borrowers, it's a deeply unequal society which doesn't look after its own, with rampant wealth and income inequality and a total lack of social safety net.
In an ideal world, folks would be able to rely on unemployment or UBI to get by tough stretches, and this system would disappear instantly. Half the country is busy breathlessly screaming socialism over what the rest of the world considers a "functioning government" and the other half has other things on their mind like walking back stupid bathroom laws, and in the end, nothing fundamentally changes.
In other words, the lack of a social safety net isn't just some accident that citizens blundered into. It was engineered and continues to be advanced by the people who make money from it.
Canada has a very cushy social safety net and still has payday lending with interest rates of 49%.
And the alternative of having payday lending is no lending - that is, these folks would have no way of getting a short term loan. Is that better?
Yours is a typical HN binary take that holds a thing must be an utterly unalloyed good or it must be banned, there's no middle ground for a thing to be useful when moderated and regulated, and predatory in other circumstances. This is a very common intellectual failure mode.
[1] https://www.nytimes.com/2018/02/02/us/politics/payday-lender...
Usually.
How many people have you met who were happy doing nothing, living with nothing, AND who made good employees doing anything at all?
I've met exactly zero.
The ambitious won't want to stay there; the unambitious may "unfairly" get their basic needs met, but they're hardly living the high life, and the lost -useful- labor to society is negligible. Almost certainly more than offset by the ambitious who can now take risks they otherwise couldn't, knowing that if they fail they at least aren't going to end up hungry and homeless.
UBI and unemployment isn't provide enough for a lavish lifestyle, you can achieve that through work.
> The ambitious won't want to stay there; the unambitious may "unfairly" get their basic needs met, but they're hardly living the high life, and the lost -useful- labor to society is negligible.
Certainly true, and of course, automation will replace the missing labor in the pool, and the continued march of development will lead to even lower birth rates (already well below replacement rate of 2.1 is almost every developed nation), and there will be fewer and fewer of these folks in time.
Canada's most recent UBI experiment, cancelled recently (2020) by Ford & co, was showing excellent results [1], and so did the earlier one in 1974 [2].
[1] https://newatlas.com/good-thinking/canada-basic-income-exper...
[2] https://www.bbc.com/worklife/article/20200624-canadas-forgot...
Conversely, I think the hard part about implementing UBI is that it would be incredibly hard to roll back once people become accustomed to it
If they had a basic UBI of, say, $20k, would they quit their job, and not look for work, not work on personal projects, not look to go back to school, nothing, just do what they are assuming others will do, sit around, watch TV, that sort of thing? Rather than keep striving, keep working, and have both an extra $20k being paid to them currently, and that safety net in place in case they lose their job?
Because I can't imagine doing that. I -like- having a higher quality of life. I desire to do things, to affect things. In fact, the most frustrating jobs I've had were the ones that felt like they handcuffed me from leaving due to the salary (not to mention things like equity cliffs and paying back signon bonus), but deprived me of any real empowerment or responsibility to affect change. If this logic applied to me, I should be thrilled; I barely have to do anything, am barely expected to do anything, and am paid through the nose. But I end up hating it and wanting out.
Even something like working McDonald's; would the additional pay of working there on top of UBI be worth it? If not, what would have to change? Better working conditions? More pay? I'd be interested to find out; why -don't- people find service industry jobs desirable? Why would someone choose to be unemployed, if their disposable income is higher working there? Are they just lazy, as America likes to paint it, or are there institutional problems that could be addressed, but remain unaddressed due to the inability for people to just quit and walk away?
We actually have some anecdotal data to this; people who inherit money sufficient they could live the rest of their lives doing nothing.
If it's multiple millions, yeah, people do decide not to work, "trust fund babies" and the like.
But plenty of people get a few hundred thousand and a house. That's enough that, if invested, they could pay property taxes and live a basic life without working. They could sell the house and move out of the country, and live even cheaper. How many do it in lieu of working? Very few. Why? Because they desire something more.
I’ve also known those who get said benefits and either use it as a leg-up to get ahead or just donate it while they keep working. Honestly, I’ve seen more in the former category than the latter.
I suspect it cuts down along the industriousness subset of the Big Five personality traits. Those who get intrinsic satisfaction doing/building are probably likely to be in the latter group. I bet HN skews towards this which is why so many find it difficult to comprehend why somebody would want to just loaf around with their life. To your very thoughtful questions about why someone wouldn’t want to continue working, my guess is the roles they qualify for aren’t intrinsically satisfying to them because it’s a poor mating of their personality and the jobs society has deemed necessary or they don’t pay enough to make the juice worth the squeeze
I meant the question in response to the observation that "we don't know what happens long term if people are promised this kind of money" - right, but the presumption there is that it will cause people to quit en masse, that they won't look to work, or use it as an excuse to better themselves in a way that society values as well. But will you? I mean, you're on HN; you likely care about bettering yourself, likely have some ambitions. If people with those things aren't dissuaded from working...what's the concern? That we won't have enough checked out people in useless administrative tasks, or poorly performing manual labor or service jobs that we then collectively complain about, while also refusing to pay well for?
I think the concern is there may not be enough “ambitious” people to maintain productivity to sustain the non-ambitious folks.
Thinking back to a previous job that most people would probably assume employees incredibly driven people, I can honestly say many were not. Hours wasted on long lunches/breakfasts/breaks, surfing the Internet for auctions, bouncing from office to office for hours to gossip, really anything to distract them from the work that needs done, all the while complaining there wasn’t enough time in the day to get it completed. If a “world class” organization is like this I don’t want to know what a “lesser” one is like.
The best employees are always those who value the work itself. I think very few people find their work intrinsically motivating and are only doing it because of an extrinsic reward (status, money, whatever). Unfortunately, after talking to many in that former organization I don’t think they have a very good grasp on what is intrinsically motivating to themselves.
If a company is happily paying white collar worker wages to people who are that big a waste of space, why not pay them $20k in UBI and let them go, $20k to someone who needs it, and not waste everyone's time? Let those people have the safety net necessary to find themselves, so to speak. Worst case is they stay on and we're in the same situation we're in now; best case they leave and figure out what motivates them.
>Worst case is they stay on and we're in the same situation we're in now
I think I disagree with this. Similar to point above, they can go from providing a marginal amount of value to justify being a net negative on the balance sheet by staying home and collecting UBI. Ideally, they will find a way to contribute to society but I’m not convinced many or most would, given anecdotal observations. I’m not taking some Randian stance here, but I can at least imagine a scenario where there are more takers than providers because it’s the easier path and we seem wired to prefer to minimize personal costs. I don’t think it’s a situation where there’s next to no downside as you suggest.
Most game theory seems to devolve when freeloading is not kept in check. With all the talk about the benefits of UBI, I hear very little about checks and balances if it doesn’t work. I’m currently in favor of it but would like to see a bit more due diligence in terms of guardrails
It's not about them being great workers or not. It's about them carrying their own weight at minimum instead of offloading that burden to the productive members of society.
There's no lack of jobs society needs filled that provides utility to society even when done by bad employees.
I don't think it is unreasonable for the productive to be fully decoupled and unburdened from the willfully unproductive.
Depends on person and their situation.
Would I quit my job and go on UBI if I could?
Me before marriage and a kid: in my line of work and with my hobbies, sure! I'll fulfill my need of doing crazy hobby projects and after few years of doing just that (and social life) I'd probably get bored and get back to work somewhere. Or spin one of my projects into a business. Or start contracting half-time to have some more spending money.
Me now: I'd probably cut down work a bit, but I can use the extra cash to ensure good conditions and financial safety for my kid.
Me if I worked in just about any other field: fuck no, not if I knew the benefits would end. Software industry is special (and still will be for at least a couple of years) - a programmer with decent skills can just find a job or start a company. For every other field, the many years long gap in your CV will scream "not good worker material". Keeping the working history continuous is something on the minds of majority of westerners; failing to do that is likely to result in being hireable only for jobs not much better than the UBI.
The entire idea behind FIRE is achieving a passive income that you earn by being a productive member of society versus UBI giving you for free with no obligation to contribute to society.
I think it’s a stretch to say this is available to most. To say it’s available to anyone doesn’t acknowledge the poor circumstances many are born into simply by chance. While still technically true, the possibility is vanishingly small for many. Policy should be based on what’s best for the general welfare and not a smallish subset
> Conversely, I think the hard part about implementing UBI is that it would be incredibly hard to roll back once people become accustomed to it
So we are left with something people like and don't want to give up, and that's bad because... :)
Sorry, I should have taken the time to elaborate.
There’s certainly a conceivable scenario when the situation is either unsustainable or not providing a net benefit.
For the first case, consider a petrostate whose population is heavily subsidized by its oil sales. If oil price drops, whether by lack of demand or over supply, they may not have the funds to continue these benefits without debt, regardless if the populace “likes” them.
In the second scenario, it’s possible that it creates unintended consequences (like spikes in drug use, drop in life expectancy, reduced productivity) that become a larger social ill than what it was trying to prevent. Despite society being worse off, it becomes hard to scale it back because of the psychological endowment effect.
I’m not saying its likely, just as a counter point that just because people like a benefit it means it should continue. I think it’s important to do a “pre-mortem“ on these kinds of policies to make sure we have the guardrails in place before implementing them.
... other people are burdened with providing it against their will.
A Southern plantation owner in the pre Civil War southeast US had something they liked and didn't want to give up and it was most certainly very very bad.
I think this is an affront to some people's ideas of fairness even though it aligns with progressive tax schemes.
Several members of my partner's family meet this description. They fit the welfare queen stereotype to a T. That's just immediate family. I've met plenty. Maybe you just don't have contact with people who would?
> Almost certainly more than offset by the ambitious who can now take risks they otherwise couldn't, knowing that if they fail they at least aren't going to end up hungry and homeless.
This is a completely unsubstantiated claim. How are you measuring this and where's the evidence? Yeah, it sounds great and is something people want to believe is true, but where's the hard evidence?
A person who is responsible with $10 a month may not be a credit risk, but clearly can't cover their needs; a person spending $10k a month when their job pays them only $8k is clearly a credit risk, living outside their means, despite earning enough to cover far more than their basic needs. You're strawmanning.
After thinking about it a while, I realized the law would need to protect the UBI payments from being accessible in bankruptcy. That would significantly limit lenders willing to lend on that money. Those who did would be charging very high-interest rates on it and probably limit the total amount backed by it, so someone can't borrow 200k and then declare bankruptcy but have it be protected.
Even writing this out now, I'm not sure that this would work because I'm not sure how you prioritize lenders for someone's assets who declares bankruptcy.
I also see upward pressure on housing prices - right now, few landlords know what the market can take for pricing. It would be easy to bump everyone's rent by a few hundred dollars when UBI kicks in because you know everyone can afford it.
Technology and the market structure are so efficient at extracting value from things that it's hard to design any policy that will effectively achieve the desired outcome of providing food, clothing, and shelter for all citizens without some wonky unintended consequences.
It could be that housing rents in certain situations could increase in response to UBI, but in most cases having more money gives one more choice, not less. A family who are now stuck in a rattrap located conveniently with respect to public transport might move to a better cheaper place in a more remote location and buy an old car. They wouldn't have to stay at the mercy of their current landlord. Other people in other situations might respond in other ways.
In my mind, it's about answering the question of how we lower barriers to moving to ownership and getting people out of the poverty cycles. There are two major hurdles I see:
- The current structure right now, and incentives that exist, are so good at extracting money that they might quickly eat up the additional money handed out - whether it's through financial instruments or increased prices for basic necessities.
- The people that consistently don't have money are bad at earning money, bad at keeping money, or some combination of the two. UBI only helps the people who can't earn money, but doesn't solve the financial literacy problem or the root cause that a group of people is bad at keeping money.
Because thats called north korea/ussr... and people routinely risked their lives to escape that equality...
Here is how i think your point of view becomes stronger:
Say inequality exists - but show how did it get there? Is it corrupt wealth? Does inequality persists because movement between wealth levels is becominy stale?
For example, did bezos sell slaves or sell missiles? Or did he get rich getting to sell you stuff which you really like?
Or, is there a chance your avg 1%er could be wiped out tomorrow? Or is being in the 1% sticky...like it is in the UK, Italy and france, where the same 5 families had the same wealth since the middle ages ?
If you have a fair shot at the 1% , and if the road to get there is morally sound, then you wont hear of anyone to complain of inequality.
Show which of the 1% is morally corrupt, and where progress in wealth dynamism is stalling, and im there to argue with you that we need to fix it.
In my Prosper experience that was the rare exception. The typical defaulting borrower bought themselves a shiny new toy and literally felt entitled to the money. As if their success in securing the loan was sufficient justification to have earned the money outright.
The drama on the Prosper lending forums, where lenders and borrowers could directly communicate with each other, was epic and educational.
Fall behind far enough and your debt takes priority over staying in your home. Hell, even the government will kick you out if you fall behind far enough on property taxes
Not everyone who borrows money is a "victim" and not everyone who asks for their money back is a "predator". It's not so black and white. I've lost money to worthless people who lied while borrowing only to find out they blew it all on prostitutes instead of that family emergency they claimed they had.
Assuming you're truthful in your application for the loan, it's not theft. It may be a poor decision on the part of the lender, but of course, that's why interest rates exist and scale with your likelihood of nonrepayment.
[1] https://www.forbes.com/sites/nicksibilla/2019/08/30/federal-...
In the second scenario the worst case is that the payday lender becomes insolvent, the company collapses, and the workers go and find other jobs because they're not the ones suffering financial stress.
How is that worse.
Borrowing when you know that you will not be able to repay the loan (or with the intention of not repaying) is also wrong.
> In the second scenario the worst case is that the payday lender becomes insolvent, the company collapses, and the workers go and find other jobs because they're not the ones suffering financial stress.
In this case, the employees of the so called lender are rendered jobless and they don't meet their financial obligations and might become homeless themselves.
I think the disagreement may be on the definition of “reasonable”.
Similar to utilities, I don’t think most people begrudge a company for making a “reasonable” profit. The problem sometimes comes when it starts to become unreasonable level of profit, predicated on lack of transparency and shady tactics
The average person thinks companies make over 5x the profit they actually make, and they think the amount of profit correlates negatively with how responsible and good for the world the company is (when in fact there's very little discernable correlation, and it may be positive). What profit people begrudge is likely not particularly relevant, given how uneducated those opinions generally are.
It's rarely ever been above 5%. Plus, a default doesn't necessarily mean the creditor lost money equal to the full value of the loan plus all interest payments. Some defaults are haircuts, some a break-even, and others simply fail to realize their full value.
> and they think the amount of profit correlates negatively with how responsible and good for the world the company is (when in fact there's very little discernable correlation, and it may be positive).
Sure, you just have to be willing to ignore "fairness, consumer protection, environmental protection satisfaction, and employee satisfaction" when considering "corporate social responsibility."
> given how uneducated those opinions generally are
So, do they merely have these opinions because they are uneducated or because they're misplacing blame in the system?
Citation on ~5%? I've seen occasional claims that it's that low, but I've often seen it quoted in the ~20-25% range as well. And that ignores the money spent on trying to get borrowers to make good, as well.
> you just have to be willing to ignore fairness, consumer protection, environmental protection satisfaction, and employee satisfaction
Nah, some of the most profitable corporations score really well there. High profit is not well-correlated with bad behavior, even though some bad behaviors can bring high profits. It often just means the company is really good at bringing people things they find useful.
> So, do they merely have these opinions because they are uneducated or because they're misplacing blame in the system?
The people are often educated -- they're merely uneducated on the relevant info for that particular question. Most people don't know how the major systems they interact with work; we should expect them to misplace blame.
People do get a say in the policies of their society in a democracy, whether educated or not. People also think NASAs budget is 50x what it is, but it doesn’t mean we should strip away their right to vote, it means they need to be educated (or their representatives, by proxy). Otherwise it’s just advocating for a technocracy
A technocratic republic, maybe where we got to pick who ends up on legislative subcommittees ourselves[0], might actually be a good thing.
[0] Obviously we can imagine many other forms for a technocratic republic to take; this is just the most similar to the current system, and thus maybe least unreasonable in a path-dependency sense.
Agreed. It very much does depend on the default rate.
FWIW when I now see 10%+ APRs on unsecured loans for presumably highly rated borrowers and much higher rates for riskier borrowers, I’m no longer shocked.