Basic Income — Part Three: Conditions and Motivations

What psychology can tell us about basic income paradigms

Soma Cube, by Дмитрий Фомин (Dmitry Fomin) (Own work) [CC0], via Wikimedia Commons

A few years ago, researchers tested how a concern over personal finances might impact a person’s cognitive ability. Participants were asked to consider how they could afford a hypothetical car repair. After this budgeting exercise, they answered a number of spatial and reasoning questions.

High-income participants were not concerned with their ability to pay for the car repair, even if it would be expensive. These participants did well on the later cognitive tasks.

Low-income participants were also unconcerned about an inexpensive repair, and they showed similar high scores on the subsequent questions. However, these participants were not so blasé about the prospect of an expensive repair. After thinking about how to manage finances for this pricey matter, they performed poorly on the cognitive tasks.

High-income and low-income participants were equal in their capabilities when not under pressure. It was only when faced with economic concern that low income participants found themselves unable to reason correctly. It’s the same logic behind buying a crappy pair of boots when a pair twice as expensive would last you four times as long. It’s the reason behind buying a pack of cigarettes every day when you can barely afford rent (well, that plus addiction). If your mind is overburdened with financial concerns, your cognitive processes diminish.

It isn’t that making bad decisions causes you to be poor. It’s that being poor causes you to make bad decisions, which can keep you poor.

To help break people out of the cycle of poverty, many programs try to help the poor financially while guiding their behaviors in a positive direction. These are known as Conditional Cash Transfer (CCT) programs.

CCT programs are simple: In order to receive money, families must complete certain conditions. Typically, these conditions are based around health and education, such as visiting the doctor regularly or keeping their children in school.

These programs are different from unconditional cash transfer (UCT) programs, such as the Mincome program in Canada I wrote about last week, or the cash transfer program in Kenya. In UCT programs, families receive money without needing to complete any conditions.

The logic behind CCT is pretty clear: The organizations giving out the money want to make sure that participating families have their own best interests in mind. Organizations don’t want to see their money go to waste, and requiring conditions is the closest thing they have to a guaranteed return on their investment.

But do these conditions make a difference? Do we see a larger benefit in conditional cash transfer programs than in unconditional programs? No.

In Mexico, the conditional Prospera program (formerly Oportunidades) showed positive results. School attendance increased, especially for high school students. Researchers found an increased demand for preventative care and a decrease in hospital visits. Teenage pregnancies also decreased. But keep in mind, many of these outcomes are similar to those found in UCT programs. If the outcomes are the same, why impose conditions at all?

The Opportunity NYC program launched by Mayor Bloomberg had less-than-exciting results. This program ran from 2007 to 2010, and rewarded a variety of behaviors in children and adults, including dentist visits, regular employment, and school attendance. As a result of the program, more people went to the dentist, and some high school students — those who had already shown some proficiency — increased their attendance. However, the program did nothing to increase attendance for less proficient students, or improve grades and attendance for primary school students.

To look directly at the differences between CCT and UCT programs, researchers in Malawi, Africa set up both. Families in the CCT group were required to keep their daughters in school in order to receive money. Families in the UCT group received money regardless of whether their daughters stayed in school.

What happened? As one might expect, families in the CCT group did send their daughters to school at a higher rate than the UCT group. After all, doing this was the only way for these families to receive money. Along with an increased attendance, daughters from the CCT group also showed a modest improvement in learning.

The most interesting finding, however, came from the UCT group. This group did not send their daughters to school, but they showed an increase in other positive behavior, such as fewer early marriages, a lower birth rate, and a lower rate of HIV transmission. It seemed that just receiving money caused these families to act in positive ways. Why did the unconditional program have this effect, while the conditional program did not? The answer may lie in the psychology of motivation.

As any intro psychology student will tell you, classical conditioning can be found in the lab and in the real world. The rat presses a lever, gets a treat. The child cleans her room, gets an allowance. External rewards can encourage specific behaviors that people — or rats — may not have wanted to do before.

But some behaviors can be rewarding in and of themselves. Why do some people spend time completing crossword puzzles? Despite having to occasionally rack their brain in search of a word, they just enjoy them. It’s this enjoyment that keeps them going. This internal drive is known as intrinsic motivation.

Unfulfilling activities like going to the dentist may require an external reward — a bribe — to jump-start your enthusiasm, but more pleasurable activities already have intrinsic motivation to carry you through. So what happens when you attach an external reward, such as money, to those already enjoyable activities?

As it turns out, external, tangible rewards can actually reduce intrinsic motivation.

This study from 1970 is a classic. Participants were introduced to a 3-D puzzle cube, much like the one shown at the top of this page. The cube was made of small interlocking shapes, and participants could take these pieces apart and put them together to form bigger shapes.

Participants were brought individually into the lab, where they were placed at a table with a number of games and toys. Participants in the first group were introduced to the puzzle cube and then left alone to play with it — or any of the other toys — for as long as they wanted. Over three separate sessions, researchers measured how much time these participants spent playing with the cube.

The second group of participants started off in the same way. During the first session, they were given free time to play with the puzzle. At the start of the second session, however, these participants were offered cash rewards for the number of specific shapes they could build out of the cube pieces. Researchers again measured how long these participants spent playing with the cube. As you might expect, they found that participants spent significantly longer playing with it when there was money to be earned.

For the third session, researchers informed these participants that there was no more money available for rewards, but they could still play with the cube for however long they liked. It was the same scenario as the first session, but now the participants were affected by the absence of a reward, which was not a concern initially. The time spent playing with the cube decreased drastically, lower than either of the previous sessions. Their intrinsic motivation to play with the puzzle was gone. Something that they had once enjoyed for its own sake no longer held interest, all because of the prospect of money.

How does this study relate to cash transfers? Remember: In CCT programs, cash is only given if the participants complete the necessary conditions. These conditions aren’t neutral; they’re all positive behaviors like staying in school or going to the doctor. They’re all behaviors that most families would do for their own sake, if finances or other barriers weren’t a factor. By attaching external rewards to these actions, researchers may be unwittingly limiting their power.

In the Malawi program, CCT families did send their daughters to school more often, but they only did this because of the money they received in return. The UCT families, by contrast, did not show much of a bump in attendance, but did increase a number of other positive behaviors. They didn’t need to do these things, but they wanted to. They had the intrinsic motivation to make good choices, and the extra cash allowed them to put these choices into action.

We can see intrinsic motivation influencing the outcomes of other programs as well. Families in Kenya received cash unconditionally, but they still chose to spend less money overall on alcohol and tobacco. No one was forcing them to make healthier choices; they wanted to do it for themselves.

In New York, more people went to the dentist when they got paid for it. That’s great, but did these people also start flossing or brushing better? Did they want to take better care of their teeth, or did they just want to get paid? Bribery for good behavior may work in the short term, but without intrinsic motivation, the long term outcomes will remain the same.

Organizations and governments considering CCT have their hearts in the right place, but the plan to require conditions will make these programs less effective. Poor people aren’t stupid. They may make unwise decisions, but — as discussed above — that’s not because they don’t know better. Rather, the cycle of poverty affects cognitive function and makes them unable to act how they ought. The answer isn’t to require and reward good behavior from low income families; it’s to give them the money and freedom to make changes on their own.

Part One: Introduction

Part Two: Poverty and Health

Part Three: Conditions and Motivations

Part Four: The Case For Universality

Part Five: How UBI Will Disrupt Poverty