Unexpected Consequencesof Basic Income (Pt 1) :The Black Market

In a world where money flows into the hands of its citizenry for their basic needs, desperation is on the decline. Stress from poverty is on the decline. Emergency room visits are on the decline. Depression, drug addiction, and suicide all begin to see a decline across the board.

People with mental illnesses can afford proper treatment. People who have lost their jobs will not also have to lose their homes. Medicine for prevention is now prescribed as the potential time to live a better life is now within reach for an increasing amount of citizens.

The world has changed.
Basic Income has come.
Who will suffer?

The Black Market

If you’re living in abject poverty and your neighbor offers you the opportunity to make ‘quick cash’ by selling drugs, you might take that opportunity because…well…You have so few viable opportunities. Odds are (depending on the country), you don’t have quality healthcare, you have limited opportunities with higher education, you hold no job prospects, and everywhere you turn, they’re clamping down on homeless.

Now, introduce a basic income into this situation. You’re sitting on the stoop of your apartment (because you have enough money to afford a place to live) and you’re offered an opportunity to sell drugs.

It has been studied and shown that people are generally loss-averse. That is to say, someone would lose more satisfaction from losing $100 than they would gain satisfaction from winning $100.

If I am earning $1000/month from the government to follow the rule of law, will I risk that earning and the possibility of incarceration to make a little bit more?

If the lowest rung of organized criminal enterprises are no longer able to be latched into the game because the risks are too high and the desperation isn’t there, how does organized crime react?

It seems only natural that the wages paid to low-level drug dealers is going to need to increase. If that is to happen, there are a few ways to balance the increased pay. Either the cost of the product increases, the bosses take diminished salaries, or some combination of the two.

There are two more factors which we have yet to consider, competing organized crime & decreased drug usage.

Competing organized crime means that an increase in the drug cost from one gang creates an opportunity of market capitalization from the other. If Gang A raises prices and Gang B keeps their prices the same, we can expect to see an increase in the revenues of Gang B, even if their profit margins are smaller.

Now we must consider the customer who is also experiencing a dilemma with loss-aversion. Continue doing drugs and risk being arrested and losing your basic income…Or try to clean yourself up and try to live with the laws put in place by the state.

If the drug user is a casual user and not absolutely dependent, their decision to keep using could also be affected by the increased costs within the black market.

It is my hypothesis that a basic income will lead to a decrease in drug use, a decrease in drug overdoses, a decrease in gang-related violence, and a mild destabilization of the black market.

Legalizing all drug use would have a much more significant effect on the black market than basic income would, but this effect is far from irrelevant.

If the poor received a salary from the government to not deal in illegal activities, wouldn’t the majority of them seize the opportunity immediately? Criminality and poverty are intrinsically linked — not because the poor want to be criminals, but because they don’t want to be poor. End poverty and decrease criminality.

In the next part of this series, we will explore the topic of minimum wage employment.

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Jamie Klinger — Founder of JoatU, former member of Coop Sur Genereux, Basic Income Activist, Community Organizer, Entrepreneur, Writer, Photographer, Marketer, Poker Coach and Rebel with a Cause.