Universal Basic Dorms

Poor people have too little money. So why don’t we just give them more money, instead of giving them many specific things? The main theory in the literature is paternalism:

The traditional justification for in-kind transfers has been “paternalism.” … If members of society care about the consumption patterns of the poorest rather than their utility, then the unconstrained choices of the poor may create negative externalities for those who care about them. … while income inequality per se may be acceptable, all individuals should receive adequate food, medical service, and housing. … Parents may not take full account of the utility of their children when making decisions, or they may neglect to factor in externalities. … attempt to redistribute from parents to children within the family. … a sense that the poor cannot be trusted with cash. … it is hard to escape the conclusion that paternalism remains a fundamental underlying rationale for in-kind transfers. (more)

You may not be surprised to hear I have an elaboration of this account based on signaling and status. Let’s start with this result:

[A] 2010 paper … makes a strong case that in fact the outcome of life satisfaction depends on the incomes of others only via income rank. (Two followup papers find the same result for outcomes of psychological distress and nine measures of health.) They looked at 87,000 Brits, and found that while income rank strongly predicted outcomes, neither individual (log) income nor an average (log) income of their reference group predicted outcomes, after controlling for rank (and also for age, gender, education, marital status, children, housing ownership, labor-force status, and disabilities). (more)

So if satisfaction and preference go simply as income rank, then there is simply no way to to use income redistribution to help with such things. Whatever you give to some comes at the expense of others, for no net gain. You can still want to help the poor, but that requires that your concern about their lives not be mediated directly by their satisfaction or preferences. That is, what you want regarding them can’t equal what they want or what makes them happy.

For example, compared to the poor, you might put less weight on their desires to signal, and to rise in status via positional goods (like winning a sporting contest). Because you can see the negative externalities associated with such things. That is, you might put more weight than they do on the remainder of their preferences, which we might call their “direct welfare”.

If there are diminishing returns to direct welfare, then you can want to reduce the overall variance of direct welfare, by giving more of it to the poor, at the expense of the non-poor. But you can reasonably fear that if you just give them cash they will spend too much of that on the kinds of non-direct welfare that have negative externalities. So you can want to constrain their choices, to better ensure that it is direct welfare that you are giving them.

The big problem here is: how to distinguish the goods, i.e., products and services, that put more weight on signaling and status, relative to those that put more weight on direct welfare. The usual political equilibrium is to give the poor the sorts of goods that people tend to praise and admire, at least for others. Like jobs, medicine, education, libraries, art, churches, and fresh vegetables. And to withhold from the poor goods that people tend to criticize and dislike, at least for others. Like parties, drugs, sex, fast food, social media, movies, and video games.

But alas, typical admired goods don’t obviously have smaller positional components, nor do they obviously contribute less to signaling. For example, both education and medicine, widely given to the poor, have huge signaling and status components, plausibly even larger than for most goods. If we cannot in practice distinguish the goods that do more to promote direct welfare, we should give up on in-kind transfers and just give the poor cash. And then only to the extent that we think direct welfare has strongly diminishing returns in terms of cash.

I have a (perhaps not original) idea. We have good reasons to think that in general most product and service variety emphasizes signaling and status, relative to standard goods that can achieve large scale economies. So if we can make especially cheap cars, homes, clothes, food, etc. via mass production with a small range of variety, then we should prefer to spend our budget on helping the poor via such standard goods.

That is, assume that we the non-poor have a budget that we are willing to spend on helping the poor. We have two reasons to prefer to spend this budget on standard goods. First, standard goods can be provided much more cheaply, allowing us to give more to each person, or to help more people. Second, because these goods have a lower signaling and status components, the poor who consume them hurt the rest of us less via making us look worse by comparison, and rising in status relative to us. We should thus be wiling to increase the budget that we spend on the poor, in compensation.

Of course the poor may resent this policy, even if it results in larger budgets. Exactly because we choose these standard goods to have lower signaling and positional components, the poor will know that others who see that they are using such standard goods designed for the poor may think less of them as a result. That may not be quite the same as a “stigma” assigned to such goods, but it may have a similar effect. Even so, this looks like an efficient arrangment.

So how exactly can we give standard goods to the poor? There’s an obvious risk that the government, or a charity, managing such poverty assistance might overly micromanage the specific standard goods offered, inducing their design, variations, production, and maintenance. Resulting in greatly increased costs and lower quality, as we’ve often seen with public housing.
So it seems better to just offer the poor credits that they could spend at any competing private supplier of standard goods packages.

That is, let us offer to pay qualifying private “dorms” a fixed budget per resident served per day. Each dorm would give its residents its standard package of a bed, clothes, food, and services for transport, entertainment, schooling, and medicine. Then the qualified poor could choose the dorms they see as offering the best combination of location, other residents, and standard services. If there were many competing dorms, and if residents could change dorms frequently (say at least once a year), competition should force dorms to offer efficient and relatively attractive packages. (We may also need to change zoning and regulation to allow such dorms to be offered.)

History seems to suggest that direct welfare can often be provided more cheaply and reliably via dorm-like living. Such as we’ve seen in colleges, the military, orphanages, hospitals, prisons, and retirement homes. So it doesn’t seem a crazy idea to help the poor live cheaply via dorms as well. But I do see a few complications.

Limiting Variety – If not constrained by some rules, competing private dorms won’t necessarily offer standard goods, instead of more varied goods of a lower quality. After all, that is what the poor seem to choose in the market today. So there would have to be some rules enforcing a degree of standardization of the goods offered. Thus there would be limits on the variety that dorms offer in their rooms, clothes, food etc. I don’t have specific proposals regarding these rules to offer now.

Unusual Variety – Some of the poor will actually be unusually different from the others, and thus need unusually different services. Such as some disabled folks, or parents with young children. These might be offered something different than the standard options proposed here.

Added Variety – Even if we push for less variety and more standardization in what we give the poor, there’s no need to go to extremes on this. Internet connections would offer the usual immense variety of outside sites to which one could connect. And some fraction of the budget paid to dorms might be paid directly to the poor as “allowances,” from which residents could pay for unusual expenses and added variety, such as for some food or clothing occasionally bought outside the dorm. Perhaps the poor who insist on more variety than this dorm system offers could be offered a cash budget to spend on their own, a substantially lower amount than the budget offered to qualified dorms to host them.

Transitions – It is probably more expensive for dorms to deal with residents who come and go, relative to residents who stay. So it would probably be better if dorms were paid some extra amount for resident changes. Residents might have a limited budget of such changes, or maybe they’d have to pay for change fees out of an allowance.

Universal Offer – I see no reason not to allow dorms to let the non-poor to pay to be residents. In addition, some may argue for paying dorms the same budgets to let anyone stay there, not just the qualified poor. Then anyone could choose to live in these dorms, and save on living expenses. This would be “Universal Basic Dorms” instead of a “Universal Basic Income”. It would be much cheaper than U.B.I., as fewer ordinary people would be willing to stay in such dorms.

Valuing Neighbors – If these dorms only housed the qualified poor, then such poor may have a worse pool of associates and role models. Thus it might make sense to pay dorms some added amount per non-poor residents who mingle with their poor residents. This makes sense not only in terms of benefits to the poor, but also in terms of compensating such non-poor residents for the status hit they take by moving to such dorms.

Crime – My understanding is that crime is the other big thing that tended to go very wrong with public housing, in addition to mismanagement. So things might go very wrong if dorms were not allowed to reject residents they deem too likely to cause problems. In addition, things would probably go even better with a crime voucher system. Offer each resident a budget to pay a voucher to cover all the crime they may commit as a resident. If they can’t get a voucher to agree at that price, no matter what the other contract terms, such a resident does not qualify for dorm living. This might be a good test environment for a crime voucher system.

And that’s my proposal. Offer to pay dorms per resident who stays there, with rules to encourage less-varied more-standard dorm goods which achieve scale economies. Residents would then get more direct welfare, even if they’d gain less status and send less attractive signals. That lower status should make the rest of us more willing to increase dorm budgets well over the cash budget we might offer the poor to live outside dorms.