UBI and moral hazard

Political cartoon of president Richard Nixon with a long face.

A common refrain from high-minded opponents of UBI is to say handouts to the idle poor is only to condone profligate behavior.

The concept of moral hazard, or the idea that people (or companies) engage in riskier or spendthrift behavior if shielded from the consequences, has antecedents throughout economic history, but really came into its own around the 1970s.

The phrase first entered the American right’s discourse around the time Nixon proposed to extend cash payments of $1,600 (about $11,000 today) to every poor family of four without income. Never enacted, the Family Assistance Plan may be the closest the United States has come to establishing a guaranteed income floor since modern experimentation.

A seemingly radical policy for today’s political landscape, Nixon’s badic income scheme can be seen as outgrowth of Johnson’s Great Society, which sought to reimagine America’s class system, and open new societal possibilities through government initiatives.

In a reversal of his thinking, Nixon amended the proposal to include a work requirement, after being presented with the case of moral hazard.