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Behavioral Economics and the Basic Income Guarantee
Citation Information: Basic Income Studies. Volume 5, Issue 2, ISSN (Online) 1932-0183, DOI: 10.2202/1932-0183.1167, December 2010
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This article provides a critical discussion of the potential contributions behavioral economics makes to the idea of a Basic Income Guarantee (BIG). Behavioral economics suggests that the consequences of a basic income may be significantly different from the ones predicted by the Standard Economic Model. Three topics from this literature are analyzed and linked to the BIG idea: Prospect Theory, Motivation Crowding Theory, and Conspicuous Consumption. The article argues that a basic income may be efficiency enhancing under some conditions, but at the same time incentives related to positional concerns may increase wasteful expenditure following its implementation.