Free Money: The Surprising Effects of a Basic Income Supplied by Government
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In a way a basic income can almost be seen as a decentralization of government as it enables citizens to direct government funded spending at their discretion.
It's illustrated well in Churchill's story about the do-gooders who bought out a bridge and lifted the toll, only to find that rents went up by the exact cost of regularly crossing the bridge.
http://www.landvaluetax.org/current-affairs-comment/winston-...
(Search for "bridge".)
If rents just advance to capture the BI, all you've done is give a big subsidy to landowners.
We actually do, both when it is driven by rational (e.g., shifting money into a monopolized market) and irrational (encouraging time-deferred costs that people are known empirically to discount) forces.
> If rents just advance to capture the BI, all you've done is give a big subsidy to landowners.
But they can't, because UBI is a redistributive scheme; without price discrimination based on income before both UBI and the taxes funding it, you can't adjust rents to capture it.
"It's driven by rational and irrational forces" isn't an explanation.
>But they can't, because UBI is a redistributive scheme; without price discrimination based on income before both UBI and the taxes funding it, you can't adjust rents to capture it.
So you're saying the bridge scenario didn't and can't happen?
Nor was it posed as one, it is your condensation of my description (which also includes specific examples in each category) of broad classes of sources which we understand very well that produce the described effect.
> So you're saying the bridge scenario didn't and can't happen?
I was not saying anything about the bridge scenario, which is structurally unlike a UBI and thus a non-useful analogy. Though, sure, I would say that the bridge example reads a lot like more like a parable than a historical account, and politicians constructing such parables with weak, if any, factual basis is about as uncommon as ocean spray containing salt. More to the point, it's exactly about one f the specific examples I gave of effects we understand quite well.
Do you deny generally that rents go up with public infrastructure? Or that lifting a toll would raise rents (because it now becomes a more desirable place to live)? Or, which supply/demand curves do you think differ here from the UBI case?
They would go up; but, absent a perfect monopoly (which real property available for rent is usually not subject to in even the short term), it would be unlikely to go up the exact amount of the subsidy (considering only the effect of the subsidy).
> Or, which supply/demand curves do you think differ here from the UBI case?
The difference is that its a lot more plausible for residential rental property in a particular locality to be effectively monopolized than for that to be the national norm. And, to the extent the effect is under consideration is real, it is explicitly a monopoly effect.
This article would look very different if some members of the tribe were taxed heavily to provide the payments to other members.
How is this a problem? If enough people support an increase in the UBI that politicians feel they have to raise it, isn't that a good thing?
If people could vote themselves more money the voter turnout would be insane. How would anyone control something like that? Anyone who ran against the increases would be easily defeated with something like this: "My opponent wants to take the money you deserve!".
At some point you would be giving people more money than you produce as a country and then it's only a matter of time until the money runs out. Once the money runs out then your government will evaporate as the enraged populace tries to pin the blame on one group.
This of course is on of the central issues with government run wealth redistribution programs, nobody wants less money and they will go to the polls to protect it. Whatever you think of the ACA/Obamacare in the US, once it got established and started paying out there is almost no way to repeal it as no one wants to lose their benefits. Even establishment Republicans learned their lesson and are now leaving it alone after seeing that they angered many Americans who enjoyed those benefits and threatened their chances of being re-elected.
Yeah, that seems mostly fine to me though (aside from the rhetoric.) If an increase in UBI makes life meaningfully better for enough people and they turn out to increase it that seems like democracy in action.
>At some point you would be giving people more money than you produce as a country and then it's only a matter of time until the money runs out. Once the money runs out then your government will evaporate as the enraged populace tries to pin the blame on one group.
Seems pretty hyperbolic.
You cannot continually raise the UBI, as this is economically untenable, however there will be significant pressure to raise it every time there is a vote. I haven't seen any UBI proposal that addresses this.
Plus there is another real issue with a true UBI: inflation. If everyone in the US made $100,000 a year then an iPhone would cost $8000 instead of $800 as people could afford to pay more and Apple would adjust their price accordingly. How do existing UBI schemes plan to avoid this?
Because there's still the same total amount of money in the system, (inflation adjusted) prices can't go up too much. According to the Econ 101 model, goods with a fixed supply will probably get more expensive since there are more potential customers wanting the same amount of stuff, but goods with an extremely flexible supply will get cheaper, again, because there are more potential customers to spread the fixed costs over.
* There's also a sort-of-UBI variant where the funds come from monetizing some big nationalized resource and distributing the proceeds (e.g. the Alaska Permanent Fund Dividend). In that case the above doesn't apply, but neither does your fear. Since in that case the pool of money is dictated by the market value of the resource the voters can't directly impact how much they'll receive.
We know empirically (see your comment, for instance) that some people would vote against a raise. That idea that 'people' is unable to control their passions is not supported by history. Not so long ago, basic income was rejected by referendum in Switzerland.
"At some point you would be giving people more money than you produce as a country"
That statement is meaningless. Any country that run his own currency can produce an infinity quantity of it. The real constrain is what real resources are available in the country. If you spent more that what is available the value of money will go down (also know as inflation).
Obviously, but in reality countries only mint more currency according to a strict schedule to avoid destabilizing their economy. UBI has to abide by this otherwise you will do real damage to your economy.
My statement is not without meaning, you cannot pretend that a country will be able to give out more wealth that it actually possesses. Technically, the US is over this threshold, but we have a massive amount of credit that we are able to leverage.
>We know empirically (see your comment, for instance) that some people would vote against a raise. That idea that 'people' is unable to control their passions is not supported by history. Not so long ago, basic income was rejected by referendum in Switzerland.
In regard to Switzerland rejecting UBI I think the issue is once people are dependent on UBI dialing back payouts is near impossible even if it makes the most sense economically.
Educated voters will reject raises, but this is like saying that educated people will not eat in excess of what they need. In reality, America has lots of people who know better but are still overweight because of the dependency cycle it creates.
Sometimes the bigger safety net people win, taxes go up, and payouts go up. Sometimes the lower taxes people win, taxes go down, and payouts shrink. Eventually these forces hit a stable equilibrium (or a semi-stable "pendulum") and the tax and benefit rates don't seem to explode or contract endlessly.
I don't see any reason to expect that a basic income would be any different.
In the end it's the classic choice. People want more from the government and they also want to pay less taxes which ends up at a balance point.
This same logic applies to corporate welfare as well - and you can see the results (see latest tax bill).
The differentiating factor is that, in one case you give to those without much political power vs. giving to those who have enough power to play havoc with your politics (or have already controlled/captured it).
A bit of perspective helps to balance the slippery slope danger you presented.
Edmund Burke famously made this argument in the 18th century as an example of a problem with universal franchise (letting non-property owners vote). Supposedly the "masses" would vote for more and more handouts.
Personally, I think the universal franchise has worked out pretty well overall, and this problem has, if anything, gone the wrong way even during the big bouts of progressivism in the late 19th and early 20th centuries.
And even when they went overboard as they did in the UK, they recovered, perhaps over-recovered. But in the long run it seems to converge fine.
Can't find a job? The government will guarantee you some baseline pay and give you a job and healthcare benefits almost unilaterally. You've still gotta show up and do your work, but you are guaranteed something to do.
It might be cleaning up roads and parks, building trails, washing streets, and planting trees, but it's a basic job that will provide you with enough money to get by.
There would be career counseling, skills-based training, and opportunities to manage other workers. Essentially, an Army without the guns; a group focused on not only improving the public environment, but also the part of the public employed by the program.
Wikipedia has an excellent page about what the WPA administration accomplished over 8 years -- I think it's an idea worth reviving.
That's not the problem UBI is intended to address, and the WPA would be an exceedingly poor fit TO UBI’s problem.
Ideologies are epistemic pathogens.
I'd like to see such a program for people who recently got out of jail, for example, or at least an addition to AmeriCorps that targets those individuals.
650,000 people get out of jail every year -- having a strong public works program could help those individuals get back to becoming functioning and contributing members of society.
For me, the goal is not to have everyone engaged in busywork. For me, the goal is to end mandatory work.
Freedom comes not when no one has anything to do, but when everyone gets to do what they want.
Population. It’s one of those things we all tend to stay the hell away from because in the past attempts to address it have been so toxic, and frankly it’s hard not to see attempts today being toxic. Having said that however, it just adds to the difficulty of the problem, it doesn’t make it any less real, pressing or important. A lot of the problems we have today are the result of having geometric growth in the numbers of people for a sustained period of time.
I’m not proposing a specific solution, I’m nowhere near that bright or compassionate. There are obvious pitfalls to avoid such as eugenics and outright genocide, but beyond that I don’t have any answers. Someone had better before the issue forces itself though, because when that happens we won’t get to choose from the best of the bunch of bad options.
Developed countries tend to have birth rates below the replacement rate for native born populations.
As much as people like to point out that humans have a problem with understanding exponential growth. There probably just as many people who have a problem extrapolating the growth of dynamic systems without understanding that growth rates are subject to feedback pressure.
...And how do you manage that for a fractious planet of many billions?
What's the issue? You'd work, save money for awhile, then enroll in some school after a few years.
Your forced labor argument makes little sense to me. Particularly this argument: "which they don't have any realistic way to opt out of." Why not? You still have free time with a basic-employment job. Learn a skill in your free-time, and then get a job in that skill.
The real world doesn't work like this - most jobs above entry level require a college degree or some kind of professional certification. If you have kids to feed and rent to pay, that's a hard row to hoe. I know it's possible to somehow get a job based on self-reported self-training but that's rare. If it was that easy why do you suppose there are so many people that are working as dishwashers and cashiers? Maybe you just think they're lazy and stupid?
As for the second point, I would argue such a situation already exists in the private space. If Walmart is the only employer in your area, and you can't live on SS/Disability/Pension alone, you've got a similar situation -- work for a low wage or go hungry ad infinitum.
A public works program with a mandate to improve both the worker and the public good presents a more attractive alternative to a private corporation with little care for the individual worker.
Prisons, at least the one's I've visited, have no such mandate to improve prisoners, thus the forced labor.
> Hughes is no basic income purist. He believes, for instance, that for this economic moonshot to be politically palatable, it would have to be tied to work. “Not just because it seems more intuitive for people,” he says, “but because work is a key source of purpose in our lives.”
The Works Progress Administration and Civilian Conservation Corps are pretty close to what you are describing. Many of the parks, lakes, and stadiums in my town were built under those programs.
A guaranteed paycheck basically creates an incentive to not work very hard. Potential employers didn't look on WPA experience as being a positive thing. A Senate inquiry found that there didn't seem to be much incentive for a supervisor to expect or require good work from the workers.
If there were a way to quantify work to the point where everyone is getting paid for what they are contributing I think something like what you describe could work very well. Maybe the solution is a bunch of non-profit businesses that have the goal of creating jobs and breaking event. I think Good Will stores are supposed to do something like this.
Having a way to easily verify jobs is the hard part. If there is valuable work that can be done by low skill workers that was easy to verify, it seems like the market would have already created these jobs. I guess Mechanical Turk is an example of that happening. On the other hand, I think there are physical jobs that could be done like painting buildings in parks, picking up trash, etc. that would be valuable to a community but where the market is unlikely to create a solution.
In the stuff I've read about the WPA, it sounds like having supervisors who cared about the quality of the work was one of their biggest problems too. On the other hand, Uber, TaskRabbit and others have found ways to quantify and judge the quality of work pretty well, so maybe there are ways to do this that just haven't been tried.
* build your own sustainable house to code in a non-hyper inflated coastal city and keep it maintained/painted according to the local home owner's association CC&R's
* grow your own food sustainably at the local CSA
* don't get into trouble
* (optionally for additional income) teach others how to do the above
That is a clever way to avoid many of the key benefits of basic income, particularly its ability to improve the ability of the labor force to adapt organically by weakening the degree to which present minimal support and retraining for better prospects are at odds.
“Basic employment” may make sense as a solution to temporary economic downturns, where it amounts to simple countercyclical spending; unless the goal is to have an ever growing share of the population economically coerced into being a perpetual involuntary government labor force, it's not a good way of dealing with any long-term need.
"...if anything is to be learned from the Cherokee experiment, it’s this: To imagine that a basic income, or something like it, would suddenly satisfy the disillusioned, out-of-work Rust Belt worker is as wrongheaded as imagining it would do no good at all, or drive people to stop working. There is a third possibility: that an infusion of cash into struggling households would lift up the youth in those households in all the subtle but still meaningful ways Costello has observed over the years, until finally, when they come of age, they are better prepared for the brave new world of work, whether the robots are coming or not."
So a non-populist politician implements an "effective" UBI policy, but since it's only effective for a short amount of time because things change and people realize later that it's not as fair/effective as they thought... or else you can only pass a compromise bill and it's really not effective at all, but you're told it will be (assuming you keep voting for X!).
I mean, why should everyone get the same amount? Or why should the percentage difference between my UBI this other groups be different by X amount?
Suddenly the UBI is just a new way to target voting blocks with promises of adjustments in their favor... essentially like how the tax code is used politically.
The only way to implement UBI effectively is to implement it a way where it can't be used as a populist political tool ever, which I think is impossible.
The most messed up thing I find about UBI is that it's the solution put forth by companies which are actively avoiding paying taxes through loopholes and havens.
Rather than someone like Zuckerberg thinking "Hmm... maybe I could help impoverished people by spreading my wealth to my employees more evenly and by paying my fair share in corporate/personal taxes to the local/state/federal govt?"
Instead they say "I deserve billions of dollars in personal wealth and to stay competitive (despite my effective monopoly) I must utilize every tax loophole possible and it's up to the government to find some other way to find the revenue to keep my users/employees at a living wage."
Add to this the fact that basic income takes away, at least some of, the reason to work in the first place, which means that the very foundation of governments paying out basic incomes -- income from taxation -- is affected by paying out basic income. The result is an unstable system with feedback loops, where paying out a lot of basic income one year results in fewer taxes the next year, which means the government has less money to pay out in basic income that year, causing people to need to a job, which increases taxes the next year, after which the government can pay out more in basic income. Predicting this oscillation is essential to making basic income work, and I'm not confident it's possible at all, at least not when we need to be as sure about it as we do when we're talking about money that people need to buy food.
A sane government behavior would be to spend in year n the known tax revenue of year (n-1), and nothing more.
With unemployment benefit the goverment automatically injects cash into the area to forstall this outcome.
In the very long term, nothing is guaranteed, but there is no basis to believe that the tax base will drop by 50% next year, and ample reason to believe the contrary.
There are problems that need to be solved, but the one you have here you just invented. Government programs don't work like this. They aren't pegged to revenue.
The problem you described with oscillations and feedback loops is exactly one of the primary criticisms of attempts at forcing the government to balance the budget each year.
This is only a problem for a government constrained to short-term budget balance (U.S. states largely are for their operating budgets, but the federal government is not.)
I don't really mind if there's lots of crappy poetry and tremendous non-enumerative attention to child rearing and looking after the elderly. I don't mind in the slightest if someone decides they just want to watch TV all day à la "Fahrenheit 451".
But in an abundance economy where the marginal cost of production is essentially nil and money is more useful as a signalling mechanism rather than a store of value, it's the mindset that will be most psychologically dangerous.
"Before the casino opened, Costello found that poor children scored twice as high as those who were not poor for symptoms of psychiatric disorders. But after the casino opened, the children whose families’ income rose above the poverty rate showed a 40 percent decrease in behavioral problems. Just four years after the casino opened, they were, behaviorally at least, no different from the kids who had never been poor at all. By the time the youngest cohort of children was at least 21, she found something else: The younger the Cherokee children were when the casino opened, the better they fared compared to the older Cherokee children and to rural whites. This was true for emotional and behavioral problems as well as drug and alcohol addiction.... Other researchers have used Costello’s data to look at different effects of the casino payments. One fear about basic income is that people will be content living on their subsidies and stop working. But a 2010 analysis of the data, led by Randall Akee, who researches labor economics at the UCLA's Luskin School of Public Affairs, found no impact on overall labor participation."
Actually, the results are that it reduced the risk of developing such disorders; that there are environmental factors for psychiatric as well as other medical disorders and that many are correlated with poverty and/or economic insecurity is decidedly not news.
https://ifstudies.org/blog/what-can-we-learn-from-native-ame...
That being said, there is an easy counter argument to this article: Canada's "first nation". They receives millions in government funding which ends up to be redistributed arbitrarily by "band chief's", often in the pocket of their own direct family. It is not uncommon to have their income in the seven figures while other members of their band fall to real vice, drugs and drinking. (facts confirmed by many first nation members when I living on treaty land). Also, it is not uncommon to see natives who tried to integrate with Canadian society being ostracized by their own community and seen as "traitors" (once again, step family experience).
I don't want my taxes pissed away into some slumlord's bank account any more than I want them pissed away on APCs for a small town police department.
Increased demand will result in increased supply except in markets/locations where the supply can't increase.
It'll be interesting to see what happens to the homeless population.