An Engineering Argument for Basic Income
scottsantens.com
scottsantens.com
Whether or not UBI is a good idea, a useful idea, or a moral idea is an interesting question (I generally think not, but it seems that position is losing the debate). Arguing for UBI (or any other aspect of the economy) from an engineering perspective is a mistake though. An economy is not an elevator. When we put failsafes in to elevators, we know what they do. When we put failsafes in to economies, they behave in bizarre, unpredictable ways.
A lot of things went in to the 2008 financial collapse, but at least part of it was due to a large group of smart (but in retrospect, unwise) people assuming that a math equation accurately represented the financial system.
UBI may not be a good idea, but the reason being that it's likely not the best design (I would say Minsky had it largely correct [0]).
[0] http://www.levyinstitute.org/publications/ending-poverty-job...
It's worth noting that Hayek's conception of the economy as spontaneous order may run into something of a paradox[0], and in the view of some, the emergent and unconscious shaping of the market as we see it today can certainly conflict with other goals - in particular justice. I think most people are interested in at least asking about what can be done rather than sitting down at the command of "don't touch that, who knows what may happen!".
[0] Assuming that some intervention in the economy is permissible (i.e. anything but anarcho-capitalism), see section "When Would Hayek Pour The Cement?" here: https://www.independent.org/pdf/tir/tir_14_01_1_sandefur.pdf
Hayek may not have realized this himself, but he was certainly talking about the blacklist style when he said this. In further support of this idea, the repeal of Glass-Steagal, which precipitated the 2008 crisis, essentially moved the investment banking system from a whitelist to a blacklist, and the result of this, was a bunch of insurance companies maximizing their correlated risk through a convoluted series of loopholes because that is always the goal of a limited liability enterprise. This was the event that made the equations invalid.
Given its sky high bipartisan popularity, it's hard to imagine how any non-UBI supporting politician will be able to compete with a UBI supporting politician going forward. I'd speculate that this was the deciding factor in the Democrats' recent Georgia runoff victory. Nothing motivates voters like the prospect of money placed directly in their pockets.
While I'm strongly in favor of UBI and think we are basically doomed without it, there are a couple things in particular that I worry about:
1 - As the Frédéric Bastiat quote goes: "the state is the great myth that everyone can live at the expense of everyone else". Once people get a taste of UBI, how do we prevent voters and politicians from pushing it to unsustainable levels? It seems like the incentive on both sides will be to always push it higher and higher.
2 - Motivation and purpose. Imagining a world with UBI, widespread automation, and general or close-to-general AI, what percent of humanity will be able to meaningfully contribute? If the number is, say, 50% or less, how do we maintain any semblance of purpose and opportunity under these circumstances?
Exactly. Every president's platform is going to be centered around "the UBI is too damn low!" And if it gets high enough you're going to find lots of people who you could otherwise depend on for the tax dollars that keep this scheme afloat deciding to retire and live off UBI the rest of their lives. I mean I make six figures and have a modest, paid-off house in a relatively low COL area. Get UBI up to say $4K per month and I'll sure as hell think hard about dropping out of the workforce. And don't say UBI will never get past $1K per month...
Also, there will also have to be a reckoning on immigration of unskilled workers if UBI came to pass. The whole argument around UBI is that there's so many unskilled workers in the US who are going to find themselves automated out of a job, so we need to pay them UBI. Meanwhile we... continue to import huge numbers of unskilled workers who are destined to do soak up UBI? Something's gotta give.
You might also ask: Once corporations get a taste of increasing the national debt, how do we prevent them from lobbying politicians to push it to unsustainable levels?
As to your actual question, don't worry, the wishes of voters have very little effect on US government policy.
> Motivation and purpose. Imagining a world with UBI, widespread automation, and general or close-to-general AI, ...
Removing UBI from that equation doesn't lead to a better outcome in terms of motivation and purpose, unless you include the motivation and purpose of the unemployed masses fighting an (unwinnable) war against the elites who control the economy and the killbots.
Perhaps we need to accept that jobs are just leaky abstractions for motivation and purpose, and governments should be trying to create positive outlets for people's talents and social instincts, rather than constructing ever more dehumanizing ways of punishing people for being poor as incentive to work in pointless jobs.
And before you downvote - I'm coming off reading this story which is on the HN front-page where the guy basically created his own UBI and then fell off the map:
https://www.wired.com/story/unsettling-truth-mostly-harmless...
As soon as you put in qualifiers it is no longer universal. Inevitably with gatekeepers you will have corruption (controlling who qualifies gives you power) as there is always an incentive. On the flip side you incentivize cheating (loopholes in the qualifiers, lying, etc.) and then all the $ spent staffing and building tools to enforce those qualifiers, then the staff who regulate them, etc.
So with good intentions you’ve completely ruined what could have been a very simple, fair, and efficient system. Basically what government does every day (usually with good intentions).
You're forgetting the other side of the coin. The money comes from somewhere.
Suppose you can fund a $12,000 UBI with a flat 25% tax rate. So now the breakeven point is at $48,000 in income. If you make more than that you don't want to increase the UBI amount because it'll cost you more than it gets you.
Whereas you could fund a $15,000 UBI with a flat 35% tax rate. The rate has to be more than proportionally higher because of the negative impact of higher tax rates on economic activity. Now the breakeven point is at ~$43,000 in income. It's lower, so fewer people want to increase it more than that.
When the breakeven point has more than half of the population on the other side, you don't have the votes to raise the amount any more.
> Imagining a world with UBI, widespread automation, and general or close-to-general AI, what percent of humanity will be able to meaningfully contribute?
Imagine a world with widespread automation and general or close-to-general AI without a UBI.
I think this is an oversimplification, because in practice, there will be a gradient of people around the inflection point who would be willing to take less in order to stop working, and that gradient will vary by the individual and by the job.
Additionally, I can also imagine politicians promising increases to the UBI without concomitant tax increases, funded by bonds or other kind of financial mechanisms for monetary injection whose long-term negative externalities would be easy to obfuscate from voters.
> Imagine a world with widespread automation and general or close-to-general AI without a UBI.
This is the key point. UBI is (in my current opinion) a necessary tool for smoothing an economic transition to a highly-automated level. However, I am concerned that it might induce other economic instabilities such as in tax rates, voluntary or involuntary unemployment, underemployment, inflation, borrowing, minimum wage, and so on -- these instabilities could then spread to social or political disruption that would undermine progress towards the transition that UBI was originally meant to support.
Since the size of the UBI would roughly correlate with the size of its influence economically/socially/politically, then as the UBI increases, the variance of these potential instabilities would also increase. As such, increases to the UBI should be carefully controlled, for example by gating them to developmental milestones. Of course, that opens a whole can of worms on who sets the milestones and so on, so I suppose it's really just shrugging and hand-wringing all the way down.
This is less of a problem than you would think, because the people for whom this is the case are the exact people who would already be in the "make it higher" camp.
Suppose you make $20,000/year from your job ($15,000 after tax) and then get a $12,000 UBI, so $27,000 in total. $12,000 is less than $27,000, but maybe if it was $15,000 and then you didn't have to work, you might be willing to take the pay cut. But this is the same person who benefits from raising it to $15,000 even if they continue to work; it doesn't change their vote.
Whereas the person making $52,000/year ($39,000 after tax, $51,000 after the UBI) is not going to be inclined to go from $51,000/year to $15,000/year even if it meant they didn't have to work, so all of those people are going to want to keep it at $12,000, to say nothing of anybody making more than that.
> Additionally, I can also imagine politicians promising increases to the UBI without concomitant tax increases, funded by bonds or other kind of financial mechanisms for monetary injection whose long-term negative externalities would be easy to obfuscate from voters.
But we have this problem already. It's an independent problem.
If you can find a way to stop it, do it. But if they're going to do it anyway then better that the money goes to everybody than that it goes to whichever cronies have the best lobbyists.
I am sympathetic to the idea of UBI but there is no trivial engineering argument for it. It is a system with many poor characteristics from an engineering perspective that would need to be addressed in any design that makes a claim of robustness.
I'm sympathetic to the goals of UBI. But without price controls, what would prevent rent/mortage/food/entertainment prices from just rising to absorb everybody's newfound income?
College tuition has been going up exponentially since the introduction of federal student aid. Is there any reason to assume UBI wouldn't do the same thing (albeit without the debt)?
> None of this leads to any inflation problems because, as mentioned in the very first section above, taxes are used to fund these programs, just as they would be for any other permanent welfare state expansion.
https://www.peoplespolicyproject.org/2020/03/18/understandin...
Most specifically, the more social programs you provide the more transparent taxation becomes. Right now our tax programs are not only lacking in transparency but are straight obtuse. This exists, i assume, because they had to work around peoples aversion to taxes and sticker shock when paying taxes.
A massively increased tax spend will only serve to illustrate the sticker-shock problem more. I just don't see UBI happening until people can learn to pay for the common good, recognizing what they're getting out of it and how the common good has material impacts on their self - even if entirely selfishly motivated (as most Americans seem).
Unfortunately the only way i see UBI (or similar) happening is in the face of mass layoffs and lack of work due to a large technology change - like various forms of automation. Until then, it's a problem people can't see, aren't directly affected by, and won't want to pay for.
Actually it will cost $3T ONCE, one-time.
Actually the USA has already paid for a UBI from just its pandemic-related stimulus alone, e.g. CARES Act.
The way to achieve an perpetual ongoing UBI with just a one time expediture of $3T is... drum roll... Stipulate that all payments must be spent on basics & essentials. AND then issue the payments & handle collection digitally/electronically like with debit cards. I sit astounded that the country's best leaders have not proposed a "basics only" amendment.
These are all groups of people that aren't working so there isn't any extra money available for people to raise prices on them.
If everyone makes $X more dollars than normal I don't understand why prices wouldn't go up to take advantage of that. Would it just be because taxes would go up as well so any extra profits would end up being fed straight back into the system?
A UBI higher than the economy can support would seem to drive inflation, especially if we're (literally or effectively) printing some of the money.
Whether that leads to a "spiral" depends on what we do in response. If our UBI is intent on delivering a certain real value, so we give an $X that we adjust regularly to account for observed or expected inflation, then we run risk of inflationary spiral. So let's not do that.
If our UBI is a fixed dollar value, increasing based only on targeted inflation, then inflation drives down the real value to something we can empirically support.
There are also proposals that tie income to a specific revenue stream (a carbon tax, or Alaska's permanent fund), which has its own dynamics but doesn't seem to risk inflationary spiral.
> But without price controls, what would prevent rent/mortage/food/entertainment prices from just rising to absorb everybody's newfound income?
Competition, of both direct and indirect substitutes; this is the same thing that prevents rent/mortgage/food/entertainment prices from rising to absorb everybody's oldfound income.
Considering rent and mortgage in particular, as they seem to be in more limited supply than the others, I want to note two things:
First, competition is not merely competition amongst like units. If there is a fixed number of rooms for rent in a city, more people that want rooms than rooms available, and everyone can pay more, we should expect prices to rise. But as prices rise, choosing to take on an additional roommate, keep living with your parents, or similar become more attractive. And of course, the number of rooms for rent is only approximately fixed, even in the short term. These will typically stop the price from rising the full amount.
Second, we aren't actually particularly limited on housing available; we're particularly limited on sufficiently desirable housing available. A huge portion of what makes housing desirable is that it is sufficiently close to sufficient sources of income. By reducing necessary income, we are actually directly increasing the supply of "sufficiently desirable" housing, even before anyone starts building.
> College tuition has been going up exponentially since the introduction of federal student aid.
There is a very different dynamic when we give people dollars that they can spend as they need, versus when we give people potential dollars they can only spend for a single purpose. If I save a dollar on tuition today, and I'm borrowing from a lender that will only lend to me for tuition, then I can't turn around and use that dollar for anything else that I need (or want). This means it's less important to me to save that dollar, so there's less pressure keeping the price down.
Do you have any evidence for this? This is not claimed in the article as far as I can tell. I don't understand how anyone might make that calculation. I don't believe any state pays your full salary while you were on unemployment. And it's time limited.
This is a well known phenomenon known as the welfare trap [0].
This may not be the case if you have the opportunity to go from unemployed directly to a higher salary but most unemployed people have minimal wage as a best prospect, many times not even that.
UBI evens it out in that if you do get a job you'll make more money instead of downright trading your free time for busy time with no financial gain.
hasn't this been debunked repeatedly? While yes, Im sure there are some people who do their hardest not to work to collect money, most people want to be out there working.
I dont think youre correct per se, but I do think that part of the reason people linger on unemployment is because jobs that they are able to get dont pay nearly enough as unemployment, thus there is no incentive to get back to work.
A system where government help was tapered until people were above the poverty line would eliminate these perverse incentives.
It's not all people do this or all people do that. It 100% happens that a non-trivial percentage of people on government benefits (unemployment, etc.) choose to stay on these benefits for their entire duration and only then pursue work opportunities.
edit: Edited to be a bit less pointed... A bit.
If you propose an alternative you're not throwing the baby out with the bathwater.
Some of the people who vote for Republicans oppose taxes. Just the existence of taxes at all. "Taxation is theft." If you want to help people, don't pay taxes to the government, give that money to a charity.
Others think that the US should have the strongest military in the world. An obviously incompatible idea, right? Good luck crowdfunding your fleet of aircraft carriers. But they're in the same party.
It's not an inconsistency because they're not the same people, even if they both vote for Republicans. The Republican party platform itself is incoherent. So is the Democratic party platform. They're not logically consistent sets of policies, they're just coalitions that evolved to gather enough votes to control the government half of the time.
But here's the secret. Nobody cares about things nobody wants. Both parties aren't just automatically the opposite of one another. It isn't that one of them is in opposition to Kill All Humans and the other one is in favor of that. For one of the parties to advance something, it has to be because there are enough people who think we should do that to make it worth a party's time to try to get those votes.
So screw the tribes. Convince the whole public that good ideas are good ideas and bad ideas are bad ideas. When there is consensus in the public there will be consensus in the parties.
If the party who already agrees with a good idea is in control at a given time then you take the win, but if you can't convince most of the country then it just gets reversed in a couple years and we can do better than that.
I was trying to convey that is a fact that some people do in fact do this.
It's not all people do this or all people do that. It 100% happens that some people on government benefits (unemployment, etc.) choose to stay on these benefits for their entire duration and then pursue work opportunities.
Yes. The goal is to reduce debt.
Even if you can pay cash, unless you have a huge cushion this could make a lot of sense (taking your savings to 0 is worse than taking your savings to n months of cost of living, including the loan payments).
I am lucky enough to be a cash buyer but I can still see the logic of using debt in this way.
A municipality can take on debt for a capital expenditure on a bridge or something that might reasonably be dismantled or replaced around the time the bond is paid off, for the same reason.
I would not consider either case to be irresponsible or economically irrational in principle. Especially as humans have finite life spans.
but to the point of bonds, a lot of bond measures are not for net economic benefit, but rather political gain (school funding bonds, for example, tend to fail to improve educational outcomes despite the political rhetoric).
example one: I have just been offered a good job that requires a car for commuting. I have no car and negligible other assets. it is rational to take out a loan for a reasonably priced car as long as I can comfortably make the payments on my new wages. if I later lose my job but am not upside-down on the loan, I am still better off than I started.
example two: I make $200k and have $500k in assets and I want to buy a $20k car. I could easily afford to buy the car outright by selling some assets, but then I would have to pay capital gains and forgo future appreciation. if the expected appreciation + capital gains tax on those assets is significantly higher than the loan interest over the full term, it is rational to finance the vehicle.
this is independent of whether I think UBI is a good idea in general (I do, actually).
Instead of (very) poorly fit conceptual models (this article), let's just look at the data.
From what I recall from other UBI pilots around the world, results have been mixed to outright disappointing.
https://www.kela.fi/web/en/news-archive/-/asset_publisher/lN...
It's unfortunate that politicians are often responsible for making this decision, because most of the time they fail to understand the economics, and make decisions that optimise their term in office or other selfish interests.
I live in South Africa. Last week the governing party made a resolution to "look into" UBI/basic grants. [0] Today, thousands of disabled and old people were queuing for their basic grants, in inhumane ways, during a pandemic + a South African virus variant that's more aggressive. The Minister in charge of social development, said "there's no money" [1].
Revisiting the engineering argument. It talks about fail-safes if the elevator stops working. This partly assumes that the elevator is maintained, because it not plunging is less of a concern than it being stuck for weeks at a time. If governments fulfilled their social duties, the overall cost of living would remain low, those in need of social services would regularly get them (without the strong need to pay people money). This reduces the bang-bang effect mentioned.
Productive labour forces also minimise the length of elevator failures. If we look at Maslow's Hierarchy of Needs, with a view of universally solving them; we'd be incentivised to optimise for food production (reduce hunger), providing basic + better shelter (reduce homelessness). Play fair with resources to improve safety (colonialisation, domination, creating wars, displacing people, increasing crime).
Doing a lot of these things, and addressing the ills of capitalism, become the fail-safes that diminish the preconditions that allow people to argue for basic income (where the recipient is an able-body who is not being productive by choice or circumstance).
[0] https://businesstech.co.za/news/finance/459738/government-to... [1] https://www.news24.com/news24/southafrica/news/auntie-theres...
The irony here is that his statement of whatever "will go wrong" applies to fault tolerant systems as well. You can't deploy redundant safety features without testing that it works.
Is UBI tested to a degree of verifiability that it will always work? No.
Also "testing" and "making arguments" is not strictly the case of engineering. These two things are the domain of science and while engineering can in many cases use "science" this is not what's going on in this article.
Engineering is mostly about using what we already know about in science and mathematics to solve problems.
This article neither uses Engineering, math or science to say anything. It's just a qualitative argument demonstrating an arbitrary point using a bunch of analogies to cast an illusion that this is an "engineering argument."
You need to run a scientific experiment with a control group or observe real world examples to make this argument at all "scientific" or "engineering" related. Until then it's just an opinion.
Whatever your political stance on this policy is... nothing substantial was said here. Just a regurgitation of things we all already know that may or may not be true.
So, UBI is just a fist step outside of this wasteful system to acknowledge that economy should serve and preserve the whole human species, and not the other way around.
In general you need to run something called "tests" to verify certain hypothesis. And even then you may not get a definitive answer given the complexity of the situation.
This is not "math" this is the scientific method.
>So, UBI is just a fist step outside of this wasteful system to acknowledge that economy should serve and preserve the whole human species, and not the other way around.
Communism was an alternative solution to UBI. In fact if you squint enough communism is UBI taken to the extreme, where all forms of income become UBI. Communism in theory works, but in practice there is no working example of a communist utopia in existence today.
So you want to turn all of society into some UBI utopia because it fits your political ideology? How about let's not be stupid and run some experiments first.