Sympathy for the Luddites
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The argument against basic income is the same as for IP laws. Without money or legal constructs to monetize their products, people have no incentives to work. Maybe we need better incentives for working and creating things.
If they do deserve compensation for their efforts, how do you do that aside from "capitalism"? In a capitalist society if you can make more things from less resources, you should (everything else being equal) reap higher profits. That's your compensation for your invention. In the absence of such a mechanism, what is the fair price for an invention? Who decides?
Everyone gets basic income, regardless of other income. It isn't taxed because taxing what the government gives just so it can redistribute again later is stupid.
If you earn additional income above the government provided basic income, you pay taxes on it, on a sliding scale. The more you make, the higher the rate you pay. The rich who work for their wealth are still rich, but the gaps between their wealth and the "poor" who only receive basic income is made smaller, and no matter what, everyone has enough to live.
As the basic income grows, more people will choose not to work. This is good as it reduces the supply of labor, thus increasing the wages of those who do work. But it also reduces the amount of income available for taxation, as this basic income isn't taxed. And as the tax base is reduced through a higher basic income, more money is needed to pay that basic income. That drives up the tax rate. It wouldn't be terribly difficult to find yourself in a situation where the math simply doesn't work.
This analysis also neglects the increase in prices that might accompany such a system. The higher the basic income the more likely you are to see an increase in prices that guts the effectiveness of the basic income.
This is, to an extent, self-controlling because people opting out of the labor pool decreases the size of the pool, increases the market-clearing price for labor, and increases the incentive to opt in to the labor pool.
The other thing is that it gives people more freedom to undertake speculative efforts (you still need to get funding to meet any costs of the effort itself, assuming that basic income isn't high enough to provide a surplus that can be used for that purpose, but you don't need as much savings to meet your own living expenses while undertaking a speculative effort.) Opting out of the conventional labor market doesn't necessarily mean opting out of work.
> This is good as it reduces the supply of labor, thus increasing the wages of those who do work. But it also reduces the amount of income available for taxation, as this basic income isn't taxed.
Its not clear that this is the case: sure, those who opt out of work will no longer be paying income taxes, but, as you note, wages for those who work are driven up by supply -- which also increases the total amount of income taxes paid by those who work. What effect this has in total is unpredictable; it seems intuitively likely that overall labor-derived income would drop, which would be expected to drop income tax revenues in a flat tax regime, but its also likely those dropping out would be on the lower end of the labor-derived income scale, and in a progressive tax system, that, combined with increased wages for workers, could still increase overall income tax revenues.
I addressed a very similar question in an earlier thread on topic (https://news.ycombinator.com/item?id=5658967). It's short and directly applicable enough I'll just copy:
Like any policy question, the answer is:
Ideally, the level will be set to what will produce the best outcome based on our current understanding of the world, where the precise parameters under which 'best' is determined is negotiated through a fair political and/or economic process.
In practice, the question is how we best approximate that. The shape of that should be informed by economics, and will likely depend on the particular country.
All of that said, I agree it's a key factor to look at when assessing a particular BI proposal; I don't think it's an unanswerable question.
In addition, many of the gains from technological advances are currently not reaped by the people who actually produce them, because technology is a very interlocked system, and monetization does not track it perfectly. For example, some technologies are produced by a chain involving basic-science research, applied-science research, engineering R&D, and product research, but the earlier parts of that chain are, in many cases, not really cut in on the profits. Sometimes that's because basic science/math is not patentable, partly b/c capturing every bit of value you create is in practice difficult, and partly because there is no good mechanism for capturing longer-term value, e.g. if you invent something today which produces a commercializable product in 30 years, any patent will have expired.
Sometimes that's a good thing: the general technological level increases, and technologies become essentially owned by humanity in general. But "owned by humanity in general" is a fairly nebulous concept, since they don't necessarily benefit people equally: the people best posed to benefit from the common heritage of previous generations' technological advances are those with sufficient wealth to utilize them, e.g. to build new technologies on them or factories to produce them. (Admittedly not always... whether new technologies tend to concentrate wealth or dissipate it varies and depends on a lot of factors.)
Dystopian fiction fairly often poses this thought experiment: Take a situation where all human food needs can eventually be produced by purely mechanized means, and that this has been the case for 100 or 200 years. Does this mean all human food needs are solved? Not if the land and robots are owned by a small subset of humans: in that case you have the strange result that a subset of humans has control over all the food, even though they neither produce the food by their own labor, nor invented the technology that produces the food.
Overall, I don't think the basic-income solution is a particularly radical one. If robots are doing an increasing amount of work, and some portion of today's robots are the result of our common ancestors' ingenuity, it's a really rough floor function on "what portion of robot labor should go to human X?". So everyone gets at least some smallish portion of the robots' output, or put differently, a smallish portion of the automation dividend. Then the rest can be allocated with regular market mechanisms. (One advantage from a pro-market position is that a basic income might remove political pressure for other kinds of social-support policies that interfere with markets more, like making it hard to fire people.)
ftp://ftp.bls.gov/pub/special.requests/ce/standard/2009/income.txt
http://www.census.gov/prod/2008pubs/h150-07.pdf
This doesn't stop large chunks of our society from opting out of work.
I see a benefit of BI, but I personally see a larger benefit of allowing open immigration (else you have large inequalities based on country of origin).
However, the ancient fact that one's existence as more than a serf required ownership of something did not change. The living standards of serfs simply improved dramatically. Those living standards still depended on the demand for labor being high and/or the supply low.
When technology reduces the demand for labor, while the supply increases due to population growth, it's easy to think that the economic sky is falling. But since none of us have lived in a pre-industrial revolution era, we are accustomed to thinking of wage-earning labor as an economic strategy that is more common than ownership of property, and just as valid. But historically it has been a specialized and risky economic strategy, and as the demand for labor-intensive physical products decreases it should not be surprising if those who are dependent on this economic strategy suffer. It may be tragic, but it's certainly not a new tragedy.
If you want long term economic security, own something.
So your solution is to tell labor that they should turn into capital? That is what you tell the millions of people who will be unable to find a job that pays a living wage?
Come on.
Labor is a market like any other. If it's too crowded and competitive, it's best to consider other options.
Progressive automation, it is at least arguable, makes that an essential part of any long-term solution. Labor as the key to income for the vast majority of the population may well not be a long-term viable option.
Of course, arguably, basic income / negative income tax is just an incredibly way of turning everyone into (at least, in part) capitalist living off what they own; what you own is a dividend-producing share of the commons. At a minimum, its a way of reducing the need to engage in wage labor to meet survival needs, and increasing the ability to direct efforts towards becoming a capitalist.
Perhaps that could even be a way to sell it to the populace so that it can't be immediately struck down as "worse than communism".
Couldn't agree more. Thinking that the only means to an income or wealth is labor a very limiting point of view. I'm optimistic about the trends toward entrepreneurialism and ownership, especially in technology. I think this is good for the economy and society overall.
What trends?
We are presently in a situation where our particular skills (which, incidentally, society has poured some resources into developing) are capable of creating things worth owning more efficiently than it can be automated. That is outstanding, but it's not necessarily sustainable.
If labor can't produce value, then people need to start out with something else.
Ah, let me commend you on your effective and nuanced translation of the French original, "Le peuple n'a pas de pain ? Qu'il mange de la brioche." Very idiomatic.
I never really understood what Buckminster Fuller was trying to get across in his Operating Manual for Spaceship Earth, until recently. The amazing thing is he addressed these concerns quite presciently in the 1960s--he saw this coming.
The only advice I can give is always be learning and adapting and apply it in creative and entrepreneurial ways.
Skills like "reading" and "writing" were once the province of highly-educated specialists. They became mainstream when the economic incentives made them critical to have. People learn what they need to learn -- especially if they start as children.
It's entirely appropriate to worry about how we can help people during this painful transition. But we need to be careful not to turn this temporary problem into a permanent one by creating cultures of dependence.
LOL, no. The amount AI would have to advance from its current state to "very close to human-level intelligence" would have to be orders of magnitude more than it has evolved from its initial state to its present state (over the last 50-60 years). Pray tell, what technologies can you name that evolved faster in their second half-century than their first?
Does that mean we definitely won't have human-scale AI in 50 years? No, because revolutions are impossible to predict. What it does mean, however, is that human-scale AI is not the predictable outcome of existing evolutionary trends. Indeed, developments in AI more or less stalled out in the 1980's, most of what we've seen to date is new applications of techniques pioneered decades ago.
To use an analogy, what do you think CPU clockspeeds will be 10 years from now? It's possible that some breakthrough will happen and we'll have 20 GHz processors, but projecting existing trends suggests that the increase in clockspeeds from 2013 to 2023 will be a lesser percentage than what we saw from 1993 to 2003.
I don't know if AI is blossoming right now, but all the interesting things I've seen in the field (Watson, self-driving cars) are not theoretical breakthroughs, but rather new applications. I don't think the technology in self-driving cars gets us fundamentally closer to human-scale AI.
Mass literacy is very much the result of concerted efforts by the state to provide universal education -- it didn't just come into being.
Moreover, the point of the article is that we are in a time where education, whether self- or school-directed, can't solve the problem, because the productivity benefits of technology are going almost entirely to those with capital, rather than labor, i.e., the people doing the learning. You can argue with whether that is the case, but be aware that when you say "people will learn what they need to learn," you are actually stating the argument that the OP is already rebutting.
This isn't necessarily accurate. The U.S. was a highly literate society before the advent of state sponsored, public education. State sponsored education did indeed increase the literacy rate because many states forced parents to send children to school.
Consider what's required to start a new business today. You need less cash than ever before. The limiting factor is most definitely skill. Not just obvious specialist skills, but the basic mindset that takes you from "just punching the clock" to "seeking opportunities to help".
One reason wealth is concentrating is that the vast majority of people are woefully unskilled in the areas that matter now. This creates big pools of labor that have no leverage, which are naturally easy to exploit.
So the existence of growing wealth inequality is not proof that education doesn't matter. It's just as plausible that most people are mis-educated. And when you look at the original intent of our education systems, they were deliberately designed to produce obedient factory workers who could reliably follow simple directions. Which is now an anti-skill.
Imagine a world where your latte is served by a machine, your taxi drives itself, when you had surgery the guy operating the waldoes was working from his office in Mumbai, you do your own lawyering with the help of Watson running on your iPad, the malls are self service, and the cops are made by Boston Dynamics.
Now imagine being sacked because your boss has a Watson too, trying to get a job - any job, and realizing that that the system doesn't need you - you are underqualified for the purely human jobs that remain, and your minimum living wage (covering rent, food, utilities and no slack) costs more than a burger flipping robot's amortized installation expense.
Massive automation absolutely does not imply massive involuntary unemployment. We've actually been through this before. We used to require 90% of the population to grow food. Now it's less than 1%. The rest didn't end up unemployed -- they ended up involved in entire industries and economies that didn't even exist before.
Most of us have jobs that would sound completely fanciful to a farmer circa 1800. He couldn't have remotely guessed how most people would spend their time and earn a living in 2013. The same is true now for us -- I doubt anyone here could explain what most people in 2050 will be doing with their time.
But the existence proof for there being useful work to do is the fact that not everyone has everything they could possibly want. So long as there are unmet needs and wants, there are necessarily opportunities for people to work together toward satisfying those needs.
Either the poor can afford the outputs of the robotic factories, in which case they will have a high standard of living, or the poor can't afford the outputs of the robotic factories, in which case they constitute a large market in which the robots are not competitive, not relevant, and unable to put people out of work.
If it's not transient, beating the drums of "no culture of dependence!" will send billions of people to starvation.
If the problem is transient, culture of dependence could indeed undermine further progress, or more likely cause progress to slow down as fewer people will be pushing the envelope.
Which mistake seems worse to you?
The worst case is that increasingly large percentages of the human population cannot perform any task that a computer can't do better and cheaper. It's fairly obvious. I admire your optimism though.
Krugman then proposes a solution from an entirely opposite viewpoint: that the purpose of work is to produce useful things, and if the constant disruption of jobs is the cost of efficiency, we should just give the affected a handout to provide for their needs.
But because the guaranteed income doesn't solve the Luddite's complaint, it misses the point entirely.
“How are those men, thus thrown out of employ to provide for their families?” asked the petitioners.
They semi-accurately predict a future where employment is sufficiently fluid that nobody is securely enough situated at a job that they can train their children into it.
Of course, the good comes from not making them suffer, keeping things calm, having a sfety, getting an overall civilized society out of the deal. But that's not the kind of benefit implicit on your phrase (or in the Ford's original).
Oh, and yes, there is one benefit that is not dependent on the price you pay for it. It'll make it possible for lots of people - that otherwise would just starve - to work into making the world a better place (for profit or not). But again, it's at least not obvious that you mean this, and it's obvious that the original didn't.
If I'm starting a business, it does me a tremendous amount of good for my customers to have money enough.
An important point about the Luddites is that while expensive weavers were put out of work by machines, those machines functioned by employing greater numbers of (vastly lower paid) unskilled immigrants.
If you put a 150k salary expert out of work by creating a piece of technology that requires two 70k workers, you still profit.
I think you forgot to add "in the current economical/social system". The technology never hurts anyone objectively, it always helps. It's us, humans, who decide that someone should be punished for the technological progress. ("You've been replaced by a machine, go eat cake. To celebrate our newly redoubled productivity, we'll let you starve.")
What he's arguing is that we should pay people not to work the same way we pay farmers not to grow corn, to ensure that the price is kept high enough for those who do engage in working/farming to earn the "right" amount of money.
It's a noble goal to be sure, to ensure that everyone can feed their families and live a comfortable-enough life and such. I don't argue with his intentions one iota.
The problem for Krugman is that taxing is his hammer and every problem in the world looks like a nail. It's far easier to exhort "we must do something!" and to use the force of law to do SOMETHING than to figure out a better solution to a very real problem.
I am of course in some ways a hypocrite since I can't think of any solutions myself off the top of my head.
It's more an issue of signaling. People won't go through the pain necessary to learn a new skill if there's no incentive. High wages are encouragements to endure the discomfort inherent (for most) in change necessary for the rebalancing of the labor force. Low wages signal that the skill is not in high demand (relative to supply) and that there may be other more opportunities more attractive.
The negative income tax reduces the incentive to move from one segment of the labor force to another and could be analogous to a tariff, in a way.
The negative income tax also removes the friction that prevents people from being able to move from one segment of the labor force to another, which is the need to continue working where you have the skills in order to survive, which reduces the opportunity to invest time and energy in learning new skills.
Which of these forces would be most dominant depends on details of implementation, but what is clear is that the effect isn't one sided.
Also, if properly calibrated, a negative income tax can (assuming diminishing marginal utility) actually create incentives for work. A basic income never does [1].
I don't understand your claim that there is an "opportunity cost to society". Could you explain in a little more detail?
[1] See this previous HN discussion where I do the calculations. https://news.ycombinator.com/item?id=1926061
Actually, no.
Basic income isn't pay not to work, its pay independent of work (or anything else). It is very different from paying people not to work, in that there is always a positive reward for earning money through work (whether wage labor or capital.)
Its essentially making everyone a stock-holder in the commons, and issuing periodic dividends.
Let's say I make a modest wage, $15/hr. For every hour of work I do, I earn about $12 post-tax. My income is y=12x. $24k per year working a normal 40 hour week. Okay.
Now let's say I make the same wage but I get a guaranteed $20k tax-free. For every hour I work, I earn $12 post-tax. My income looks like y=12x+20000. 44k/year if I work a regular 40 hour week. But I could also work only 20 hours a week and still make $32k/year, doubling my effective wages. I could work 10 hours a week and bring in $26k/year. Or work a single hour and make an effective hourly rate of $22,012 in that one hour.
People are absolutely smart enough to see how that works and many of them will choose not to work at all. Yeah, it might be true that you don't live anywhere near as fun of a lifestyle on $20k/year as $44k/year but that's only if you value spending money. There are plenty of people who would be content to contribute nothing TO society but still collect their checks FROM society. That kind of asymmetry is worrisome to me.
Pretty much every set of real policies in the world does that. So, what?
> Now let's say I make the same wage but I get a guaranteed $20k tax-free. For every hour I work, I earn $12 post-tax. My income looks like y=12x+20000. 44k/year if I work a regular 40 hour week. But I could also work only 20 hours a week and still make $32k/year, doubling my effective wages. I could work 10 hours a week and bring in $26k/year. Or work a single hour and make an effective hourly rate of $22,012 in that one hour.
Which doesn't really matter. Total income over hours worked isn't what measures the incentive to work, the marginal utility (not the same as dollar amount, to be sure, as income experiences diminishing marginal utility) of the next dollar is what sets the incentive. So, sure, the incentive is less in a system with basic income compared to one otherwise identical without it -- but nowhere near what you are portraying.
> People are absolutely smart enough to see how that works and many of them will choose not to work at all.
Sure, some will, but to an extent that's the point; people are going to be without wage labor one way or another.
> Yeah, it might be true that you don't live anywhere near as fun of a lifestyle on $20k/year as $44k/year but that's only if you value spending money.
You mean, if you value any of the things for which money can be exchanged. Which, pretty demonstrably, most people do.
Would you like to try Ed's Patent Elixir? I promise it won't kill you. It's from a little guy, just tryin' to compete.
And, no, no free-market solution solves this without people fucking dying. Back to mises.org with this silliness, please.
Can we please just let it be just this one article, this time?