In defense of a Basic Income (Response to McArdle)

[Mr_Reasonable]

@phyllo

You’re going to take away $3000 from somebody who worked to earn it and you are going to give it to someone else

Most people who are really paying shit tons of taxes aren’t earning their money in the sense that we normally think of when we think of what we mean when we say “earn”.

If I have a huge tax bill because my company made a shit ton of cash, but then my company only made that shit ton of cash by hiring 1000 people and paying them 7 bucks an hour for their work…then…I mean…you can go ahead and put 2 and 2 together yourself.

No one’s asking the coal miners and the lumberjacks and the restaurant and retail employees who work 50 hours a week to pick up the tab for welfare.

[CelineK]

@Carleas

A couple years ago, Megan McArdle summed up a debate she’d been a part of with a short post on the problems with a Basic Income Guarantee (BIG). Here, I’ll lay out responses to each of her four criticisms.
(NOTE: in the interest of space, I won’t quote her whole argument for each point, and instead I’ll pull what I think is representative or summary language from them. One useful response to this post would be to point out if I am misinterpreting her argument or responding to a straw version of it.)

@Megan McArdle

Cost: …[Z]eroing out our current income security system wouldn’t provide much of a basic income… Getting rid of all of our spending on welfare and so forth would be enough to give each of those people less than $3,000 a year. For a lot of poor people, that’s considerably less than what they’re getting from the government right now.

First, I think this calculation is off. McArdle only considers spending on “income security”, but the programs that could be replaced with a BIG could be much broader. Social Security ($1.3 trillion), disability ($200 billion), agricultural subsidies ($20 billion), and likely many other large government programs could be eliminated or reduced and replaced by a BIG (that “or reduced” is important: any program whose justifications include the well-being of workers should be reduced commensurate to the degree that that justification supports the program; if the well-being of family farmers is part of the justification for agricultural subsidies, then agricultural subsidies will be less necessary if we have a BIG).

However, such calculations might not even be necessary: $3000 a year is not a trivial sum. Globally, $3,000 dollars a year is near the median individual income. Guaranteeing that every person in a country is above the median globally is an absurd achievement. Even in the US, for the median household it would be 6% raise, a not insignificant change. But perhaps the best way to look at it is this: every citizen would get enough money to eat a nutritious meal every day of the year.

Finally, to the point that it’s “less than what [a lot of poor people are] getting from the government right now”, it’s not a 1-to-1 comparison. McArdle treats $1 dollar of food stamps as $1 in value, but any first year econ student can tell you that their values aren’t equivalent. Giving people cash is more valuable than giving them vouchers or in-kind services, because cash can be used on whatever an individual values most. You can’t save up food stamps to start a business. You can’t buy stocks with services. You can’t invest in yourself to the same degree with vouchers and in-kind services. And you have to spend vouchers and in-kind services where you’re told, so that most of your spending goes right back out of poor communities. Cash lingers, and allows for trade and development within communities, which tends to break the cycle of poverty.

@Megan McArdle

Reciprocity: … How can you say that the affluent have an obligation to give a considerable portion of their income to their fellow citizens, precisely in order to free said fellow citizens from any obligation to the people who are paying their bills?

McArdle touches on the response to this when she considers “trust fund babies”, but I think she takes that point too literally. The better statement of the point is not “trust fund babies”, but “the average middle class American”, who has non-reciprocal benefits from their family and social network throughout their lives. A BIG just adds in the same safety net already provided to anyone who’s family makes median wage. Moreover, people who grow up in communities of people making median wage or better have plenty of non-reciprocated benefits: better schools, better services within closer distance, less crime, etc.

And while the focus of BIG is frequently on the individuals receiving the BIG, many of the benefits and justifications for it are in externalities. A wealth transfer from top to bottom is a net increase in the value of the currency, as people who might have bought a third car instead give money to someone who can then buy a first (and so contribute better to society). A BIG will decrease crime, it will stimulate the economies of the most depressed areas, it will bring into the economy through opportunity many people who would otherwise be excluded, increasing diversity and thus likely the speed of innovation and the richness of culture. Those are reciprocal benefits, not paid directly by BIG recipients, but nonetheless reaped by those funding it.

@Megan McArdle

Politics: As I pointed out recently, any sort of guaranteed basic income means ending immigration from poor countries… There is no way that we are going to admit people to this country in order to hand them, and all of their descendants, a check for a thousand or two every month…

…Some people would make bad decisions with their cash, and then we would have to bring back various programs to help the people who make those bad decisions. There’s also the issue of people who don’t make bad decisions but simply have greater needs: the disabled, the mentally ill, those with cognitive disabilities and so forth. A guaranteed basic income instead of a welfare state might be attractive, but a guaranteed basic income on top of a welfare state presents a lot of problems, not least that it would nearly double everyone’s tax bill.

To immigration: first, I think the point is a dodge. It’s effectively arguing that McArdle isn’t convinced because not enough people are convinced, which is empty. As it stands, not enough people support a BIG to replace other government programs with it, that’s clear. What I take the goal of the argument to be at this stage is to convince the thought leaders, intellectuals, and influencers that it’s a good idea, so that they can convince the body politic.

And on immigration, a BIG has a lot going for it. First, recall again that we aren’t necessarily talking about “a thousand or two every month.” A $4000 BIG would be a significant improvement, could replace a lot of programs, and would be a much easier sell. Moreover, there are great security benefits to a BIG. Immigrants would have to make themselves known in order to be eligible for it, so it would encourage honest immigrants looking for a better life to come forward, increasing the presumption of guilt on anyone who remains undeclared.

Otherwise, the argument really boils down to ones stance on immigration. If you think that immigration is good for the country, good for the economy, or that immigration is a right, you will likely not have any problem allowing immigrants and come and participate fully in a society, however it is structured. If instead you see immigrants as a drain or as a threat to “natives”, you will likely oppose it regardless of how society is structured. Immigrants use the roads, no matter how much we spend to repair them. They are protected by police, no matter what those police are paid. If a BIG makes things better, there’s no reason to deny it to immigrants, and if immigrants add value, they will still add value through the use of their BIG to pursue their happiness.

In-kind services: With judicious elimination of in-kind programs, we can avoid many of these problems. First, many programs that support people who have made bad decisions in the past would be unnecessary: the BIG is not a one-off payment, it’s a continuing payments, and misspending last month’s check does not need to affect next month’s. Also, it should be noted that substance abuse is closely associated with economic hardship. Given a more fulfilling life, many who might otherwise waste away in a bottle would choose otherwise.

Other programs could be reduced without being eliminated. Some people with disability are merely subsidized, and such subsidies could be replaced by the BIG. Moreover, private services would develop to cater to people who might not otherwise be worth building a business around, because suddenly they have available resources to spend on what they value most.

And of course, some services would always remain. Services for those with severe disabilities; legal services; child welfare services. But criticizing BIG on the basis that it can’t replace every program is an absurd standard that no program can meet. If BIG can replace welfare and improve lives in the process, we should do it, even if it only means giving people $500 dollars a year and leaving every other program intact.

@Megan McArdle

Work: If you make it possible for some people to live without working, some people will live without working. That decision will be rational in the short term but disastrous in the long term… Discouraging people from making the short-term sacrifices necessary to gain a long-term foothold in the job market is not good social policy.

First, again, McArdle over-estimates the level of comfort that a properly calibrated BIG will provide. It is possible to live on $4000 a year, and some people live. But many more people will use that to supplement rather than replace their other income. And, they’ll use it to fill gaps in employment, so that they can transition to better and more fulfilling jobs, or to gain additional training to be able to contribute more and better.

In addition, an influx of money into economically depressed areas means more jobs available to those most likely to drop out otherwise. Shoveling steps and walkways door to door, babysitting, car washes, these are jobs frequently available in wealthier areas that are unavailable to those whose neighbors are all as poor and desperate as themselves. Or, consider a corner store in a poor neighborhood, surrounded by a populace that can’t afford to shop there. An influx of money into the area means more business, hiring someone to stock shelves or wash the floor. The commensurate reduction in crime means less spending on security, freeing up more capital to hire, to develop, to expand and innovate.

Of course, some people will check out. But few who do would have been long-term employed otherwise. The marginal person influenced to drop out by a modest BIG is a vanishingly small number, and to weigh that more heavily than the economic gains, especially in the area of work, is myopic.

To sum up, I’ve taken the easy route of criticizing someone else’s argument rather than make an argument of my own. But in doing so, I think I’ve provided several compelling arguments in favor of a BIG in some form and at some level.

Hello there,

I dont think money will ever mean anything when robotics and mega computers will fully replace man, from the surgeon, the factory worker to the cubicle job. Money and knowledge become kinda incompatible at some point. More knowledge eventually turns the quest for materialism into a mirage.

[Carleas]

Money isn’t only about materialism, it’s also about exchange: trading a good for a dollar tells us something about the value of the good relative to other goods. And because it’s about exchange, it creates a system that quickly and efficiently aggregates information about the preference of everyone participating in the exchanges. It’s a form of voting, and will remain useful even in a post-scarcity economy, though I think something like a Basic Income would be necessary to be just and to maximize participation.

[James_S_Saint]

@CelineK

I dont think money will ever mean anything when robotics and mega computers will fully replace man, from the surgeon, the factory worker to the cubicle job. Money and knowledge become kinda incompatible at some point. More knowledge eventually turns the quest for materialism into a mirage.

Actually and perhaps interestingly, machines are already “trading with” and “employing” each other based upon money. They don’t call it “money”. They call it “statistical usefulness”. Machines choose which other machines to employ based upon their “credit history” (historical success ratio). More advanced systems choose “who to work for” or which other machine to respond to, based upon the machines own assessed needs. Your PC is already doing that to a degree right now.

[Jakob]

Turd/Omar, I agree that Bama should not have said that; however I am sure I dont know that it was an actual mistake. Backtracking; A lot has changed in Lybias financial word (extremely wealthy nation) that is literally never talked about officially, same goes for all Nato politics. Basically I dont tend to take things as much at face value, especially not in geostrategy. ISIS represents a couple of things for Nato interests, most of all a handy powervacuum. It cant have eluded you that the group never mentions Israel. Why is that? Im on the side of Israel so I wont divulge any strategies I perceive but on the surface we can be pretty clear that if they were to harm an Israeli publically, they would find themselves under burning skies in a matter of hours at gigantic civilian cost. Isis being openly backed by a bunch of powerful ‘friendly’ sunni states I should not have to mention either, is programmed to avoid causing WW3. Israel wont hesitate to set it off if triggered. It would likely play to their advantage in the end. They are one of the very few nations in this theatre that play by the ruthless ancient calculations and dont have to worry about public consensus. All its enemies know this. For example Iran is much more modern in its calculations as it has a delicate electoral balance to keep. The country is divided 50 50 between backward and secularized types. If war were to loom the regime might fall. In Israel the reverse is the case.

Russia would love to carpet raid the group but is modern as well in its political strategies, mwaning again respecting a fickle popular basis, and can not interfere too much, it is playing the European game, having just won the Ukraine standoff it knows to abide its time and not to risk what it does not absolutely need to risk (such as over Crimea, integral part of its military architecture). It also knows that it doesnt know precisely and for a country this big with this much border and so many powerful bordering ootential enemies (EU, Turkey, Iran, Paki-Afghanistan, China, US (Alaska) It will always choose the small underground game. It counts on surviving this by clever situation-by-situation play and not lose too much economic range -that is the bit I agree with.

Whatever very clearly ‘doesnt make sense’ in light of thenassumed will to bring stability to the region is part of a dtrategy to cause chaos and make the muslim world into a plasmic state ready for total transformation. The aim I see is very simple, I leave it up to you to either or not dare to think it as I sure as hell wont speak it, (it is precisely what is never mentioned, it is very naive yo think any strategist would even so much as suggest his true aim) and Russia is trying to figure out a way to benefit from that aim rather than get isolated.

Finally, what Obamas motivations are is truly beyond me as I am not at all sure how the alliances within Nato run, it is only clear that that is the sort of stuff I dont want to know - the sort of knowledge that is the opposite of power.

Im just watching it unfold now. In any case we now all know that WWI never ended.

[CelineK]

@Carleas

Money isn’t only about materialism, it’s also about exchange: trading a good for a dollar tells us something about the value of the good relative to other goods. And because it’s about exchange, it creates a system that quickly and efficiently aggregates information about the preference of everyone participating in the exchanges. It’s a form of voting, and will remain useful even in a post-scarcity economy, though I think something like a Basic Income would be necessary to be just and to maximize participation.

hey there, I do get what you mean and am very well versed in economics. I am not looking at what money is or is not, but if the current trends are any indication, we can rightfully assess that corporations will always seek to optimize returns and end up robotizing and computerizing as much as they can. Eventually there will be no jobs out there and it is a mere 20 years or so ahead. I am even not mentioning AI that will replace politicians and decision makers.

Maybe it is time to consider abandoning the concept of money and give more attention to our passions?

Okay I admit that I am precisely writing about the topic and expect to have my thesis ready by next March and which is about a Money Free Society,

[Carleas]

@CelineK

Maybe it is time to consider abandoning the concept of money and give more attention to our passions?

I agree with your description of the problem, I made similar a prediction here:

@I

At some points, some humans will just get in the way of projects already under way. This seems certain if automation continues. And it presents a big problem for policy. What do we do with such workers? Do we just watch unemployment increase? Do we create make-work jobs to keep them busy? Do we provide sufficient welfare to keep them alive? I don’t see most modern policy approaches as particularly well poised to deal with this problem, but it’s one we would be wise to consider before it presents itself.

I don’t agree, however, with your solution. Because of the information-aggregating nature of money, it will remain a vital part of a society even when automation takes over production. Humans will still need to collectively define what is valuable: should we set the machines to building a colony on Mars, or just more and better virtual reality systems on earth? In my view, a Basic Income solves the problem long term: whatever percentage of GDP is attributable to robots, pay that out as Basic Income and let people indicate their values through their spending decisions.

As I understand money-free societies, the effect would be similar, but it would retain a valuable tool that humanity has developed. The market will probably always be the largest, most parallel computer we can build, and even automated governance could be fed by the data it crunches.

I will be interested to see your thesis when it’s done. Have you read any of the discussion of the Star Trek economy that was percolating in the econ blogosphere not too long ago? It got into very interesting ruminations about the operation of a post-scarcity economy. Such an economy often looks money-free, but I think the case is compelling that there’s still a place for money.