What are some of the biggest problems with a guaranteed annual income?

by on November 14, 2013 at 7:06 am in Economics, Political Science, Uncategorized | Permalink

Maybe this isn’t the biggest problem, but it’s been my worry as of late.  Must a guaranteed income truly be unconditional?  Might there be circumstances when we would want to pay some individuals more than others?  Many critics for instance worry that a guaranteed income would excessively reduce the incentive to work.  So it might be proposed that the payment be somewhat higher if low income individuals go get a job.  That also will make the system more financially sustainable.  But wait — that’s the Earned Income Tax Credit, albeit with modifications.

Might we also wish to pay more to some individuals with disabilities, perhaps say to help them afford expensive wheelchairs?  Maybe so.  But wait — that’s called disability insurance (modified, again) and it is run through the Social Security Administration.

As long as we are moving toward more cash transfers, why don’t we substitute cash transfers for some or all of Medicare and Medicaid health insurance coverage benefits, especially for lower-value ailments?  But then we are paying more cash to the sick individuals.  That doesn’t have to be a mistake, but it does mean that an initially simple, “dogmatic” payment scheme now has multiplied into a rather complex form of social welfare assistance, contingent on just about every relevant factor one might care to cite.

You can see the issue.  Whether on grounds of justice, practicality, or just public choice considerations (“you can keep your current welfare payments if you like them”), we should not expect everyone to be paid the same under a guaranteed annual income.  And with enough tweaks, this version of the guaranteed income suddenly starts resembling…the welfare state, albeit the welfare state plus.  Unemployment insurance benefits wouldn’t end.  More people could get on disability, and without those pesky judges asking so many questions.

The potential problem is that we inherit and in some ways magnify the problems with the current welfare state, rather than doing away with those problems.

Or we could be truly dogmatic about it, and simply pay each person the same amount of money no matter what.  But then do we take away the various forms of in-kind aid which are already in place?  And what about all those former EITC recipients, whose incentive to work is now lower than ever?

Part of the original appeal of the guaranteed income idea, especially as expressed by Milton Friedman, is that it would substitute for welfare programs and bureaucracies, not all of which work well.  On first hearing, the guaranteed income proposal sounds quite “clean.”  In reality, that is unlikely to be the case.

And once we recognize the proposal may be “the current welfare state plus some extra and longer-term payments,” one has to ask whether this is really what we had in mind in the first place.  It seems that if you wanted to reform current programs and also pay people more (debatable, of course), there may be better and easier ways of doing that than reforms which have to fit under the umbrella of “a guaranteed annual income.”

I still think the core idea is a good one, but perhaps “what the core idea is” is less pinned down than I might have wished.

Here is again Annie Lowrey’s very useful piece, which provides an overview of current proposals.

copycat042 November 14, 2013 at 7:25 am

Want to know what’s wrong with a policy? Ask, “what if everyone abused it?”
People respond to incentives. The incentive in any wealth transfer scheme is to get the most while working the least. This reduces the total wealth available to “society”, making the original problem worse. Conversely, reducing involuntary wealth transfer gives incentive for people to find ways to produce. Those who are unable to do so (a very small minority) can be helped by private charities, which are more fully funded, by the increased availability of wealth, which was formerly consumed by those who were merely unwilling to produce.

Hoover November 14, 2013 at 7:36 am

“The incentive in any wealth transfer scheme is to get the most while working the least.”

That’s not the only incentive. People do also have the urge to provide for themselves and their families.

“a very small minority are unable to do so”.

Unless you regard current welfare schemes as creating the problem of worklessness, then a large number of people are unable to do so.

People are suddenly talking about a basic income because they’ve realised that there’s simply less work to do. Basic income proposals aren’t simply a shuffling around of welfare, they’re an attempt to respond to a profound reality: working hours are falling, particularly for lower skilled people. The signs are everywhere: a rapid increase in uptake of found vouchers in the US, the spread of zero hours contracts in the UK, and of course the bald statistic that average annual hours worked are falling everywhere in the developed world.

If you don’t like the idea of a basic income, what are you going to do about lack of work?

1234 November 14, 2013 at 1:06 pm
JoseLuis November 28, 2013 at 10:30 am

Sorry but this time automation is progressing at an exponential rate.
http://www.wilsonquarterly.com/essays/automation-anxiety

anonymousrepublican November 15, 2013 at 12:00 pm

Those people can move to Mexico where they can lead a better life. What do you tell people still forced to do the day to day drudge jobs? Whos going to flip burgers when Government will always pay more? Flipping burgers will never be a middoe class occupation.

Ryan123 November 16, 2013 at 10:10 pm

“Flipping burgers” won’t exist as an occupation within the next 50 years. Japan has already developed automated fast food restaurants.

Neal November 14, 2013 at 7:36 am

Incentives are on the margin. Reasoning about any total quantity when discussing “incentives” is wrong.

Marcos November 14, 2013 at 11:28 am

Yes, incentives are on the margin. Just don’t forget that the marginal value of income mostly* reduces when the total increases (like nearly anything else). The difference between $0 and $30 to buy food for your family is much bigger than the difference between $30 and $60, for example.

Anyway, no, I’m not disagreeing.

* That is, except when it increases :)

Jared November 14, 2013 at 12:17 pm

“Those who are unable to do so (a very small minority) can be helped by private charities…”

Why wouldn’t transfers from private charities be abused in much the same way until their effectiveness is minimized? You don’t think you’ve ever come across someone who accentuated their plight to gain your pocket change?

It’s astonishing how little people are willing to actually try and challenge their thinking about the incentives that face the poor or benefits receiving. Copycat’s hopelessly static line of thinking is exactly what causes the benefits trap in the first place. You poor people need help, but I can’t bother to worry to intimately about you. Take this hard cut-off or, if I’m feeling generous, a mild sliding scale as the maximum effort I’m willing to put into thinking about the transition between aid granting and aid denying. Lazy heuristics breed poverty.

A GBI (or hopefully NIT) eliminates the problem of transitioning from receiving benefits to having all those benefits taken away as soon as you get a dollar over the poverty line. Removing that disincentive is huge. I would be willing to bet that it would be as big a force, if not bigger, than the force of people choosing to be permanently unemployed.

Tyler’s worries about politics still getting us into targeted welfare are misplaced as well. An NIT should be functionally seen as replacing unemployment benefits. The greatest inefficiencies created by all the other programs can be dealt with by actually creating a plan for transition out of them. It’s so hard to cut benefits these days because the one side in American politics that’s actually interested in considering welfare benefits as anything other than Bolshevism, understands that terminating someone’s targeted benefits leaves them completely on their own. With a minimum income through an NIT there to be an actual safety net, the conversation over managing other benefits will be completely changed.

Dan November 14, 2013 at 4:29 pm

“Those who are unable to do so (a very small minority) can be helped by private charities…”

Those who are unable to work includes not only those who are physically unable to work, but also those who are unable to work because there are not enough jobs. If the unemployment rate rises to 10, 15, 20%, a large number of people who would otherwise be physically able to work become unable to work, through no fault of their own, because the unemployment rate is high. Any admonition that they should simply try harder to find a job or work harder is irrelevant. Unless the economy is at full employment, each person who finds a job displaces another person who is looking for a job, with 0 net effect on the unemployment rate and the economy. There can be no blame to the individuals in this case, and therefore any payment to them cannot possibly have a negative effect on the job market or the economy.

anonymousrepublican November 15, 2013 at 12:03 pm

Too bad for them. Let them move to a country with more jobs.

JoseLuis November 28, 2013 at 11:28 am

Besides the fact that it is quite difficult to emigrate, it is increasingly becoming a worldwide problem.

Brett November 14, 2013 at 3:48 pm

Those who are unable to do so (a very small minority) can be helped by private charities, which are more fully funded, by the increased availability of wealth, –

Sorry, couldn’t keep a straight face on this one anymore. Private charities and churches couldn’t handle the burden the last time around at the end of the 19th century/early 20th century. They’re not going to handle it now, and they’ve even said as much themselves (particularly the food banks).

A.B Prosper November 14, 2013 at 4:44 pm

No they can’t and frankly I don’t want the instability caused by widespread hunger and poverty.

Now as to a GMI, the easy way to do this is to combine it with a progressive income tax on all income above GMI. Its pretty simple to administer . You can even roll in minimum wage relief if you like. If people are guaranteed X income and a bsuiness can get them to work for say $3 an hour good on them

It won’t however leave much of anything for well anything else and its not compatible with much immigration. We could say allow an immigrant to get benefits after 18 years and if we were foolish enough to do an amenesty,allow the clock to start at zero and maybe succeeed but the moral hazard from all that cheap labor is high.

Also the world would have undergo a significant realignment if the US were to do this. No Pax Americana would be possible as the costs or inflation from money printing would make it prohibitive, We could not afford the great society and Vietnam (that and oil created stagflation) and the eocnomy worked better. Basically every dime would be on social credit and little else.

Another big issue, the supply of cheap reliable labor would dry up. Many low wage types would simply never work This isn’t bad on its face but it would require some changes in business models or wider use of automation and come with its own issues,

A last option would be to tie social credit to not having kids or require being married to get it,. This would cause howls on the left and there are big policy implications but it would actually resolve the problem of poverty. It might also provokle instability and in the long run if sucessful might end up in a pretty serious propulation decline. I can’t see any institution outsde of a Green types wanting that

Jay November 15, 2013 at 10:13 am

The poverty rate since the Great Society and the War on Poverty government programs is roughly the same at ~15%, are you saying that the current regiment is working or that nothing else is different about the late 19th and early 20th century than now?

Oakchair November 15, 2013 at 5:58 pm

Not to mention that administration costs for private charities runs around 30% while for welfare or government tax credits its only around 5%. Meaning Government aid to the poor is around 25% more efficient then charities.
Meaning anyone saying “rely on charity” is advocating we use an institution/policy that is wastes a lot more money then government ones.

Hoover November 14, 2013 at 7:28 am

Is there not a moral issue too?

Why *should* some people who don’t produce anything of value receive money from people who do produce things of value?

My prediction is that a guaranteed income would be hard to implement in the US thanks to this question, and easier to implement in Europe.

I’m unable to make solid predictions about other areas of the world. I know that the muslim world has a strong tradition of charity. What about Asia?

Rahul November 14, 2013 at 8:28 am

Agreed but some people’s morality might ask another question: “How much should I watch those worse off than me suffer without helping.”

All I’m saying is, the answers are complicated.

Edward Burke November 14, 2013 at 9:51 am

And of course yet another someone’s morality might ask still other questions: “Would a guaranteed income raise or lower suicide rates and homicide rates?” “What would be the status of divorce and property settlements in a domain of guaranteed incomes?” “Would inheritance be abolished under a regime of guaranteed incomes for each and all?” “What become of waste and frugality in a regime of guaranteed incomes?” “How would ‘status’ be construed in a realm of guaranteed incomes?”

And the lists go on . . . .

Cliff November 14, 2013 at 10:22 am

Nobody is asked to watch without helping…

whatever November 14, 2013 at 3:07 pm

“How much should I watch those worse off than me suffer without helping.”

If your morality makes you ask this question, good for you. You should ask the question and answer it for yourself.

The problem is really when you ask me to do something your morality asks of you

James Pope November 15, 2013 at 4:26 am

Why? That’s what societies and democracies are all about. No one’s morality operates in a vacuum, just as an economy doesn’t exist for an individual.

Jay November 15, 2013 at 10:21 am

Not sure what my principles of right and wrong have to do with anyone else, only totalitarian regimes force a collective morality, democracies are for societies that have the privilege to disagree on such things. Not sure what the economy non sequitur is all about.

Oakchair November 15, 2013 at 6:05 pm

—–only totalitarian regimes force a collective morality,

Under your definition every country in the advance world is a totalitarian regime.
Corporations force upon its workers contractors and co-corporations their collective morality of “profits first” etc etc, so every business is a totalitarian regime.
We live in a society were every action of ours effects others and were everything we produce is produced via help from other in our society; meaning everyone should have some same in our actions because those actions effect them.
Currently and in the past CEO’s, executives etc have the power and as a result they get bonuses while workers get fired and their companies either fail or get bailed out by government. A federal democracy can be used to counter act this power imbalance to make things fair for society

Explodicle November 14, 2013 at 10:02 am

Everyone does produce something of value – we forfeit our share of Earth’s natural resources to whoever can make the most of it. The basic income is restitution – we have no more right to meddle in how it’s managed than we would with someone’s class action lawsuit winnings.

Although the Lockean Proviso is a European concept, Henry George helped popularize it in the USA.

asdf November 14, 2013 at 10:27 am

I produce little of value (probably negative, I try to scam people for a living), but I have a high income. The correlation between income and “productivity” (goods or services that genuinely enhance the well being of others) is not as high as people like to think. When people are threatened with poverty they are just as likely to engage in unproductive activities (white or blue collar crime) to get what they need as to produce goods/services, especially as more of the basic good/service production is automated and that option is unavailable to most.

Floccina November 14, 2013 at 12:19 pm

I try to scam people for a living
asdf, isn’t that a different problem, that poor prosecution of fraud. I am amazed at how little Government does to prosecute fraud and yet they have plenty of time to prosecute drug sellers and make new laws against things like check cashing which if cleared of fraud are not so bad.

mulp November 14, 2013 at 12:58 pm

Are you saying the government should return to the 60s with all the evils of government regulations like Regulation Q, to the days when interest on checking was prohibited, when savings in banks was capped at 4% and S&L capped at 4.5%, when interest rates on loans was capped at 6 to 12% depending on the security, when bankers had to verify income and assets to make loans, when only banks and S&Ls were able to make loans, and all other loans were illegal and unenforceable?

In the name of “liberty” individuals have been given the “freedom” to borrow money at 500% interest that the “lender” knows will become a legal source of income as long as he enforces the terms roughly by staying within the lines of legal threats. Banks issue credit cards with the intention of never being paid for the purchases but profiting from the fees that are many times higher than the debt.

Note that Milton Friedman argued that no one engaged in this kind of activity must consider the morality, because the responsibility of employees and managers of a bank is profit, so legally deceiving consumers and borrowers for profit is mandatory for those in banking.

Alex' November 14, 2013 at 1:18 pm

Not all fraud is or should be illegal

asdf November 14, 2013 at 1:48 pm

The government is full of people just like you and me that can be corrupt, incompetent, or simply fail because all large organizations tend to be pretty dysfunctional, especially with broad and hard to define goals like, “end fraud.”

If you want to get moral and pro-social trust activity out of people you usually need all sorts of cultural, institutional, religious, traditional, etc support to make it happen. The idea that “the law” enforced by people in the justice system/bureaucracy is going to be able to stop a citizenry with desperate incentives and no meaningful connections to the people around them is silly. If anything if the people in charge feel similarly they are likely to join in the crime. People do good for one another, and refrain from doing evil, primarily because of the empathy that comes with being connected to other people. The law can only ever be one support mechanism among many to correct outliers in an otherwise well functioning system. If the culture or a society has degraded to the point of, “everyone needs to get theirs, I have no connection to anyone else in my society” they I doubt the law will really be able to prevent all the scheme such a citizenry can come up with.

One surefire way to shred social bonds and create a nation of desperate people who are looking to screw each other over and skirt the law whenever they can is to create a highly unequal society in which a substantial number of people can’t live lives of basic dignity, relate to the other people in their culture, or achieve fundamental social goals like being able to start a family.

anonymousrepublican November 15, 2013 at 12:11 pm

Well reality is that life in an industrialized nation is expensive and unless you have some kind of advanced technological skill, you’re economically useless.

Economically useless people should be deported to mexico or canada where they can lead a better life.

Ano November 14, 2013 at 11:40 am

> Why *should* some people who don’t produce anything of value receive money from people who do produce things of value?

Hey, if you’re against helping the poor on principle then there’s nothing in this proposal that you’re going to like.

As a moral issue, I think of the basic income idea as treating consumption like you should treat respect: everyone gets some bare minimum just for being a fellow human, and the rest you have to acquire by skill, hard work, or blind luck.

wait November 14, 2013 at 11:47 am

People who don’t “produce anything of value” (whatever that means–a lot of jobs in Wall Street probably produce nothing of value but rather just shift value around) already receive money from people who do. It’s called welfare. The only thing that makes this policy harder for the public to swallow is the framing of it. Unemployment benefits are literally giving money to those who produce nothing of value. I think if you offered this policy to the public while simultaneously telling them all the other welfare programs you would do away with entirely and were able to show that the former would cost less than the latter had, you’d have a good chance.

Bakabon November 14, 2013 at 12:08 pm

People who aren’t working aren’t necessarily producing nothing of value. One thing that a basic income might encourage is innovative risk taking and more start ups. You know you will have something to fall back on if you fail. You are also have more incentive to raise your human capital by trying out new hobbies or educating yourself on the internet.

Pshrnk November 14, 2013 at 4:35 pm

Or taking time to raise children to be courteous and hard working.

Dave November 14, 2013 at 1:44 pm

“Why *should* some people who don’t produce anything of value receive money from people who do produce things of value?”

Moral answer: Most people value human life above money. This is reflected in our legal codes, in the fact that murderers receive longer sentences than thieves. It’s also reflected in religious traditions, for those who care about that. Therefore, to let one person starve or freeze to death because some other person doesn’t want to part with money they don’t need to survive is morally equivalent to ignoring a person lying on the side of the road desperately begging you for help.

Personal answer: You probably do this – taking care of children, supporting a non-working spouse or sibling, helping out retired parents, etc.

Practical answer: People who have no money will still do what they can to survive. That gives them 3 options: Beg, borrow, or steal, all 3 of which cost the rest of us at least as much as taking care of unproductive people.

anonymousrepublican November 15, 2013 at 12:16 pm

What BS. If this is your best argument… really look at all the people who said ” I like it that all those people can get coverage but I didn’t know I was going to be paying for it.”

I’d say that the average American will always choose to buy Timmy an Xbox rather than pay higher taxes for some high school dropout to sit at home playing call of duty all day and smoking legal weed.

Brett November 14, 2013 at 2:55 pm

Why not? Society has a duty to serve all of the people who compose it, and a Basic Income is not welfare – it’s security. It’s saying that there is a “floor” below which society has decided people will not fall in terms of social welfare, which we already have in other areas. For example, everyone gets police and firefighter coverage in most of the US, even though we pay wildly different amounts of property and sales tax. Everybody gets access to public schools, even though the tax base for that also varies greatly by individuals.

don December 2, 2013 at 1:34 pm

Hoover: “Why *should* some people who don’t produce anything of value receive money from people who do produce things of value?”

There are several answers, as you may already know. One I particularly like is that the earth belongs to everyone. A basic income is the rent due to every human for letting society use its stake in the earth be temporarily put to exclusive use as “property”.

Squarely Rooted November 14, 2013 at 7:34 am

“And once we recognize the proposal may be “the current welfare state plus some extra and longer-term payments,” one has to ask whether this is really what we had in mind in the first place. It seems that if you wanted to reform current programs and also pay people more (debatable, of course), there may be better and easier ways of doing that than reforms which have to fit under the umbrella of “a guaranteed annual income.””

The assumption that leaving certain programs in place means leaving their current payment structure in place is where this goes wrong. You may want to preserve disability support, unemployment insurance, work incentives, old age insurance, etc, but you can substantially scale back these programs. The average Social Security payment in 2012, for example, was $1230/mo, so $14,760/yr. In a world where there is a guaranteed basic income which say is $10K/yr for sake of argument, perhaps Social Security is scaled back until it is merely a few thousand dollars every years. Perhaps disability insurance takes the form not of extra cash (since the idea of cash under the current program is to compensate for inability of work, not to purchase disability-specific items) but of a series of vouchers that could be exchanged for certain products like wheelchairs, etc, that are beyond what insurance would cover that would then be redeemed by the government. Unemployment insurance could be scaled back. The minimum wage could even be reduced if the GBI was high enough.

This idea needs to be taken very seriously. Within my lifetime (I’m 27) tremendous numbers of jobs that are done by humans currently will be partially or totally replaced by machines – taxi drivers, truckers, cashiers. Unless we want a world where we have redistribution of capital or where the vast majority of people are dependent on providing services to or procuring debt from the relatively few owners of capital, then a GBI is one of the most likely proposals to navigate the post-word world.

ummm November 14, 2013 at 8:18 am

yes but these moochers already get govt. subsidize healthcare, hosing, education etc.

jpa November 14, 2013 at 2:19 pm

the point is we can do it a lot more efficiently by giving them a direct cash payment.
If we are going to transfer wealth, we might as well cut out the bureaucracy and make it as efficient as possible,

OneEyedMan November 14, 2013 at 8:20 am

In David Brin’s science fiction novel Kiln People they do exactly as you suggest with the huge surplus generated by many not having to work. They call the program the “Purple Wage”.

Dan Weber November 15, 2013 at 8:30 am

I don’t remember that from that book, but if it was in there, it was a minor point in an excellent book. There seem to be other novels that deal a lot with that, though.

Z November 14, 2013 at 10:33 am

Within my lifetime (47), I have seen a lot predictions about the riotous future. They are always followed by a scheme to mitigate today what will surely be a calamity tomorrow. As you get older you will learn that these predictions are always wrong, despite being a great way to sell books and justify some expansion of the state. The mobs of idle nitwits made idle by robots will not be pacified by a guaranteed income. They will riot, French Revolution style and that will be the end of the robots or the robot makers.

F. Lynx Pardinus November 14, 2013 at 10:44 am

“Within my lifetime (47), I have seen a lot predictions about the riotous future.”

If you’re 47, then you’ve certainly witnessed many waves of revolutions, civil wars, and civil unrest around the world, often caused by economic issues. It’s worth thinking about why they occur and how to mitigate them, unlike your glib reply.

Z November 14, 2013 at 11:42 am

I’m 47, not 407. As to mitigating the human condition, immanentizing the eschaton is nothing new. There’s a reason why the Church used to burn those who tried at the stake.

ummm November 14, 2013 at 10:47 am

Zman, but doesn’t your last two sentences contradict what you said earlier about doom & gloom predictions being wrong? Or is a proletarian uprising an example of a common failed prediction? If so I agree. No uprising

Z November 14, 2013 at 11:40 am

Straight line predictions always fail to materialize because life is a random walk. People react to change which alters the trajectory causing further change and on and one. The worry about legions of idle nitwits misses the fact that those idle nitwits will not stay idle. Thus the crisis of technology. If things progress anywhere near as proposed, the solution will not be guaranteed income or some other modifications to social welfare programs. It will be methods to defend the elite from the idle army. The robots will not be driving cabs. They will be defending the perimeter.

jpa November 14, 2013 at 2:26 pm

great insights. However, I think the robots will be driving the cabs *and* defending the perimeter. The new elites will be the ones who control the software / robots (both for economic gain and as you pointed out for defense of property).

Martin Keegan November 14, 2013 at 7:45 am

What’s to stop everyone in the whole economy quitting their jobs the day after it’s introduced? How does it get funded then?

The weaker form of this problem is the dynamic effects: people are going to be bullied into not working in low-paying jobs because it’ll “show up” the workshy (and anyone who has been intimidated into pretending to be workshy)

Dan Weber November 14, 2013 at 8:53 am

The wage is supposed to be enough to live, but not enough to live well. Whether it becomes this in practice or not is of course up for debate.

john personna November 14, 2013 at 9:17 am

Yup, the devil is completely in those details.

Brett November 14, 2013 at 3:04 pm

In practice, it’s going to depend on what you can afford to do. I think $10,000/year would be doable, particularly if it replaced a bunch of existing patchwork welfare programs at the federal and state levels. If it’s too heavy, then we’ll go downwards. If not, then we’ll push up – I’d index it to real or nominal GDP growth.

Otto Maddox November 16, 2013 at 4:45 pm

Yeah, no cable TV for the takers, only for the makers.

asdf November 14, 2013 at 10:34 am

How many people do you know only work because they need the money to eat? If they had enough to eat without working, would every single one of them quit their jobs?

It seems to me this is a very small portion of the population that acts in such a way, and that its not a particularly productive part of the population that we are giving up a whole lot if they quit.

Even amongst those that don’t work for money, I’ve met many a quite productive person. I spend a lot of time listening to free history podcasts of quite high quality that bring me a lot of joy for instance. Just because its difficult to capture that value your creating monetarily doesn’t mean value isn’t being created.

DPG November 14, 2013 at 10:52 am

A man works to have enough money to get laid. For a middle class person with the long-term goal of acquiring a spouse, this means holding down a job.

For an increasingly large share of the left half of the bell curve, women no longer demand or even expect a man to have a career. A guaranteed income would exacerbate this trend and all but destroy any semblance of a family structure in poor communities.

If most of your friends work for self-acualization rather than to pay the bills, then you are in too much of a cocoon to truly appreciate this issue.

john personna November 14, 2013 at 11:02 am

I think gyms are as popular as they are because wealth is no longer a big differentiator. Everyone has a credit card.

DPG November 14, 2013 at 11:19 am

Yes. For a man with an IQ of 90, biceps have become a better investment than books.

This isn’t to disparage them; it’s simply a fact that we need to recognize when considering incentives and unintended consequences.

john personna November 14, 2013 at 12:51 pm

For someone with an IQ of (insert the number) living in a neighborhood of (the same number) as well. On the west cost “Equinox” is a differentitor for the high end.

asdf November 14, 2013 at 11:55 am

Single mothers already get massive welfare under the current system, any GI would likely be lower then they get now. Eliminating those incentives would seem to do a lot more of the situation then trying to impoverish the crowd of Wal Mart men who end up sending in 1,000 applications for a single job.

Bakabon November 14, 2013 at 12:04 pm

I disagree about destroying families. I think you would see the opposite. A basic income would encourage people to pool their resources, i.e. live together.

DPG November 15, 2013 at 12:44 am

That’s an interesting hypothesis. In a Nordic country, I can see it happening. Here in the US, I think the sexual relationships in many poor families are too unstable for them to act with that much foresight. The obligation of a job brings stability to a man’s life.

Alex' November 14, 2013 at 11:39 am

Even for the type of guy your talking about, gym memberships, crossfit membership, protein shakes, fad diet supplements, kale, quinoa, steroids, hgh, jaegerbombs, etc. all cost money. That’s without even getting into other differentiating factors like flashy clothes, and bottle service.

Even if your only purpose in life is to get laid a ton, there’s still plenty you can do with more money.

John Schilling November 14, 2013 at 12:20 pm

“Even amongst those that don’t work for money, I’ve met many a quite productive person. I spend a lot of time listening to free history podcasts of quite high quality that bring me a lot of joy for instance”

I’m guessing that in your utopia, there are going to be lots of high-quality podcasts and lots of uncollected trash on the streets. Count me out. Also, get out of your damn bubble and start meeting actual working people, as opposed “productive” people. Because yes, there really is an awful lot of work that absolutely needs to get done for civilization to survive, that only gets done because there are people who won’t get paid if it doesn’t.

Steve J November 14, 2013 at 3:52 pm

Hmmm… do you think the market would just stop working if basic income became a reality? People would decide how much trash they are willing to put up with laying around compared to the cost of removing that trash. The same way it works today. Tyler seems to be trying to undermine the idea of the basic income by taking away the concept that makes it so simple – no conditions.

msgkings November 14, 2013 at 3:58 pm

The point being over time robots will do much of if not most of that ‘actual working people’ stuff. What happens to those people?

JWatts November 14, 2013 at 4:04 pm

When the Robots are here in mass, then a Guaranteed Income will probably make sense. But not before.

JWatts November 14, 2013 at 4:02 pm

Because yes, there really is an awful lot of work that absolutely needs to get done for civilization to survive, that only gets done because there are people who won’t get paid if it doesn’t.

I think a depressingly small minority of the posters on this site have ever jumped into a septic tank because it had to be fixed and someone had to do it. Or gone out on a snowy, cold day to cut down fire wood.

No one does these type of things on a routine basis to enrich their life. They do it to pay the bills.

GiT November 14, 2013 at 6:41 pm

So at worst people who do this work will get paid more than they do now because they are less desperate for income and can hold out for a bit more. So what? What a horrible world, in which people are less pressured to do unsafe or unappealing work, and hence are capable of demanding more compensation for it.

DPG November 15, 2013 at 12:41 am

The worst case scenario is that everyone’s reservation wage for bad jobs is so high that we are simply unable to afford them and our government’s finances collapse.

Ano November 14, 2013 at 11:42 am

> What’s to stop everyone in the whole economy quitting their jobs the day after it’s introduced?

The desire to have even more. Lots of people earn more than a poverty-level income just from their investment returns. Virtually all of them work. Why? Whatever the reason, it would also apply to most people getting a basic income.

Brett November 14, 2013 at 3:15 pm

I think this would especially be true in the US. There have been tons of opportunities for Americans to work significantly less hours at the same pay, but instead we almost always work the same amount of hours and earn (and spend) more.

DPG November 15, 2013 at 12:50 am

Anyone who earns tens of thousands in investment income belongs to a social class that requires them to pay for a house worth high six if not seven figures, along with sending their kids to private school for 10+ years. Like I said above, men do work to get laid. An investment banker stops getting the laid the minute he quits and lives off 40K a year in dividends. The very rich will keep working. However, what’s in it for a guy making 50K (the median household income) if everyone gets an income of 25K? 250 days a year at work, or a 50% pay cut for zero days at work. Especially if a woman with a 25K guaranteed income doesn’t give two cents about his job.

Stop thinking about the influence this will have on Ivy grads and start thinking about the influence it will have on the 150 million people who live in households that make less than 50K.

Brett November 14, 2013 at 3:03 pm

How many people in the US would quit their jobs over an extra $10,000 a year, especially if you constrict it to adult citizens and legal residents? Not that many, even if some of them reduce their hours. I’m skeptical that even hour reductions would occur, because this is the United States – when we get income increases, we tend to spend and consume more, particularly at the lower end of the spectrum.

I especially doubt you’ll have a lot of quitters when working even a minimum wage job would push you up into lower-middle-class status if you did it full-time. Even a minimum wage job at 40 hours a week plus the $10,000/year stipend would get you above $30,000/year.

Steve J November 14, 2013 at 4:06 pm

I assume any proposal for basic income would be linked to a gradual removal of the minimum wage. Of course I guess that is what Tyler is pointing out here. What is supposed to be a replacement for a variety of welfare programs may get corrupted by people trying to “improve” it.

JWatts November 14, 2013 at 4:28 pm

It would, as was stated above, have a significant effect at the margins. Quite a lot of students would give up their part time jobs, quite a few people working a full time and a part time job would give up the second job, etc.

I see quite a few people cutting back on their hours, I don’t see any people raising their hours as a direct result of a guaranteed income. Of course, low end wages would probably rise because of the people cutting back which would bring some marginal labor back into the market. So my guess is we would equalize at higher wages and slightly lower average hours.

anonymousrepublican November 15, 2013 at 12:25 pm

And an absolutely unsustainable cost of living that reduces recreation and consumption to minimal levels.

Oakchair November 15, 2013 at 6:19 pm

Studies show that students with jobs are more likely to fail and not graduate resulting in lower future incomes because they didn’t finish schooling.
Studies also show that working over 40hrs per week slashes your productivity, they also show that working more then part time reduces ones volunteer activity.
A GBI would result in more people getting higher education (IE higher futrue income) more volunteering, better child rearing. Also with unemployment so high it would be more productive if people working 80hrs a week switched 40hrs to an unemployed person.
Some areas have had limited GBI and the results were resulted in higher total incomes or a neutral income effect[1]

[1]http://www.ted.com/conversations/14456/why_basic_income_should_become.html

mw November 14, 2013 at 7:53 am

This is an uncharacteristically practical, technocratic response of the kind normally heard from the bland center-left in response to sententious policy claims from the right about various similarly sounding “simple” “clean” ideas of the ilk of the “flat tax” or ‘simply’ replacing everyone’s current employer health insurance with a Singapore system, that become absurdly complex upon actual implementation.

john personna November 14, 2013 at 9:21 am

Perhaps the biggest argument for it is that a mess of special purpose subsidies (rent, food, education) could be eliminated. Would a population with guaranteed minimum income need Pell Grants?

Marcos November 14, 2013 at 11:39 am

That.

Not only special porpouses subsidies, but also conditional programs that incentive not working (the ones that give money specificaly to the poor). I don’t get how people reach the conclusion that it should replace the entire government, or that it would be any more complex than the stuff it’s replacing.

Brett November 14, 2013 at 3:15 pm

The incentives for having Pell Grants would be reduced, although I doubt they’d completely disappear.

Josh McCabe November 14, 2013 at 8:10 am

The benefits of a GAI or NIT program are only partially economic or based on efficiency. Yes, it will be great to eliminate some overlapping or redundant programs but the real beauty of it would be the ability to eliminate some of the cultural distinctions we make which stigmatize some beneficiaries and lead to all sorts of problems in terms of political support and take up rates. You see this in all countries which rely on some sort of special income maintenance or “welfare” program – TANF (welfare) in the US, social assistance (pogey) in Canada, income support (the dole) in the UK. Right now, programs totally separate the “deserving” (SSI, Social Security) from the “undeserving” (TANF) needy which leads to all sorts of unnecessary moral regulations on the latter which limit the effectiveness of the program. A GAI/NIT might not totally eliminate these distinctions but it could minimize them. Yes, we might make special distinctions which mean higher payments for the disabled or some especially “deserving” group but this would be part of a strategy which Theda Skocpol calls “targeting within universalism” which would put programs for the poor on much firmer political footing. The distinction between “deserving” and “undeserving” groups becomes blurred when they are all part of the same program. Think about how family allowances go to both of these groups without question. The problem with family allowances is that they are prohibitively expensive and inefficient if you are directly trying to target poverty. This is why the Nixon administration economists favored FAP over family allowances in early deliberations.

The tricky part is figuring out how to replace welfare with a GAI/NIT. Nixon’s plan failed because people thought he was expanding welfare – thus turning working folk into welfare recipients – rather than shrinking it and replacing it with a totally new program. See Brian Steensland’s work on the topic.

ummm November 14, 2013 at 8:15 am

A guaranteed income is one more stepping stone on the path to socialism. We need programs that will create wealth like QE and tax cuts for the wealthy instead of redistributing wealth from the most productive to the lest.

Explodicle November 14, 2013 at 10:13 am

QE? So redistributing wealth is OK so long as it’s from the poor to the rich.

Brett November 14, 2013 at 3:16 pm

When you get the same amount of police protection as the rich guy living up in the foothills, is it unfair redistribution if he’s paying far more in terms of property tax than you for it?

That’s why I say that a Basic Income isn’t welfare – it’s a universal security, like public education and public firefighter/police services. Everyone gets it.

Oakchair November 15, 2013 at 6:23 pm

—-if he’s paying far more in terms of property tax than you for it?
That means he has more property for the police to protect from robbers meaning he needs more police services.

Alex' November 14, 2013 at 11:39 am

you being sarcastic?

chuck martel November 14, 2013 at 8:16 am

The desired result can’t be achieved through legislation, social evolution is required. Just as it has become de rigueur to keep unusual dogs like Afghans or pugs as pets, the rich will soon keep people as voluntary pets and, in fact do so now. NBA basketball players have their “posses”, who are paid buddies. In fact, the players themselves are the paid toys of the team owners. Peter the Great had his squad of giant Latvian bodyguards. The cycle of society will return to a kind of neo-feudalism where in order to be considered rich one will have to be the obvious support of many underlings.

Z November 14, 2013 at 8:19 am

This promises to be a very entertaining thread. What I love most about these ideas is how they start. You have a leaking roof so a group from the local university takes a look and concludes the *only* solution is to rethink human shelter design and building. The old joke is if you ask an engineer for the time he tells you how to build a watch. There’s a touch of that in debates over social welfare.

To Tyler’s point, every word, every comma in the Federal regulatory code has an army of lobbyists standing behind it. Barring a bloody revolution, you are never going to see a wholesale repeal of any of it. Further, government is a protection racket. Clean and transparent are not the ways of protection rackets. Further still, the middle class views welfare as riot insurance. Attaching a bunch of rules to it is what allows them to think it keeps the poor in-line.

ummm November 14, 2013 at 8:24 am

old engineer joke

you ask a mathematician to multiply 3×3 and he immediately tells you 9
you ask an engineer to multiply 3×3 and he pulls out his scientific calculator, inputs the numbers and reads off 9.00000000 (until the character limit is reached)

Dude November 14, 2013 at 11:00 am

You ask an accountant what 3×3 is and he leans over his desk and asks….

What do you want it to be?

MD November 14, 2013 at 4:13 pm

You ask a lawyer what 3×3 is and he says, “well, on the one hand …”

Jason November 14, 2013 at 3:39 pm

No, the engineer would read off: 9.0 x 10^1

Although he might adjust the number of significant digits depending on the precision of the numbers you gave him.

whatever November 14, 2013 at 5:37 pm

I hope you’re not an engineer if you think that 9.0 x 10^1 = 9

Portland November 14, 2013 at 8:51 am

Poverty is primarily a result of unequal & unjust social institutions, according to the political left.

Capitalism and free markets serve only the selfish interests of exploiters. It dooms the lower masses to progressing impoverishment and degradation. The poor are merely innocent victims of society.

Taming the greedy economic exploiters by wise and noble government officials is the only solution.
The egalitarian “service” motive must be substituted for the “profit” motive. The coming of an age of benevolent, just, and efficient central planning & redistribution is inevitable. Then there will be abundance for all. Economic scarcity will be erased by political ingenuity.

———————————————–
“The problem with socialism is that you eventually run out of other people’s money.”

– Margaret Thatcher

Marcos November 14, 2013 at 11:43 am

> …and concludes the *only* solution is to rethink human shelter design and building

When every shelter has a leaking roof, well, it may be a good idea to rethink human shelter design and building.

TMC November 14, 2013 at 7:01 pm

When it’s single digit percentages you assume the design is fine and it just that building.
Apply this to Obamacare as well. We screw with 300 million peoples insurance to fix 10 million’s problems.

Oakchair November 15, 2013 at 6:26 pm

Obamacare is estimated to increase premiums for 1-4% of the population while lowering premiums and allowing people to afford to buy premiums for the rest of the population.
Lie less plz.

Nathan W November 14, 2013 at 8:35 am

I think the unemployed who receive it should be required to log some volunteer hours. Obviously there are people with disabilities who wont be able to do so much … all the more reason to get them out of the house by forcing them to find something they care about enough to go meet like minded people.

The idea appeals to me from the start because it gives everyone a strong stake in the game. It would breed faith in the system for those who are nearly down and out. And just imagine the level of basement/garage entrepreneurship we could see. A couple shifts a week to buy parts and materials, and every inventive genius on the planet would need nothing more than a network to get their time-intensive ideas off the ground.

We would also suffer from a surplus of amazing art and music because … some people are happy with just a bit of space to make their art. Would that be such a terrible thing? Most of them would eventually grow up and get real jobs. And some of them would provide inspiration for generations to come.

All of them would feel more like they were part of a system that had something for everyone.

Dan Weber November 14, 2013 at 9:01 am

If you are going to require work, require work that someone else is paying for. Letting people get away with “volunteer” jobs will lead to endless bickering over what volunteer positions are really worth getting paid your dividend.

The work they get paid for, of course, could be work that a charity hires them for.

Dude November 14, 2013 at 11:02 am

Especially if we abandon the minimum wage, which should be desired in this scenario.

Rahul November 14, 2013 at 9:19 am

A modern day Civilian Construction Corps? Not a terrible idea really.

Ricardo November 14, 2013 at 10:29 am

We’ll see what the unions have to say about that.

JWatts November 14, 2013 at 4:36 pm

I think it’s an awful idea. If we are going to give someone $10,000 and then require them to work at a useful activity, why wouldn’t we just hire them to do the activity in the first place.

Rahul November 14, 2013 at 11:26 pm

They sound like duals. What’s the difference? Basically government run job corps.

Oakchair November 15, 2013 at 6:30 pm

The idea is not to require work, but to require some kind of contribution to society via volunteering. Also you could require unemployed people (non disabled of course) to apply to so many jobs. Doing this is better then the government hiring every single unemployed person because then we 1) have no workers for start ups or new businesses 2) can’t determine via central planning the efficiency ratings of 150million+ jobs

Bakabon November 14, 2013 at 12:16 pm

I don’t see the point in requiring work in what would most likely be an unproductive industry to begin with. If a society can produce at a certain level that requires fewer workers, then why not pay them off NOT to work (i.e. pay off the vested interests)? Resources aren’t wasted. That way we aren’t holding onto unproductive farms and factories that are ruining the countryside or polluting our cities. Let the robots do it. If there comes a time when humans are needed for a task, let the market bid up the wages to an appropriate level.

Brett November 14, 2013 at 3:19 pm

The problem is that if you require volunteer hours, you introduce additional layers of administration required for monitoring the hours done as well as punishing those who don’t do them. I can understand the sentiment, but I don’t think it’s necessary.

TMC November 14, 2013 at 7:02 pm

Use volunteers to do the admin work. Looks like there’s going to be a lot of them.

prior_approval November 14, 2013 at 8:37 am

‘Might there be circumstances when we would want to pay some individuals more than others?’

Is this the sort of question which a tenured professor should be posing? Because let us be honest, in a university settting, the tenured professor is paid more – for the simple reason of being tenured.

And a tenured university faculty member already possesses the closest thing to a guaranteed income that the free market (cough, cough) in America offers to a certain group of individuals.

And only an American is likely to think a guaranteed income would have anything to do with health insurance. In most places other than the U.S., health care is not seen as some sort of welfare scheme.

JWatts November 14, 2013 at 4:37 pm

Does it get lonely under that bridge?

Becky Hargrove November 14, 2013 at 8:39 am

None of this can fill the hole that people are still trying to fill, for skills wealth limitations. Better to reopen knowledge use and monetize time arbitrage with shared skills sets. That would also serve to reintegrate class divisions and provide positive incentive.

Z November 14, 2013 at 8:51 am

You should enter this in the Bulwer-Lytton Fiction Contest.

Becky Hargrove November 14, 2013 at 9:10 am

I don’t read fiction. I’m just saying that the solutions are not linear. And I wouldn’t be thinking about this if I had better options.

x November 14, 2013 at 9:02 am

Is incentive to do work that one would not otherwise do really desirable?

If there is no longer anyone willing to drive taxis, for instance, I’d expect self-driving cars to be available far faster.

Lack of waitresses would result in automated restaurants.

Lack of assembly line workers will give us fully automated factories.

Lack of street cleaners will probably result in the self-driving cars gaining the ability to clean the street.

And so on…

john personna November 14, 2013 at 9:47 am

The suggestion is similar to the endpoint of robo-socialism. I think Tyler is just suggesting it before the robots take over.

radical blogger November 14, 2013 at 9:06 am

the idea that the small, white nations of western europe might get a guaranteed income is not outlandish at all. It may well happen.

But the idea that americans would ever have any chance at all to get a guaranteed income is outlandish in the extreme. It will never happen.

America is run for the benefit of the rich. Been that way from the start. I refer you to words of the man who designed the constitution: the structure of the american govt is designed to maintain wealth inequality and to “protect the minority of the opulent against the majority.
That are the words of james madison.

Nothing has changed. And the idea that a guaranteed income is in the works is laughable.

Where did you ever get the idea that the USA is run for the benefit of the citizens?

ummm November 14, 2013 at 10:37 am

An argument can be made that the top 1% contribute more economic value than everyone else in terms of consumer spending, innovation, job creation, investment etc and thus an economic & political system that benefits their interests exclusively is one is optimal for economic growth and technological progress.

prior_approval November 14, 2013 at 10:54 am

And let us see some of the more notable examples of that argument – Brasilia comes readily to mind. So does Russia.

agm November 14, 2013 at 11:46 am

Just because the argument can be made doesn’t mean that said argument is anything other than horse apples.

Brett November 14, 2013 at 3:26 pm

Not really. Even if we discount the members of the 1% who got rich exploiting regulatory arbitrage, special privileges, and politically tied deals, the rest are basically the equivalent of architects: they design stuff and lead construction efforts. But without the rest of their staff, they’re nothing – just dreamers.

radical blogger November 14, 2013 at 8:30 pm

who cares how much the elite contribute to the economic system? It is an absolutely meaningless metric.

Ed November 14, 2013 at 12:14 pm

I actually agree, but I think there is still use for “this would be a good policy for the United States if the place were less of a plutocracy” musings.

Presumably the American plutocracy will fall someday like all the other ones have, and this will happen quicker if the rest of American society decides they are standing in the way of even non-radical desirable social reforms and projects. GI incidentally was proposed by Nixon, endorsed by Milton Friedman, and I’ve generally seen it pushed by the libertarian center-right, and may even be necessary if automation keeps proceeding rapidly, so arguably it can be characterized as exactly the sort of technocratic reform that redistributes downward but which plutocracies block only if they are very stupid and semi-suicidal.

Brett November 14, 2013 at 3:20 pm

People say that it will “never happen”, but it’s worth considering that it almost did happen. It was a serious policy proposal by Nixon back in the early 1970s.

JWatts November 14, 2013 at 4:40 pm

“the idea that the small, white nations of western europe might get a guaranteed income is not outlandish at all. It may well happen.”

So, black and brown people aren’t smart enough for this? Or are they just too lazy?

dearieme November 14, 2013 at 9:16 am

“it would substitute for welfare programs and bureaucracies”: oh no it wouldn’t – the poverty pimps wouldn’t give up their jobs that easily.

James B. November 14, 2013 at 9:24 am

I could be persuaded to support GNI, but I think my conditions would probably be to severe for others to agree to them

1. Vagrancy and panhandling no longer protected activities
2. Folks on GNI are denied the vote until they are off the dole for 4 years. (Ideally this would be extended to gov’t workers and people working for government contractors)
3. Alternatively to 2 we could have a more complicated legislature with separate houses for taxes/spending and laws, where folks on GNI can’t vote for the house that controls taxes/spending
4. You are ineligible for GNI if you have a kid! Abort, adopt or practice safe sex
5. Immigration restrictions similar to 1924-65

Rahul November 14, 2013 at 9:45 am

#1 seems fine. #4 is probably too unfair to the kid who doesn’t deserve any blame.

What would be the details of #5? Would you say no to a Nobel laureate who American university has invited to teach?

DPG November 14, 2013 at 11:09 am

A) That’s what temporary work visas are for.

B) Even during the strict immigration regime of 1924-1965, there was still immigration from all parts of the world.

C) Better to lose out on a few Nobel laureates than to have 20 MM Haitians receiving GNI.

Rahul November 14, 2013 at 11:54 am

The crux is never having a system that’s blind to the difference between a Nobel laureate & an Haitian refugee.

JWatts November 14, 2013 at 4:42 pm

Indeed.

DPG November 15, 2013 at 1:01 am

The 1952 act allowed preferences for people with special skills.

The deeper question is why places exist such that Nobel laureates flee them, and why the Nobel laureates choose to come to the US.

john personna November 14, 2013 at 10:00 am

Wouldn’t the right way to do a GNI be to send everyone the check, every month? Then those who work make GNI+x or GNI+y.

anonymousrepublican November 15, 2013 at 12:33 pm

GNI plus x minus the stiff taxes that reduce your net pay back to the GNI.

No thanks.

Oakchair November 15, 2013 at 6:35 pm

So you say no thanks to more money then a basic income of which the majority of advocates put around the poverty line?
You’re full of shit

Ed November 14, 2013 at 1:29 pm

I’m in favor of a guaranteed income, but I’m fine with all of this except for # 2. A limitation on children (I would make the limit higher than zero) may even be needed to make the concept work, unless Malthus was completely off base.

People really should be able to vote if the government can put them in jail or conscript them, or do other nasty things beyond just taxing them. That is why I am against #2 though #3 could work. I actually think that if you have a government that doesn’t tax most of its citizens, doesn’t conscript them, and pretty much leaves them alone (very basic criminal code) much of the argument for democracy vanishes, but these types of governments vanished in World War One. You could also turn most local government over to taxpayers’ assemblies and retain universal suffrage for state/ provincial government (which controls criminal law and appoints prosecutors) and the national/ federal government (which can start wars).

Ed November 14, 2013 at 1:31 pm

Also, a big chunk of taxes are sales taxes and fees that fall on everybody, so much of this argument is moot. Some people greatly exaggerate the amount of government activity funded by the income tax. Even property taxes are passed on to renters, so they wind up hitting just about everyone not living in public housing.

Brett November 14, 2013 at 3:28 pm

I don’t think it would affect the incentives for children, particularly if people only started receiving it once they turned 18. It might actually work the other way, giving people more financial security to wait on children until later in life, rather than having children because they just can’t foresee that they’ll ever be in a position to be “ready” for them.

cfh November 14, 2013 at 9:37 am

Here’s a problem with guaranteed income:
Suppose this morning the price of a pencil is $1. This afternoon, pencil ownership is declared a human right; everyone is given a $1.25 pencil allowance. What is the price of a pencil tomorrow?

karl November 14, 2013 at 1:35 pm

$1.01

Brett November 14, 2013 at 3:29 pm

Income supplements aren’t even remotely that one-to-one.

Pat November 14, 2013 at 9:42 am

A guaranteed minimum income would make people more accountable. We wouldn’t need unemployment insurance because people would’ve still gotten the guaranteed minimum income along the way. Everyone would know that everyone else has the minimum income.

Losing the EITC is not as big a disincentive to work as the the higher marginal tax rates caused by the existing phaseouts of benefits.

David C November 14, 2013 at 9:54 am

The proposal in Switzerland (I live there) leaves much of the other safety-net programs in place. The healthcare system would stay pretty much as it is — mandated private insurance. If the guaranteed minimum was your only income, you’d qualify for premium support. The retirement system would also be unchanged. If you only got the guaranteed income, you wouldn’t accumulate retirement credits, and would have little income in retirement — except of course the guarantee. We don’t have many of the other programs that are found in the US, no housing vouchers or home heating assistance, for example.

The effect on incentives to work is hard to figure in an economy with incredibly low unemployment (in my Canton it is currently around 1%). For a bit of context, one Swiss Canton just passed the country’s first minimum wage. The figure isn’t finalized yet, but the current proposal sets the minimum at CHF20/hour (almost US$22). In practice, that would increase the wages of only a very few people.

john personna November 14, 2013 at 10:35 am

I’d think that if the country had a guaranteed minimum income you’d particularly not want a minimum wage.

Brett November 14, 2013 at 3:32 pm

The Swiss proposal seems too high to be stable. Their monthly proposal gives someone over $30,000/year just off of the Basic Income, which means two adults living together would get a household income of ~$63,000/year just off of the Basic Income. That’s too much in the present economy – the tax burden alone for it would be close to 25%-33% of their GDP, never mind other governmental functions. A Basic Income in the range of $10,000-$15,000/year would be more reasonable.

But it would be an interesting experiment if they passed it, particularly with a minimum wage. You could theoretically get an equilibrium where there’s higher structural unemployment/more part time work, but it’s all good because the de facto wages drove automation to the point where the labor productivity of the workers in the labor force is sky-high.

Rob November 14, 2013 at 10:08 am

“So it might be proposed that the payment be somewhat higher if low income individuals go get a job”

You already get paid for having a job. That’s why they call it “having a job”.

Pat November 14, 2013 at 11:50 am

Thank you, Rob. What evidence does anyone have that people would stop working at the poverty line? A big benefit of GMI is to avoid the high implicit marginal tax rates from taking away benefits. More people would work with GMI than what we we have now

Ed November 14, 2013 at 1:51 pm

I was going to write a longer post about this, but I agree that Tyler’s reasoning is odd.

The income guarantee is exactly that, a guarantee. So if all the various transfer or welfare programs remain in place, and someone gets paid more on them than the guarantee, then that person draws no income at all from the guaranteed income program. If he gets some money from welfare, but not enough to hit the guarantee, then he draws only enough money to reach the guarantee.

Jobs would work the same way, if your income from the job is less than the guarantee, they you get paid the catch up amount, if its more, then you already have the income that is supposed to be guaranteed so you draw nothing (by the way I think the guarantee should be after-tax).

Part of the whole point is that no distinction is made on how you draw your income!

The practical difference between income from the job and income from welfare, is that I would expect pressure to eliminate any welfare or transfer payments above the guarantee amount. This was anticipated and why the program was originally blocked by Democrats when it was proposed in the 1970s. This could wind up inducing people to enter the workforce.

John Schilling November 14, 2013 at 10:38 am

Might we wish to pay more money to people who are likely to vote for us and less money to people who are likely to vote against us? But wait – that’s called politics, and it’s how the world actually works. Raise your hands, everyone who thinks politicians will ever implement a system that doesn’t let them keep doing this.

ummm November 14, 2013 at 10:40 am

The 47% among us get enough benefits as it is. If welfare reform was supposed to be a line in the sand it’s already been crossed.

XVO November 14, 2013 at 10:48 am

To try to quantify this. According to this website http://www.cbpp.org/cms/?fa=view&id=1258 the federal government spends 3.5 trillion 55% of that is social security, medicare and medicaid.

If you convert all of that to a guaranteed minimum income you’d get ~6000-6500 per person per year. This would be pretty nice unless you are sick or old in which case you’d be very angry. It’s not enough to live off of but it would make a minimum wage job profitable and maybe allow a group of people to pool their money to live. Having kids would be way too profitable and probably result in lots of lazy morons having tons of kids so if you limited it to over 18 only, then each person would get ~7800 a year. Still not livable but that can go towards a lot of things and give people a lot more flexibility. Would it discourage work? I’m sure it would discourage certain people from working.

I wouldn’t advocate giving anyone any extra benefits other than this. If they want more they should get a job. If people pool their resources they should be able to get by easily.

XVO November 14, 2013 at 10:52 am

Right now the average retired worker gets 14760 per year according to social security.

Tom November 14, 2013 at 10:59 am

I would be shocked if any comprehensive proposal that gets brought up allows for people under 21 to collect

Brett November 14, 2013 at 3:35 pm

Realistically, you’d either want smaller benefits allowing children to get them (like what Matt Bruenig proposed over at his article in The Atlantic), or benefits that only go into effect once you turn 18.

Although . . . maybe you could have kids receive the stipend, except that it goes into a savings account that neither they nor their parents can touch until they turn 18. If you had a $10,000/year stipend, plus 18 years until they can access it, then that would be $180,000 even assuming that you earn zero interest on the money and don’t adjust for inflation. That would be a fantastic nest egg for people to get started with, especially in terms of education.

john personna November 14, 2013 at 11:05 am

No one has mentioned Alaska?

Note that a (low) guaranteed income there did not make everyone socialist, nor stop them from working.

Greg Ransom November 14, 2013 at 11:08 am

Didn’t the Seattle and Denver study tell us all we needed to know that a guaranteed annual income is a bad idea?

Brett November 14, 2013 at 3:44 pm

That was a temporary negative income tax proposal targeted at poor households, and it didn’t really have any negative effects except for a minor reduction in working hours. Here’s a study done on it.

Greg Ransom November 18, 2013 at 12:09 pm

Thanks

Oakchair November 15, 2013 at 6:46 pm

They showed us that amongst people with GAI crime decreased, educational attainment increased (meaning higher future incomes), women were more likely to raise their children then work by 17%, and people had lower health care costs.

Oakchair November 15, 2013 at 6:46 pm

They showed us that amongst people with GAI crime decreased, educational attainment increased (meaning higher future incomes), women were more likely to raise their children then work by 17%, and people had lower health care costs…

RPLong November 14, 2013 at 11:14 am

Isn’t the real problem the marginal disutility of labor?

The problem with a guaranteed minimum income is that if you set it too high, you reduce workforce participation in a way that shrinks the economy. But because that level of income is different for everyone, the tendency is to instead set it too low, at which point it fails to achieve the desired means.

So really, it’s an idea that is simply doomed to a fate of being too much cost for too little benefit. Socialism never works; why do people insist on believing that it does?

Brett November 14, 2013 at 3:45 pm

Eh, if you set it at a certain level (like $10,000-$15,000/year), then you’re setting it at the point where it will keep you from starvation and homelessness. You won’t be comfortable just living off of it, but you’ll manage – and since there’s no disincentive to add work on top of the Basic Income, I doubt most people would be content to just live off of it.

Not everyone will be happy at that level, but they’ll be significantly better off.

John November 14, 2013 at 11:38 am

What would happen if we simply replaced all taxes and government functions with a monthly citizen’s dividend paid out evenly to all adults, financed by a use fee for property rights? To make assessment easy we could use only liquidation value of said property rights (ie: mark to market).

The so-called “libertarians” would scream bloody murder at this even though it privatizes everything.

The so-called “progressives” would scream bloody murder at this even though it redistributes wealth.

Bankers and rentiers wouldn’t scream, they’d just hire mercenaries to kill anyone who led such a movement.

So I guess it must be a good idea.

If Switzerland adopted it, it would be forced to think rationally about immigration now. That fact, alone, is enough to send the neo-Libertarians, neo-Liberals and neo-Conservatives into hysterics.

John November 14, 2013 at 11:41 am

Citizen’s dividends—the replacement of all government transfer programs with a simple cash dividend paid equally to all citizens—is the single-plank political platform that can, in the present climate, be used by a minor party to capture control of virtually any parliamentary government in the West.

The rationale is simple: Immigrants are not citizens and they would be deprived of public benefits. This would be immensely popular. Moreover, it would “empower” the populace to fight for their “entitlement” to their own country in a manner far more effective than any “get out the vote” campaign.

The response by the political parties now in power—traitors that they are—would, of course, be to fast-track “a path to citizenship” for immigrants, but they would be doing so in an economic environment far from conducive to popular apathy toward such shenanigans.

This can’t work in the United States without the take over of one of the 2 major parties because of the way the electoral system works in the US. But in parliamentary governments, minor parties can get a foot in the door. That’s all it takes because once this idea is aired in the halls of power, it will necessarily attract an enormous amount of attention from the usual suspects:

“Isn’t this racist? Isn’t this inhumane? Isn’t this xenophobic? What about refugees? Why should immigrants pay taxes if they aren’t going to get a citizen’s dividend?”

It would be wonderfully clarifying.

As for the economic effects, I’ll simply point out what should be fairly obvious by now: The current economic crisis is caused by centralization of wealth to the point that the populace isn’t simply impoverished, but is so deep in debt that the consumer base has collapsed. This was caused not by “easy money policies of the central banks” but by the subsidy of wealth built into any society that protects property rights by taxing economic activity. The would-be upwardly mobile pay the bills—not the recipients of the primary government service: protection of unnatural concentrations of wealth. Although it is true that this means the proper source of revenue for the citizen’s dividend would be a net asset tax on in place liquidation value—a tax that eliminates taxes on economic activity—it is not essential to political success that such a tax reform be another plank in the platform of the citizen’s dividend party. That change would come in due course as people were empowered to fight back against centralized wealth’s capture of government. However, once the tax reform is adopted, the populace would be very motivated to maximize the net in-place liquidation value of the nation’s assets. They will become keenly interested in the real externalities of immigration, graphically demonstrated in places like California. They might even start thinking other taboo thoughts about human ecology, sociology, economics and politics.

John November 14, 2013 at 11:43 am

Citizens’ dividends are a good idea. With the exception of basic functions of government and the pay down of debt, the government budget should be dispersed to citizens as cash, rather than being spent in government programs or even limited in the form of vouchers. This is “market democracy” in which the citizens and their markets, rather than central planning and politics, influence the selection of goods and services to be capitalized and provided.

A Citizen’s Dividend would replace government transfer program public sector rent-seeking.

You want to remove discretion from the appropriations process entirely with a CItizen’s Dividend aka a non-means-tested Basic Income so that there is no chunk of money sitting around waiting to be stolen by people who have the resources to steal it by virtue of having stolen it before (lobbyists/special interests/etc.).

Under a Citizen’s Dividend, there is no struggle over who gets what piece of the pie—the current regime’s rentiers are relegated to an equal rentier status to current non-rentiers which means they get less than they currently do and current non-rentiers get more than they currently do.

So the game changes in 2 fundamental ways:

1) It isn’t over who gets the biggest piece of the pie anymore. 2) It becomes over how to make the pie bigger in relation to the number of citizens.

Bakabon November 14, 2013 at 12:30 pm

I think a dividend (a fixed percentage of government revenues) is better than a fixed flat rate. If it was a percentage, you could reach an equilibrium of sorts. As long as the economy as a whole is being productive, each individual’s basic income would increase. If too many people start slacking off the dividend would go down, providing more of an incentive to get back to work. The robots would take care of the rest.

ladderff November 14, 2013 at 9:41 pm

John you are close.but the dividend analogy breaks down because every time a citizen has a child the stock splits and the value of everyone s share goes down.

Franklin November 14, 2013 at 11:50 am

“…I am for doing good to the poor, but I differ in opinion of the means.—I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it.

In my youth I travelled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.

There is no country in the world [but England] where so many provisions are established for them; so many hospitals to receive them when they are sick or lame, founded and maintained by voluntary charities; so many alms-houses for the aged of both sexes, together with a solemn general law made by the rich to subject their estates to a heavy tax for the support of the poor.

Under all these obligations, are our poor modest, humble, and thankful; and do they use their best endeavours to maintain themselves, and lighten our shoulders of this burthen?—On the contrary, I affirm that there is no country in the world in which the poor are more idle, dissolute, drunken, and insolent. The day you passed that act, you took away from before their eyes the greatest of all inducements to industry, frugality, and sobriety, by giving them a dependence on somewhat else than a careful accumulation during youth and health, for support in age or sickness. In short, you offered a premium for the encouragement of idleness, and you should not now wonder that it has had its effect in the increase of poverty.

Repeal that law, and you will soon see a change in their manners. St. Monday, and St. Tuesday, will cease to be holidays. SIX days shalt thou labour, though one of the old commandments long treated as out of date, will again be looked upon as a respectable precept; industry will increase, and with it plenty among the lower people; their circumstances will mend, and more will be done for their happiness by inuring them to provide for themselves, than could be done by dividing all your estates among them.”

- Benjamin Franklin, “On the Price of Corn and the Management of the Poor” 1766

Jacob November 14, 2013 at 2:07 pm

Franklin of course was writing from the perspective of America, where there was essentially free land. Since there was so much land, people could obtain their own land and work it for themselves, paying no rent. The entire yield of their labor was their own wage. In fact, Franklin himself wrote elsewhere that this was the reason for American prosperity: a high amount of land relative to labor. This situation was much closer to a “guaranteed annual income” or “citizen’s dividend” since the economic rent of society was more dispersed among the citizenry, rather than being concentrated among fewer land barons or asset holders.

In England, by contrast, there had been the land clearances, which dispossessed the rural majority of their own land plots, and concentrated land ownership for land barons and industrialists. There was a high amount of labor relative to land. As a result, wages were relatively lower for the average laborer. There’s less incentive for non self-employed labor since greater yield from labor doesn’t necessarily go to labor in the form of higher wages, while the entirety of self-employed labor’s yield goes to higher wages. Removing alms and charity wouldn’t have changed this basic incentive structure.

Furthermore, alms, charity, welfare, etc. are not the same thing as a citizen’s dividend or guaranteed annual income.

chuck martel November 14, 2013 at 6:37 pm

No, it wasn’t “essentially free land”, it was property stolen from the previous inhabitants, the native Americans, many of whom were killed for that land. Even today the same methodology could be used. Mexicans or Canadians could be paid in trinkets for their land or, if disinclined to make the deal, they could be killed or chased into the remaining wilderness of their homelands. In fact, with drones and other sophisticated weaponry it would be comparatively fast, easy and cheap.

mulp November 14, 2013 at 6:41 pm

In the Americas there wasn’t free land, but land barons that the English immigrants decided they could do what they wanted to do to the English land barons, kill them and take their land and redistribute the wealth.

The American revolution was about preventing the politically connected English corporations doing in the Americas what the politically connected in England did to the common folk.

And Locke justified individuals taking undeveloped land in the Americas because so much existed that it was impossible for him to imagine a day when the migrants and hunter-gathers who did not improve the land would ever be denied access to bountiful common land to live off. In fact, he never imagined the day in the Americas where a man would not be able to find plentiful common land from which he could carve a claim by improving it, and thus becoming a self made man.

It was FDR that ended officially the law that Locke imagined forever in the lower 48 because the last gasps in the 20th century had literally turned into dust in the mouth, as far east as NYC where the dust bowl winds were dropping Texas and Oklahoma.

One needs to also consider the explicit rejection of the English workhouses and debtors prisons by the effective mandate Congress wipe away debt through a Federal system of bankruptcy. Note that Ben Franklin became a fugitive from his debt obligation.

Ano November 14, 2013 at 11:54 am

> Might there be circumstances when we would want to pay some individuals more than others?

I think the main improvement of relying on a basic income is what happens on the margin. If you have a basic income replace all or most of our disability system, then you don’t get more for being labeled “disabled.” People who are genuinely disabled are held harmless. People who could work but are collecting disability will still get a minimum payment but won’t be trapped in a system where they can’t work lest they lose benefits. Similar for payments for being unemployed, which may cancel out the EITC-related incentives you mention in the post.

Overall, we would have to eliminate some programs (housing vouchers, food stamps), reduce others (disability and unemployment, done in a way that doesn’t make the target population worse off but reduces disincentive to work), and still others will naturally be reduced if they are income-based (medicaid eligibility, free and reduced-price meals in schools).

Oakchair November 15, 2013 at 6:53 pm

Disability doesn’t work like that. If you are in disability and you start working you have to earn more than you get from Disability in order to lose disability and you must have the job for 5+ years before you lose out on disability benefits if you ever lose your job

Steve November 14, 2013 at 12:43 pm

“And what about all those former EITC recipients, whose incentive to work is now lower than ever?”

I don’t understand. The phase out of welfare benefits (and the EITC) is what makes the. Have little incentive to work. If the guaranteed income replaced food stamps, housing vouchers, and Obamacare subsidies and Medicaid, then they would get to keep like 70 cents on the dollar from working instead of 30 cent or so.

Donald Pretari November 14, 2013 at 12:48 pm

We need to have a National Therapy Session to cure people of being Obsessed with the idea of a few people getting money from the Govt who then sit on their ass. So what? They’re hardly going to live the life of Riley ( Maybe Ignatius Reilly ).Once you start looking for these ( Pejorative of Choice if you’re still obsessed ), you need people to find them, people to adjudicate disputes, etc., and soon enough you’ve got an Interest Group that spawns another Interest Group, etc. Although it would be nice to deal with all issues on a Case-By-Case Basis, we don’t have the Money or the Stomach for Intrusion to do so. So we come up with a system that pretends to be Case-By-Case but is actually a system of Inefficient General Rules often with Conflicting Consequences. The beauty of the Guaranteed Income is that it Targets the Poor. Perhaps that’s it’s problem.

Milton Friedman’s many essays on this topic and the book by Charles Murray entitled “In Our Hands” still put forth a powerful case that a Guaranteed Income of some sort is cheaper and fairer than the current system of helping those in need we have, and, indeed, is a better alternative than whatever else we are likely to come up with, and that’s really all that it needs to do.

FC November 14, 2013 at 12:51 pm

Guaranteed Income for citizens + Uncontrolled Immigration = Demoplutocracy.

Every household will be able to afford at least one servant from the Third World. Every woman can be mistress of her own Downton Abbey.

JWatts November 14, 2013 at 4:54 pm

Guaranteed Income for citizens + Uncontrolled Immigration = Apartheid

John November 14, 2013 at 10:25 pm

If some sort of citizen’s dividend or guaranteed income were adopted, it would turn the citizens into the shareholders of the land trust called the “nation” and they would then be forced to think rationally about immigration. They wouldn’t their shares diluted by uncontrolled immigration. That fact, alone, is enough to send the pro-immigration neo-Libertarians, neo-Liberals and neo-Conservatives into hysterics.

Dan Hanson November 14, 2013 at 12:51 pm

Among the many problems with a guaranteed income is a major one of knowing what that income should be. Aside from the current welfare state issues Tyler mentions, what are we to do about the different amounts required to live in different areas? A minimum income that provides a modest but livable lifestyle in Kansas isn’t going to get you very far in New York or Los Angeles, while a minimum income that is adjusted for regional cost of living would destroy a very important market signal. Fixing the minimum income at a level that doesn’t allow mobility into higher-cost areas would also risk turning low-cost regions into modern reservations of trapped people.

A minimum income would need to be low enough that it doesn’t act as an incentive for people to drop out of the workforce entirely, but high enough that it provides for a basic acceptable standard of living for those who cannot work. Unfortunately, I don’t believe the government possesses the information or the tools required to know that number. And my suspicion is that any income low enough to ensure it doesn’t act as a major disincentive to work will be considered ‘too low’ by the activist community and there would be pressure to constantly ratchet it up.

In any event, I reject the notion that something like this is needed because there won’t be enough jobs for everyone. The mechanization of agriculture resulted in far more disruption to the labor markets than what technology is causing today, but all those displaced workers found new ways to be productive. And you could have made the same arguments against that happening – the farm work force was uneducated, didn’t know how to do anything but farm, lived in rural areas where there was no opportunity for other jobs, etc. So what happened? Well, they got educated and they moved to where the jobs are.

Of course, had there been a ‘living wage’ then, perhaps the American Midwest would be filled with millions upon millions of people living off of government handouts and bemoaning that modern agriculture left them no choice but to subsist on the dole. And if the transformation of labor never happened because of this, it would be hard to argue with them because you can’t see the road not taken.

A good case study of the effects of a living wage would be a comparison between the Maritime provinces in Canada and the coastal fishing states in the U.S. In Canada, we responded to the problem of seasonal employment of fisherman by essentially allowing them to collect unemployment insurance during the off-season every year. It was basically a permanent income subsidy – a guaranteed living wage for fishermen.

In Maine, no such program exists. However, in Maine the market adapted to the glut of labor in the off-season, and fisherman learned to take on second seasonal careers. They adapted and thrived.

In Maritime Canada that process was short-circuited by government subsidy, so no such secondary market exists, and the fishermen became trapped and it was ‘obvious’ to everyone that the subsidy had to be continued indefinitely because after all, there was nothing for them to do in the winter.

If we create a minimum living wage for people who will be ‘displaced by technology’, we will have done exactly what was needed to make that a self-fulfilling prophecy. We will create a permanent underclass of dependents. And we’ll never see the inventions that necessity would have mothered, because we took away the necessity.

asdf November 14, 2013 at 1:20 pm

Did they really “get educated”? Seems like they went from grunt work on the farm to grunt work in the factory. They were still doing grunt work. A few taxed their brains and got low end white collar jobs, but its exactly those jobs that have been most hit by recent changes.

If the problem was seasonal or temporary we wouldn’t expect to see obvious decades long trends in one direction. If welfare was the problem we would have expected that the decrease in welfare that has taken place in many times and places over the last few decades to have effected the overall trend strongly. No such empirical relationship exists.

I’m skeptical of the argument that XYZ happened in 1900, so obviously things are the same today, as if there hasn’t been some massive changes in our world since then. Perhaps creative destruction worked for 90 IQs in 1900 but it won’t in 2013 because the IQ threshold of useful work has gone up.

The same could apply to immigration (different to accept whites into a country with a high demand for unskilled labor in 1900 vs accepting NAMs into a country shedding unskilled jobs in 2013). For a bunch of people that believe incentives and circumstances greatly change behavior and value economist all seem to think that the same economic, social, and political policies are essentially correct in every single era for every single people.

Dan Hanson November 14, 2013 at 1:37 pm

Now why would you assume that the agricultural work force was made up of low-IQ people? Why would you assume that those people were doing ‘grunt work’, and continued to do ‘grunt work’ when they left the farm?

Certainly farming back then consisted of a lot of manual labor, but it also required a lot of skills. Farmers repaired their own machinery, fixed their own fences, built their own houses, tended after their animals, etc. Many farms had a small shop with anvils and power tools, and farmers fabricated many of the things they needed. They also had to do their own bookkeeping, maintain their own supply chains, plan for winters, figure out crop rotations, etc.

Don’t confuse specialization for intelligence, or book learning for education. Farmers back then had to be much more self-sufficient than modern city dwellers, and therefore needed broader skill sets. They also needed to solve problems for themselves; when their tractors got stuck in the field they didn’t have the luxury of calling AMA. They had to solve the problem.

asdf November 14, 2013 at 2:03 pm

Yes, they were very able people.

However, it seems obvious to me that the IQ threshold for bookkeeping or welding is different then the IQ threshold for doing nuclear physics. Someone who did tasks on the farm that required a 90 IQ may have done different tasks in the city, but they were still 90 IQ tasks.

“Now why would you assume that the agricultural work force was made up of low-IQ people?”

With some outliers, I would feel confident saying that most farm laborers are pretty low IQ today. In 1900 that may not have been the case. Due to economic and cultural constraints there were probably a huge number of intelligent people working on farms who never got to fully exercise their IQ. As such I would expect that some of those people would go onto high IQ work when the opportunity presented itself, as it did in the last century. Today we are very good at sucking up high IQ people based on standardized testing and other such things, and we have the resources to educate them. However, that is a one time gain. The next generation isn’t going to have any more high IQ people then the last. You can only gain from an increase in “sorting efficiency” once. At some point the raw material itself, genetics, is the limiting factor.

The fundamental problem is that certain kinds of abstract work, the only kind that can’t get automated, requires pretty high IQ, more then most people have.

chuck martel November 14, 2013 at 6:50 pm

You probably never put the cans of beans on top of the fresh tomatoes when you’re bagging an order and never hit a car with that radio-controlled shopping cart mover.

mulp November 14, 2013 at 6:19 pm

“in Maine the market adapted to the glut of labor in the off-season, and fisherman learned to take on second seasonal careers. They adapted and thrived.”

Living in New England for three decades with family roots in Maine and hours spent talking political economics with very loud opinionated mainiacs – family roots to the region go back to 1620 and my dad was the black sheep for leaving Maine for the far far far West of Indiana and Iowa only partially redeeming himself by moving to eastern upstate NY, that view of Maine is like from a tourist postcard or a what’s his name;s painting – Rockwell.

Maine has a high tax burden, as measured by the taxfoundation.org. In large part because of the large welfare burden, as rated by Heritage (though they did justify the mandate to buy insurance back when that was a conservative Republican idea) Maine is the only State to be in Heritage’s top ten on its three measures of being a welfare state, beating out California and Vermont. See http://www.mainepolicy.org/wp-content/uploads/Fix-the-System-2012.pdf – “Freeing Maine Families from Welfare Dependency” It states “Maine’s welfare system undermines work and traps families and children in welfare dependency.”

Dan Hanson November 14, 2013 at 6:34 pm

How long has this been the case? In Canada this was in the news in the late 1990′s after our equivalent of ’60 minutes’ did a comparison piece between Maine and one of the Maritime provinces which found the points I listed above.

Another thing they found was that despite the fact that the Canadians received far more government assistance than did their American equivalents, they were much angrier and unhappy with their situation and with the government.

tj November 14, 2013 at 1:39 pm

Weird – the date on this article isn’t April 1st…..

Slocum November 14, 2013 at 2:03 pm

“A basic income might be enough to live on, but not enough to live very well on. Such a program would be designed to end poverty without creating a nation of layabouts.”

A guaranteed basic income payment is a much more valuable proposition than a full-time job with the same pay. Mr Money Moustache and family are living on about $25,000 a year: Living well on $25K a year is much more feasible if you can choose a low-cost area to live (without any concerns about job opportunities), have no employment-related expenses (clothing, commuting) and can devote your time to valuable but non-taxable home production (home improvement, auto repair, cooking, gardening, canning, hobbies etc). And barter (check out MMM’s ‘carpentourism’). Mr Money Moustache and his family certainly aren’t layabouts, but they pay the same income taxes as layabouts (i.e. next to none).

How many people would take after Mr Moustache? How many people take advantage of unemployment benefits until they run out?

asdf November 14, 2013 at 2:12 pm

Isn’t that what we are hoping a lot of people trying to live in GI will do?

1) Move somewhere that doesn’t drive up the rent or crowd out the people who are working.
2) Be as self sufficient and economical as possible.
3) Engage in productive hobbies and activities that enhance themselves and their communities.

And if we forced such people to crowd into cities and fight over minimum wage jobs would that be an improvement?

People with the talents and drive to be productive in the modern economy generally won’t drop out because someone offers them the drop out lifestyle. If a job is so unproductive it pays around the GI we out to just automate it.

Slocum November 14, 2013 at 3:24 pm

“Isn’t that what we are hoping a lot of people trying to live in GI will do?”

Well, no — people who are living off a guaranteed income supplemented by home production + barter + under-the-table work are not, in any sense of the word, ‘self-sufficient’. We’re facing quite enough of a worker-dependent ratio time-bomb already without lots of younger GI ‘retirees’ added to the mix. As for people with ‘talents and drive’ the disincentive for them may not be the mere availability of the GI, what about the increased marginal rates needed to fund the GI program? It seems almost certain that GI would, at least, generate more early retirements in the 55-65 range? And, of course, ‘talents and drive’ may be channeled into activities that don’t generate much income or tax revenues. There are countless ambitious aspiring artists, musicians, authors, etc — I hope I don’t sound too hard-hearted when I say that I really don’t want to pay the extra taxes needed to enable them to quit their day-jobs and follow their passions full-time.

asdf November 14, 2013 at 6:08 pm

Well, I said “as self sufficient as possible.” I don’t think anyone is 100% self sufficient.

I’m not so certain making money and being able to pay my bills makes me “self sufficient.” I require any number of people to do most of the things I need to live for me. Sure, I can pay them, but only because my giant company provides the physical, institutional, and human capital to transform my specialized skills into money. If some economic or technological change made those skills obsolete then I could no longer pay my bills. You could maybe say I could re-train, but the whole point here is that we are entering an era in which there is no creative part after the destructive part because all the new labor demand is filled by machines. In such a case I would be far less self sufficient then those with the skills for frugal and self sufficient living.

For those where re-training is obviously and their new skills in demand the difference between GI and work income will in almost all cases be more then enough incentive. I’m not going to turn down six figures to earn a 10k GI. I suppose there are some people on the margin whose potential skills are so low the GI could influence them, but is such behavior really going to have a huge effect on the economy? If anything removing those people from the labor pool and geographically from in demand areas could have a lot of positive effects if you think about it.

I doubt GI would cost more then current welfare programs, it would simply reduce the absurd marginal tax rates people face when benefits start to fall away at middle income levels.

brad November 14, 2013 at 2:37 pm

No you don’t give more to disabled people, or working people, or mothers, or old people, or any other deserving category de jure. That’s the whole point.

You want everyone’s favorite luxury good, an infant? Fine, you’ve got the money for it. But while your non-breeder friends are using their basic income to buy a nice car, you decided to have a kid. You don’t get the nice car and the kid. Pick one or the other luxury item, or get a job if you want both. Ditto with fancy wheelchairs, or college tuition or what have you. No one can complain about dying in the street when they collect 2x poverty line from the state, but at the same time no more middle class welfare that we all pretend isn’t welfare.

asdf November 14, 2013 at 2:47 pm

Most people want to “work”, as in due productive things, but they don’t want to have a “job”. Many of us even pay money to do work (example, you pay to pick apples at an orchid on vacation). What you don’t want is some asshole that doesn’t respect you standing over your shoulder screaming, “pick faster!” Or to have to leave your sick mother at home alone because if you don’t make the shift that day you’ll be fired and be destitute.

What people don’t like is:
1) Forced subordination, especially to people they don’t respect but put up with because they need the money
2) Huge practical burdens (unable to care for the sick mother, etc).

Brett November 14, 2013 at 2:51 pm

I think you’re over-complicating this, Tyler. If you do a Basic Income, then other stuff (like additional support for disabled individuals) would be over-the-top stuff, and far more likely to face scrutiny than it is in real life. This is because unlike the current situation (where disability constrictions could dump people straight into homelessness and starvation), disability constrictions won’t do that in a Basic Income situation.

mulp November 14, 2013 at 3:01 pm

“Maybe this isn’t the biggest problem, but it’s been my worry as of late. Must a guaranteed income truly be unconditional? Might there be circumstances when we would want to pay some individuals more than others? Many critics for instance worry that a guaranteed income would excessively reduce the incentive to work.”

This is the “outrage” expressed by conservatives who look at the welfare system and see that the means testing they have insisted in results in those with the deepest needs and the least means get $80,000 a year in welfare.

There out rage is that such people who get that level of welfare will either work for 10 hours a week at $7.15 an hour and not lose any benefits, so they are not motivated to work for another 30 hours to earn another $12,000 a year providing 1500 more hours of labor to an employer in exchange for losing the $80,000 of benefits that the means testing determines they need,

If a woman with a dependent disabled daughter must either care for the child most of the time, or hire a caretaker at a cost through an agency for a higher fee per hour than she can earn, how is she supposed to care for her family on $15K per year minimum wage while paying $30,000 a year for a caretaker 10 hours a day while she works 8 hours a day? To care for her daughter she needs not just any transportation, but a reliable van with a lift to transport her daughter to get health care and while shopping, and to provide her daughter opportunity for enrichment because her mind is functioning, even if her body isn’t. And she needs a place to live that is equipped for the disabled. And she needs food and health care herself because she’s a 20 hour per day caretaker and if she dies, the government will need to pay others in the private sector to care for her daughter, a cost that seems to be in the $100K per year range.

If this woman were paid $50 to $100 per hour, then she would be able to afford to get off welfare because she would have the income to pay for day care and the other costs of her disabled daughter.

The welfare system saves society from euthanizing the disabled like a the free market kills a disabled car, truck, machine, building – they are too great a burden to the market. I’m sure that there are 57 chevy’s getting crushed still because they are too badly rusted than the sentimentality of even the richest car buff just can’t overcome the market signals that its worth more as ton of near iron ore than as a rusting memory of a golden age.

If society were to follow Milton Friedman’s advice to corporate managers to erase morality from decision making and focus on shareholder interests, her the shareholders being taxpayers, the disabled would be chopped up and sold for salvage just like cars and machines and buildings. And even good running cars get chopped up with the free market price is too low to make keeping them around profitable. So, if a worker can not earn enough in the market to live, then he;s like the car that costs too much to use, sp he should get euthanized and sold for scrap.

This will reduce the supply of disabled and low wage workers, driving up wages so everyone is able to work and earn enough to support themselves, just like the free market adjusts the supply of cars to match the demand so the price is higher than cost.

But we need more abortion not less, more birth control not less, nore death panels actively seeking out the unproductive parts of society. Forget morality, and focus on balancing the supply and demand for labor. Dependent people should be a luxury of the wealthy.

brad November 14, 2013 at 3:30 pm

This is ridiculous. No one disabled or otherwise needs $80,000 a year to survive. You think there are no disabled people in India, they just kill them all? No, they make do without special vans and opportunities for enrichment.

asdf November 14, 2013 at 6:11 pm

Nobody has to kill anyone. They die in the gutter all on their own.

chuck martel November 14, 2013 at 6:58 pm

Too bad there isn’t a possibility of retroactive abortion in your case.

The Anti-Gnostic November 14, 2013 at 3:51 pm

The biggest problem with GNI is it would demonstrate too vividly that in most instances, poverty is not due to lack of money.

Uninformed Observer November 14, 2013 at 4:10 pm

It pains me that this is even discussed as a proposal worth considering. I get that everyone here likes to imagine they can bring about world peace through applied economics, but hasn’t this idea caused enough problems? Stalin? Mao?

It. Never. Works.

Mass redistributionist policies lead inevitably to abuse, corruption and totalitarianism. The reasons are obvious and I shouldn’t have to recount them here…. should I? Please, can we leave this in the dustbin of history?

Tarrou November 14, 2013 at 4:23 pm

So, maybe a touch off-topic, but what happens when you combine this economics hobbyhorse with another, open borders? Factor in human tribalism and show your work.

nazgulnarsil November 14, 2013 at 5:00 pm

Reading the reasoning of someone I consider a well above average economist and the ensuing comments on BI has caused me to lose any hope that humanity will handle the productivity gains of an automated future with anything but dystopian lunacy.

**** humans. ffs.

greg November 14, 2013 at 6:12 pm

There’s always the old debate over cash vs. in-kind benefits. Cash is arguably more efficient, but not if you think there are serious behavioral problems among the poor. I used to strongly favor cash benefits (based on standard lump-sum principle type arguments), but since moving to a city and having more interaction with poor people I’m leaning more and more toward favoring in-kind assistance.

GiT November 14, 2013 at 7:07 pm

I would think having relatively frequent disbursements could mitigate the sort of poor budgeting/impulse control issues one might get.

Franklin November 14, 2013 at 6:24 pm

“Furthermore, alms, charity, welfare, etc. are not the same thing as a citizen’s dividend or guaranteed annual income.”

Certainly they differ. Charity is funded voluntarily by those who can afford it and deem it necessary, while guaranteed annual income is funded via the tax burden on productive members of society who may have other preferences. However, welfare and guaranteed income, along with many other forms of government assistance to the poor, share the dilemma of suppressing self-reliance and encouraging dependency.

Thus Franklin’s observation holds: “…the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

John November 14, 2013 at 7:42 pm

No, a citizen’s dividend or guaranteed annual income is not welfare, just as a stockholder receiving a dividend is not welfare. The citizens are the stockholders of the land trust called the “nation.” The government’s chief function is to protect, via a legal infrastructure, property rights, and thus property rights should be the tax base rather than income or capital gains or sales or anything else.

The citizen’s dividend or guaranteed annual income does not suppress self-reliance or encourage dependency. It encourages independence and promotes “market democracy” in which more is privatized and the citizens and their markets, rather than central planning and politics, influence the selection of goods and services to be capitalized and provided.

Franklin’s observation doesn’t hold because the incentives are fundamentally different for yeomen who own their own land outright and for landless and property-less peasants and urban labor.

Franklin November 14, 2013 at 9:59 pm

A redistribution program by any other name is still redistribution from those who bear the burden of taxation to those who do not. One may excuse it as a “dividend” for something or other, but it is paid by taxpayers. It is a boon to those who receive more than they pay and a burden to those who pay more than they receive. It would seem the “dividend” is negative for those citizens.

John November 14, 2013 at 10:12 pm

It’s not a redistribution program, just as stockholders receiving dividends isn’t a redistribution program.

The government’s chief function is to protect, via a legal infrastructure, property rights, and thus the burden of taxation should fall on property rights rather than on income or capital gains or sales or anything else.

Property rights beyond simple subsistence animal territory are those first upheld by government hence the proper source of revenue for government is the use fee for those property rights beyond subsistence animal territory. Short term treasury rates are categorized as “zero risk” in modern portfolio theory hence are reasonably classified as economic rent or the profit that derives simply from the monopoly power over a resource created by property rights.

The best way to quantify the economic rent stream of any property is to take its in-place liquidation value and fund a citizen’s dividend from it at the risk-free Interest rate (usually the short term Treasury rate) used in the Capital Asset Pricing Model of Modern Portfolio Theory.

Franklin November 15, 2013 at 12:01 am

In your scheme someone pays the property “user fee” (in the real world called a property tax) while someone else benefits from it, for no other reason than having a pulse it seems. A burden for one and a boon for the other.

It would be nice if one could reap a stock dividend without actually investing one’s money but that would hardly be equitable.

One is simply redistribution, the other is a return on investment.

John November 15, 2013 at 1:05 am

Yes, since the government’s primary function is to provide property rights, the burden of taxation should fall on property rights. People should pay for what they use. It’s not fair to tax people’s incomes, capital gains, sales, etc. to subsidize the cost of providing property rights. Apparently you want people to pay in money and blood in order to protect other people’s property rights.

Property rights beyond simple subsistence animal territory are those first upheld by government hence the proper source of revenue for government is the use fee for those property rights beyond subsistence animal territory.

When we form a government, we invest our individual sovereignty which necessarily, due to simple carrying capacity limits, entails a certain amount of necessary animal territory — subsistence or homestead land — an investment for which we should be compensated as beneficiaries of the land trust called a “nation.”

Certainly, as with any corporate structure, including a land trust, there are voting rights corresponding to the rights of the beneficiaries to vote themselves dividends or to empower the trustees (government) to reinvest those dividends in the Trust. But social contracts upholding property rights are, by their nature, best structured to let the various Parties take their dividends to invest in creation or spend on transfer of private property rights — property rights that are upheld under the terms of the contract. The only question then is, what are those terms? Nobody agree that the mere fact that some assets are more subject to depreciation than others is the proper basis to decide that some assets are more subject to positive externalities (windfalls) or to negative externalities (environmental degradation). A better estimate for the rents of all property upheld by the social contract is that portion of the in-place liquidation value attributable to the risk-free interest rate used in calculating total asset value.

Franklin November 15, 2013 at 2:30 am

“Yes, since the government’s primary function is to provide property rights, the burden of taxation should fall on property rights. People should pay for what they use. It’s not fair to tax people’s incomes, capital gains, sales, etc. to subsidize the cost of providing property rights. Apparently you want people to pay in money and blood in order to protect other people’s property rights.”

The straw man you’ve constructed doesn’t look anything like a real person.

You can call it a user fee, if it makes you feel better, but it is a tax.

You’ve made a (poor) argument that the only legitimate tax is a property tax, but to then conclude that redistribution as guaranteed income to all citizens is not redistribution (like welfare) is a non sequitur.

Further, your premise is flawed. The primary function of government is not to protect property. See the U.S. Constitution.

John November 15, 2013 at 12:14 pm

Yes, it’s a tax. I’ve said that the burden of taxation should fall on property rights rather than on income or capital gains or sales or anything else. People should pay for what they use. It’s not fair to tax people’s incomes, capital gains, sales, etc. to subsidize the cost of providing property rights. You want to force people to pay in money and blood in order to protect other people’s property rights.

Property rights beyond simple subsistence animal territory are those first upheld by government hence the proper source of revenue for government is a tax for those property rights beyond subsistence animal territory. You haven’t refuted this argument because you can’t.

The government protects non-subsistence property rights i.e. wealth. Note, I said “non-subsistence” property rights. The point here is that house and tools of the trade are protected from confiscation under bankruptcy law precisely because they are subsistence assets. Where government does not exist, subsistence properties are typically defended by the occupant, whose life is sustained by those assets. Government brings precisely the property rights we associate with civilization — assets beyond home and tools of the trade i.e. wealth. Since the primary function of government is to uphold property rights, then government should be funded by taxing economic activity rather than taxing property rights.

A citizen’s dividend or guaranteed annual income is not redistribution just as dividend payouts to shareholders are not redistribution. The natural individual, endowed with vital interests sufficient to form a viable family, will demand, in exchange for his commitment to invest his sovereignty into the land trust called the “nation”, a voting share in the corporation and guarantee of regular dividends.

What constitutes redistribution and welfare is failing to treat the government as a mutual insurance corporation and failing to pay out an equal monthly dividend to all citizens. What also constitutes redistribution and welfare is failing to charge a mutual insurance premium for property’s liquid value i.e. failing to tax property rights and taxing something or everything else instead e.g. income, sales, capital gains, etc.

US November 14, 2013 at 6:37 pm

I’m late to the party, but perhaps a few people are still reading along…

Anyway, there are lots of papers on this stuff kind of stuff and I’m a bit surprised an economics professor isn’t linking to relevant literature in a post like this. Here’s a paper that highlights some of the issues related to the question at hand:

http://mit.econ.au.dk/vip_htm/msn/Workfare170409.pdf

Abstract: “A key policy challenge is to ensure a proper balance between incentives and insurance in the labour market. A particular important question is whether incentives can be improved without resorting to general benefit cuts. This paper shows that workfare or active labour market policies as an element of an unemployment benefit
scheme can improve the incentive structure for given benefits, and thus lowers both open and total unemployment. The paper also highlights that the direct search effects of workfare policies are a poor indicator of the overall effect workfare policies have on labour market policies.”

The last point incidentally is really important, especially given that the general equilibrium aspects seem to have been overlooked in a lot of early US studies on this topic in the past, and so lots of people may be misinformed about how to properly think about the costs and benefits of implementing various conditionalities. Both the authors of the above paper have incidentally done quite a bit of work on this kind of stuff.

Jake November 14, 2013 at 9:12 pm

“So it might be proposed that the payment be somewhat higher if low income individuals go get a job. That also will make the system more financially sustainable. But wait — that’s the Earned Income Tax Credit, albeit with modifications.”

What? Who would suggest that? A core part of the appeal of a basic income is to let us move on from the connection between work and sustenance, not use government money to incentivize people to take jobs they otherwise wouldn’t.

iolanthe November 14, 2013 at 10:49 pm

In Australia we more or less have this (but not by name) in that unemployment benefit is unlimited in duration (which requires you to look for work and to take offered work but of course both are quite easy to deal with) and, with only some sympathetic medical support, you can get yourself signed off as a disability pensioner with no obligation to work or look for it which gives you just under A$20k annually permanently.

Impacts are:
- a small but slowly growing multi-generational welfare class
- most immigrants don’t see this as a permanent option but that’s because we pick ours on skills – the exception is the refugee intake who are typically unskilled and from quite deprived backgrounds – they see $20k a year for ever as a very good outcome and unemployment/disability rates are up to 90% from some backgrounds
- 3.8% of the population are on disability pension and this has tripled in the last 30 years but this seems to show signs of slowing.

My conclusion therefore is that only a relatively small proportion of the population would be satisfied with a basic income and use it as an excuse to avoid work. But I don’t think it’s an unalloyed good – it does seem to be socially destructive for the multi generational welfare types. Nopt sure what the solution is – if you called it what it is in most cases – a non disability pension – then you could legitimately ask people to do say 20 hours a week in return but that would introduce admin costs and I suspect the type of low skilled jobs such as street cleaning will not be competitive against automation even on a free basis in the next two decades.

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