A Libertarian Universal Basic Income

by on June 30, 2017 at 12:34 pm in Economics | Permalink

Nobel prize winner Vernon Smith (our emeritus colleague at GMU) is a bold thinker. I have long proposed selling “government” land in the West but Vernon takes it a step further, privatize the highway network to create a permanent income fund. Essentially what Vernon is proposing is a libertarian method to fund a universal basic income. Can’t we all agree on that?

Even more than in the United States, there are many countries in the world today where the government holds trillions of dollars assets that are underutilized. Selling those assets to create a permanent income fund would be good for efficiency, liberty and equality.

…[T]he richly interconnected highway network really could be auctioned. Between major highway intersections there are alternative routes that could be auctioned to different bidders, assuring drivers of a choice of toll roads, along with state and local freeway alternatives. That competition would keep tolls affordable.

 Perhaps most important, surface transportation rights of way would be opened to new mass-transit innovations at a time when driverless vehicles are making their entrance. A few autobahns might also compete more effectively with short- to medium-haul airline routes, but you will need to resist airline opposition.

You should also consider auctioning off the Bureau of Land Management’s extensive grazing lands. Better incentives through ownership, or long-term leases, mean better stewardship and innovation. But neighboring farmers and ranchers won’t like the impact on their land prices.

How could you use the money from highway and land sales to benefit all Americans—and improve your own popularity? By creating a new Permanent Citizens Fund, invested in stocks, bonds and real estate world-wide. Every citizen would hold an equal share, with annual dividends paid in cash.

Better highways, more land for productive development plus a permanent fund sending checks to every citizen. A guaranteed basic income financed from public assets waiting to be monetized and put to work. You might even get the progressives’ vote. Have you ever made such a great deal?

If you think it’s pie in the sky, ask an Alaskan. The Alaska Permanent Fund, initiated in 1976 to distribute oil revenue, has a market value I estimate at $72,000 for each Alaskan citizen. Annual dividends began in 1982, when the public corporation that administers the fund cut the first checks for $1,000. Little wonder that Alaska is second among all the states in income equality.

1 Thomas June 30, 2017 at 12:37 pm

Most environmentalists prefer nature to providing for the poor. Most anti-market folks prefer poverty to capitalism. You won’t get either of them on board, and they are a majority of Democrats.

2 Jan June 30, 2017 at 12:43 pm

Most Republicans prefer paying billions in tax revenue to keep the ACA in place over giving the poor cash, and you won’t get them.

3 Thomas June 30, 2017 at 12:50 pm

After posting my original comment I sat and wondered how Democrats would respond. You could prove me wrong by affirmation of your support, but you don’t support it, for the reasons I gave. Your response was silly, as Republicans prefer vouchers to ACA.

4 Jan June 30, 2017 at 5:26 pm

Your response shows you’re not very familiar with the ACA and what Republicans are proposing these days.

But I’d be happy to add a UBI on top.

5 John June 30, 2017 at 1:35 pm

I’m a progressive and support the idea in theory, but can imagine a lot of potential for abuse and rent seeking in privatizing highways.

Perhaps some analysis has already been done, but isn’t selling the highways just replacing dividends in the form of free highway use with dividends in the form of investment income? Whether the former or latter is larger seems to depend on the discount rate applied by private industry vs the returns achieved in a wealth fund. What if you used the proceeds of highway sales to buy the private operators of highways? Wouldn’t that effectively just be converting highways into toll roads? Do we need a private intermediary to do that? I guess the upshot is, what are the extra efficiencies to be gained by private ownership rather than public ownership? Perhaps more cost effective maintenance (less make-work and union featherbedding)? A more optimal pricing structure? Additional “fairness” achieved by allocating costs to users of roads (and their downstream beneficiaries) vs allocating benefits to society more broadly?

6 byomtov July 1, 2017 at 9:41 pm

So why is this whole privatization scam needed? Looks like it just throws money at some influential rent-seekers.

Finance your Permanent Citizens Fund by having the government charge tolls, and market-rate grazing rights. That’s not hard. Why is the intermediary needed?

7 Jeff R June 30, 2017 at 3:10 pm

There is a general cognitive bias in favor of public ownership as opposed to private ownership, too. Privatizing roads is just not desirable for reasons no one can ever quite put their finger on.

8 Jan June 30, 2017 at 12:40 pm

If we do this as an international project along with open borders and universal Medicaid for everybody in the world, I’m in. USA USA USA USA. Alex/Bernie/Hillary 2020!

9 chuck martel June 30, 2017 at 12:45 pm

“You should also consider auctioning off the Bureau of Land Management’s extensive grazing lands.”

Or you could return it to the native Americans, from whom it was taken by force. Auctioning the property off would disperse it to the same activist investor groups that are intimidating various corporations today. They would, in turn, exert similar pressures on the federal government to expand agricultural rent seeking.

10 White Man Evil June 30, 2017 at 1:25 pm

Native Americans also took that very same land by force. So as long as we evaluate ideas based on the magical fairy dust that is identity politics instead of actual thinking and logic, that’s a brilliant idea Chuck!

11 Chip June 30, 2017 at 5:00 pm

You beat me to it. Wiki’s opening graph on the Kiowa is a perfect example:

“They migrated from western Montana southward into the Rocky Mountains in Colorado in the 17th and 18th centuries,[4] and finally into the Southern Plains by the early 19th century.[5”

Except by “migrate” they really mean murderous rampage.

In Canada my parents live near an Indian reserve that regularly seeks reparations. And yet every member of the band is a descendent of a tribe that killed or drove off every member of another tribe. Explorer Adam Horne described the event in his diary:

“At the mouth of the Qualicum River, Horne’s party and their native guides observed a large fleet of Haida canoes approaching and hid in trees unable to warn the villagers of the impending attack. Afterwards, they observed the attackers as they left holding human heads. When they came to the mouth of the river, they came upon the charred remains of the village of Saatlaam[2] and the mutilated bodies of its inhabitants.[3]”

12 chuck martel June 30, 2017 at 5:35 pm

So expropriation of native American land is justified by the conduct of their ancestors centuries ago? Why so excited by the Russians invading the Crimea and Ukraine? The Crimean Tatars and Cossacks were famous for their savagery. The Kievan Rus’ came to power by murdering the original inhabitants, Then there’s this: http://nailheadtom.blogspot.com/2013/07/orders-of-george-washington-to-general.html

13 Chip July 1, 2017 at 2:47 pm

Comprehension failure. Original poster referred to theft of native land. I showed that this land was stolen from someone else. Conclusion: it’s complicated.

14 Chris July 5, 2017 at 12:45 pm

If we get to ignore what happened centuries ago…why can’t we ignore taking the land from Indians?

15 Jan June 30, 2017 at 6:22 pm

Jesus, what a terrible argument.

16 Bryce June 30, 2017 at 8:40 pm

You’re a troll, Jan.

17 Chip July 1, 2017 at 2:50 pm

What argument? I didn’t make one. It’s just a statement of fact that land in question was often stolen from someone else. You want a simplistic morality play. History is complicated.

18 XVO June 30, 2017 at 2:50 pm

Maybe you should return your land back to the native americans. I’m 1/8th, I’ll let you sign it over to me, I’ll see it get distributed fairly among the tribe.

19 Jan June 30, 2017 at 6:23 pm

Rain dance first.

20 Bryce June 30, 2017 at 8:34 pm

I’m from out west, and the allure of having land publicly owned is… wait for it… so that the public can use it freely. People who actually enjoy the outdoors would never go for its privatization, let alone the creation of more reservations (which are very, very shitty places).

My point is that privatizing public land is a bad idea, and you’re idea is even worse. BTW, I checked out your blog, and your blog about how catch-and-release fishing is torture proves that you’re acumen as an outdoorsman is absolutely 0.

21 chuck martel June 30, 2017 at 10:42 pm

As an example, chicken fighting is illegal in every state, evidently because it’s regarded as cruel to the roosters, who need little or no encouragement to do something that comes naturally to them. The individuals that raise and fight the cocks and spectators at the combats are all arrested whenever possible. Fishermen, on the other hand, are encouraged to catch fish (probably not much more stupid than chickens), “play” them to exhaustion and then release them where their survival isn’t a for sure proposition. What are the differences between fighting cocks and catch and release fishing? First of all, while fighting chickens are flopping noisily about and shedding blood, a fish being “played” can’t be heard and its blood is dispersed in the water. Upon release it disappears beneath the water and is seen no more. Every chicken fight ends with at least one dead chicken. The second, and most important difference is that there’s a very negligible economic aspect to cockfights, other than the value of the cocks themselves and the illegal gambling that keeps the sport alive. Catch and release fishing, on the other hand, is a multi-billion dollar business, beginning with fishing license sales and state fish hatcheries, resorts, boats, motors and accessories, depth finders and sonar, fishing tackle, minnows, gasoline and so on. Only an outdoorsman with zero acumen would bring up the inconsistencies of the attitudes toward these two activities.

22 Bryce July 1, 2017 at 6:19 am

“Only an outdoorsman with zero acumen would bring up the inconsistencies of the attitudes toward these two activities.”

Yes… thank your for describing yourself as someone without knowledge of the outdoors. I couldn’t care less about your argument against catch and release fishing. Go eat some grass for dinner.

23 chuck martel July 1, 2017 at 2:36 pm

“At a meeting of the Dakota, the U.S. government and local traders, the Dakota representatives asked the representative of the government traders, Andrew Jackson Myrick, to sell them food on credit. His response was said to be, “So far as I am concerned, if they are hungry let them eat grass or their own dung.”

https://en.wikipedia.org/wiki/Dakota_War_of_1862

24 Ned June 30, 2017 at 12:48 pm

That seems like it would devolve into a cable/ISP-style oligopoly pretty fast.

25 Moo cow June 30, 2017 at 12:52 pm

Alaska – plus it rains Federal dollars there.

Good god.

26 Thomas June 30, 2017 at 12:57 pm

We should not sell federal lands to give money to the poor because you don’t like Alaska or…?

27 Moo cow June 30, 2017 at 1:46 pm

You want to give money to the poor now? Okay.

28 Thomas June 30, 2017 at 2:34 pm

Right, as I commented above, it comes down to whether the left could compromise – UBI in exchange for selling public lands. I predict that they can’t compromise to that because they value the existence of federal lands over payments to the poor. Some smart Republican should propose this and use Democrat opposition to get more votes from the poor.

29 XVO June 30, 2017 at 2:51 pm

Not sure there are any smart Republican politicians…

30 Jan June 30, 2017 at 6:25 pm

It would go over with conservatives just as well as all Ted Cruz’s proposals. Like a lead balloon.

31 louis June 30, 2017 at 12:58 pm

Investors would buy highways only if they could collect a revenue stream on the investment. And this proposal requires that the capital raised from the sale of the highways be invested in securities in order to generate income, effectively swapping one set of income producing assets (highways) for another (stocks, bonds).

This prompts a question: Why not just have the government charge the tolls on highways, segregate that revenue into a fund, and then pay some modest UBI out of that fund (net of covering maintenance expenses)? Lower transaction costs, less risk. Not all that compelling an idea on its own, but overcomplicating things by introducing a privatization layer doesn’t make it any more compelling.

32 psmith June 30, 2017 at 1:23 pm

“Why not just have the government charge the tolls on highways, segregate that revenue into a fund, and then pay some modest UBI out of that fund (net of covering maintenance expenses)?”

Yeah. If you believe EMH, risk-adjusted returns from investing proceeds of sale of infrastructure in markets shouldn’t be any greater than risk-adjusted returns from charging rents on the infrastructure; conversely, making the infrastructure free to use is just a way to redistribute those rents in kind.

Right?

33 Cassiodorus June 30, 2017 at 1:27 pm

Even if you believe in EMH this proposal doesn’t really make sense for reasons along the line Louis states. The risk would be the same, but the government would need to sell the asset at a lower price than the expected rent.

34 msgkings June 30, 2017 at 1:34 pm

Plus the EMH is about large liquid markets like the US stock market, not giant infrastructure projects.

35 JWatts June 30, 2017 at 2:15 pm

+1 trillion dollars, the EMH doesn’t apply to this at all.

36 Larry Siegel July 2, 2017 at 6:12 pm

No one has seriously suggested that the EMH applies to projects. It applies to the pricing of liquid securities, as msgkings said.

Essentially all companies use capital budgeting procedures that assume some projects are more profitable than others.

37 Anonymous June 30, 2017 at 3:17 pm

You might want Hotelling’s Rule:

https://en.m.wikipedia.org/wiki/Hotelling%27s_rule

It is another assumption of efficiency, but subject to some of the same anomalies as other markets:

http://www.investopedia.com/terms/w/winnerscurse.asp

38 BC June 30, 2017 at 9:30 pm

Yes, winner’s curse implies that the government/taxpayer will be better off auctioning these assets because the auction winner is likely to overpay. Even without a winner’s curse, if everyone bids rationally, the government will gain by selling the assets because the auction will be won by the entity that can make the *highest value* use of the asset, e.g., the highest value use of the land or the most efficient operator of the highways.

Beyond not believing that the federal government is the world’s best highway operator and land developer, the other reason the government should auction off the assets is so that it can allocate the proceeds to an optimal portfolio. Rather than owning a portfolio of (mostly Western US) land and highways, the government can own something closer to the market portfolio of stocks, bonds, real estate, and other assets.

I have not heard anyone yet make a case that (1) the federal government is an outstanding land developer and highway operator and (2) a portfolio of land in the Western US and a bunch of highways is a great investment portfolio.

39 Axa June 30, 2017 at 1:30 pm

How does the fund idea squares with a world with near zero or negative interest rates?

Also, 5% of the famous Norwegian fund is invested in real estate. It would be very funny to sell real estate/land to invest in…………..equities dependent on land/real estate.

40 Cooper June 30, 2017 at 2:12 pm

I think it’s pretty clear that the government isn’t earning market rates from leases on much of its western lands. Privatizing some of these assets could make financial sense.

However, it won’t be enough to fund a UBI. We’re probably going to need to sell off this land just to cover the rising cost of Medicare and Medicaid over the next two decades.

41 Slocum June 30, 2017 at 3:20 pm

One potential advantage is that private operators would be able to build and maintain roadways less expensively than governments do (with cronyish contracting deals and Davis Bacon prevailing wage requirements).

42 Mark Thorson June 30, 2017 at 10:36 pm

And private operators would price use of the assets closer to their true value. Under public management, they were only charging $5 per trip, but now the Shkreli Bridge is $150 and it’s still a bargain compared to what it’s worth. This has the side benefit of relieving traffic congestion in the city, so it’s win-win for everybody!

43 byomtov June 30, 2017 at 1:06 pm

Given that the government extracts inadequate fees for grazing rights fro political reasons, what makes anyone think it will get a fair price for selling off the land. More likely it will be a giveaway to the Western moochers.

44 Cassiodorus June 30, 2017 at 1:28 pm

This, especially when you consider the Western moochers are already complain about the sub-market rates they’re currently charged to graze.

45 JWatts June 30, 2017 at 2:17 pm

“Given that the government extracts inadequate fees for grazing rights fro political reasons…”

I’m sympathetic to the argument that the government is prone to giving out plenty of free (or heavily subsidized) stuff with other peoples money. But what is the alternate use of those grazing lands that generates higher fees?

46 Cassiodorus June 30, 2017 at 2:24 pm

If the government sells it, the purchasers could just charge market rates for grazing.

47 JWatts June 30, 2017 at 2:59 pm

What are the “market rates” for grazing? It’s not like it’s a highly competitive bidding process with dozens of corporations hanging around ready to move 10’s of thousands of cattle onto the cheapest grazing spot available. There’s a lot of land available for grazing and it’s not in high demand.

48 Cassiodorus June 30, 2017 at 3:01 pm

What private landowners are charging for grazing? This shouldn’t be that difficult.

49 JWatts June 30, 2017 at 3:01 pm

“If the government sells it, the purchasers could just charge market rates for grazing.”

To be clear, I don’t actually disagree with this argument. I just disagree with the silly argument that cattle ranchers are getting some huge subsidy from the government. I’m highly doubtful that private entities would be able to charge a lot more without relaxing a lot of the restrictions the Federal government currently puts on the land usage.

50 byomtov June 30, 2017 at 10:11 pm

Charging market rates for grazing?

51 Mark Thorson June 30, 2017 at 1:12 pm

Don’t forget to auction off our fleet of aircraft carriers to the highest bidder. Russia would buy it, except they don’t have any money. China or maybe Japan.

And why exactly do we need a Smithsonian Institution? Auction it off on eBay!

52 Daniel Weber June 30, 2017 at 1:12 pm

It’s like a combination of all the bad ideas put together in one Voltron of suck.The only thing missing is income-based-repayment on student loans.

53 JWatts June 30, 2017 at 2:10 pm

I’m not completely to the “Suck” stage, but the idea doesn’t seem particularly good.

54 Larry Siegel July 2, 2017 at 6:16 pm

Exactly. Selling Federal lands is a one-way street; if the lands have a legitimate public use, and many (not all) of the wild lands in the west do, the public will only get them back at a much higher price. And the process is subject to rent-seeking and corruption. A UBI will not help most of the poor; it will hurt those whose current benefits exceed the UBI.

Income-based repayment of student loans is, of course, OK if each transaction is entirely voluntary on both sides. You should be able to sell part of your human capital to multiply the value of the rest of it.

55 prior_test3 June 30, 2017 at 1:15 pm

Didn’t the Russians try something like this, after giving up on the idea of the state actually being able to provide anything for anyone?

56 Gordon Mohr June 30, 2017 at 1:20 pm

Mire generally, perhaps all sin/externality/pigouvian taxes should be automatically allocated to a general citizen’s rebate that also works like a de facto basic income?

(Such an automatic, broad-based allocation of this sort of tax revenue might even help check the occasional campaigns to “tax [unpopular activity] and direct all the funds to [symbolic pet project]” – as seems especially popular here in California.)

57 Mike Linksvayer June 30, 2017 at 1:21 pm

I like transportation (with all its externalities) paying out to all, but auctioning of the roads seems unnecessary: just drastically increase effective fees (taxes, whatever) based on distance and vehicle

58 Benny Lava June 30, 2017 at 1:25 pm

Remember kids, taxes are good if they are levied by for profit corporations but bad if levied by non profit seeking governments.

I am just a simple man. Explain to me how privatizing revenue from roads will lead to long term funding for poor people or how this even remotely resembles Alaska’s oil trust fund, which is essentially a big government tax on private companies.

59 Adrian Turcu June 30, 2017 at 1:30 pm

Open borders AND basic income…. How could it go wrong?
If the Government has underutilized assets, how about putting them to work to pay off debt, rather then creating another entitlement that in the future politicians will propose be expanded past funding because the Public will always vote for a free lunch.
I don’t get this obsession with giving people money. This is not how you grew up and got successful: why do you keep advising with your heart, and not from experience?

60 mpowell June 30, 2017 at 1:38 pm

The idea that there is any significant free lunch to be had with private freeway ownership or auctioning off public lands that are already leased for things like grazing (the only real economic value for the land) is really stupid. Anyone who believes it just outs themselves as either not very smart or far too enamored with private ownership. There is definitely some loss here, but it is not even a small fraction of the cost of UBI.

61 R.G. June 30, 2017 at 1:52 pm

modest UBI of $10K/year for every US person is about 100 trillion USD in assets assuming reasonable 3%/year withdrawal rate – seems rather beyond what the world’s financial system can efficiently handle today.

To make such things a reality (and make the world more fair and efficient) we need to financialize everything much more. Pay per use public services and infrastructure, trading in individual’s earning rights, many cool ideas out there.. Doubt that’s gonna happen before homo sapiens turns into/is replaced by something better, for now we can’t even have fair trading in such easy to do things as health risks.

62 Bob June 30, 2017 at 1:55 pm

It’s difficult to make a road really private, for political reasons. There’s plenty of experimentation with private toll roads in Europe, and it isn’t all rosy: Companies operating roads fail too, and can leave the country in a worse state. In practice, what happens is that the successful companies that operate the highways are the very same inefficient, giant companies that are designed to overcharge governments, and who live by their ability to bribe officials, like Ferrovial.

Any movements towards privatization require major changes in how companies interact with government in the first place, to make interactions market-like, because reality is anything but.

63 Moo cow June 30, 2017 at 10:02 pm

Yeah. See the Indiana Toll Road privatization faceplant for one example.

64 Shahid June 30, 2017 at 1:56 pm

Oh wait, you’ll first have to find a willing buyer for those assets. Government assets are normally heavily subsidized and incurring losses, which doesn’t make them very attractive to potential investors.

65 JWatts June 30, 2017 at 2:19 pm

Currently, the roads are paid for by some fees but mostly fuel taxes. Is the government going to include the receipts to those fuel taxes in the bargain, or eliminate them completely?

66 Quite Likely June 30, 2017 at 1:59 pm

How could someone possibly imagine that this plan would produce better highways? Just like every other privatization of transportation infrastructure it’s a recipe for underinvestment and rent seeking.

67 chuck martel June 30, 2017 at 4:08 pm

So true, a single national airline, like Aeroflot, for instance, would work out a lot better than a host of competitors. Taxi companies could be municipal, state or federal entities, too. Nationalize all those many trucking outfits and the railroads as well.

68 robin July 1, 2017 at 10:51 am

seems pretty clear that some markets are natural monopolies and others are not. interstate road transport infrastructure seems more like a natural monopoly than a highly competitive marketplace. dont really see big ompanies building competing roads.

69 Al June 30, 2017 at 2:00 pm

Wouldn’t work as the trust fund would be raided almost immediately.

70 mkt42 June 30, 2017 at 3:28 pm

Yes! I was waiting for someone to say this. The fund would be depleted within oh 20 years if not sooner. Because Democratic administrations would raid it to pay for government programs. Republican administrations would raid it so they can keep taxes low. (Around 1990 California had a budget surplus and the Republican governor cut taxes to “give the money back to the people” instead of creating a rainy day fund. Which would’ve come in handy because the 1990-91 recession hit California very hard, arguably harder than the 2008 Great Recession, and when tax revenues tanked California had to increase its tax rates even though that’s a pro-cyclical policy that exacerbates an already severe recession.)

71 The Engineer June 30, 2017 at 2:00 pm

Meh. Specifically to highways, how successful have Tollways been? The Indiana toll road was privatized and then went bankrupt! The Illinois tollway system went for years barely covering its cost of operation (before they DOUBLED tolls).

How about that private tollway in Texas, how is that thing doing?

This seems like a lot of magic happy talk, not economic analysis.

72 The Engineer June 30, 2017 at 2:01 pm

BTW, I totally support privatizing roads and turning them into Tollways. I just question whether they generate enough income to support a UBI.

73 Larry Siegel July 1, 2017 at 7:55 pm

Sure, just by driving around, motorists can pay for the entire country to have a subsistence income. NOT

74 Tarrou June 30, 2017 at 2:02 pm

Questions for UBI supporters:

1: How is it to be funded? The article above gives a small funding stream. Certainly not enough to do UBI the way it is envisioned (replacing all functions of the welfare state). If we gave ten grand to every citizen, that’s roughly 3.5 trillion dollars per year, or almost the entire federal budget, and even if we eliminate all welfare functions, that leaves defense, courts, law enforcement, the state department, EPA etc. that still need to be funded.

2: Any UBI small enough to be affordable is too small to replace the social safety net for the truly hard-up. The very poor/elderly/disabled won’t be getting health care coverage at ten grand a year, not and still pay rent.

3: You will always have people too devoid of skills/ability/forethought to use their UBI wisely. So what happens when someone blows their UBI in two days and their kids wind up on CNN reprising Ethiopia? How do you stop political pressure to reinstitute the welfare state after UBI is put in place? Do you really think the American public won’t vote for that?

4: Even if you figure out all this, given the above constraints, how do you stop future political pressure to constantly raise the UBI, until at some point it becomes unaffordable?

75 Cooper June 30, 2017 at 2:22 pm

I think #3 is the least problematic of the four.

We could create a bank account through the post office for every American into which we would deposit their weekly UBI check. We could also create a law that says UBI income may not be used as collateral for debt obligations. You couldn’t sell away your future UBI income for a lump sum payment.

We wouldn’t give people a single check of $10K. We would give them 50 weekly checks of $200 or 12 monthly checks of $833.33. That way you wouldn’t have the “Daddy gambled away our UBI by January 9th” problem.

#1 is the biggest problem, IMO. You can’t raise that kind of revenue in the US at the federal level without some kind of massive VAT.

76 Tarrou June 30, 2017 at 10:13 pm

@ Cooper
I’ve heard that explanation, but surely that only slightly mitigates the problem. We know that some people will blow their UBI as soon as they get it. Whether it is $200, or $800 or $10,000 is immaterial. They will then have nothing to live on. Their children will then have nothing to live on. We’re already past the “let charity pick up the slack” mode of operation. We will have eliminated all means-tested forms of public assistance. Are we that hard a people to tell them that they’ve had their UBI, so they can starve? I doubt you are. I am absolutely sure a majority of voting Americans are not. So there is no bar to re-erecting the welfare state on top of the UBI, which remember, we can’t afford as it is.

77 Mark July 1, 2017 at 12:07 am

The Bill Gates and Warren Buffets of the world can fund soup kitchens to feed these people. They can build 3D-printed orphanages, staffed with cheap and hard-working robots, to provide shelter for those neglected children. The bottom 10% of the future will still get by and probably have a higher standard of living than you or me today.

78 Tarrou July 1, 2017 at 6:40 am

Y’all aren’t filling me with confidence here. Anyone have an answer for my questions that isn’t a non sequitur or a fantasy?

79 Todd K July 1, 2017 at 9:57 am

“The bottom 10% of the future will still get by and probably have a higher standard of living than you or me today.”

*Probably* have a higher standard of living? It won’t be close.

80 Larry Siegel July 2, 2017 at 6:19 pm

The bottom 10% far in the future may have a material standard of living higher than the average today, but if they’re surrounded by crime, filth, and stupidity, as seems likely, they will still be poor.

81 chuck martel June 30, 2017 at 4:11 pm

1. It will be funded as expenses are funded now, by printing money, or actually enpixelating it.

82 Tarrou June 30, 2017 at 10:20 pm

I find it interesting that so many smart people are proposing the UBI, and all their talk about second- and third-order effects is quite convincing. But they never get around to the basics of the incentives and the cost. Surely, someone must have crunched some numbers! I was interested in UBI until I did some napkin math. I’m still open to the idea, but the cost and the lack of a barrier to future returns of the welfare state seem to me to be absolute deal-killers.

The only way to make a UBI affordable is to make it too small for the really hard up to live on, or to make it not universal.There is no brake on the actions of future polities, no way to insure that the delicate system, even if it were figured out, is not destroyed by future tinkering.

I’m serious here. Someone convince me of this. It’s the sort of thing I’d like to support, and I can’t believe this many serious economists are backing this shit without doing some real basic calculations.

83 Brian June 30, 2017 at 2:08 pm

Aren’t highways example number one of “natural monopolies”?

84 Borjigid June 30, 2017 at 2:09 pm

I think this is the first time I’ve seen everybody in the MR comments agree on something, namely that this libertarian UBI proposal is bad.

85 JWatts June 30, 2017 at 2:14 pm

“.., privatize the highway network to create a permanent income fund.”

Why wouldn’t you include Amtrak in this? Otherwise, you are subsidizing one group of citizens and taxing another.

86 rayward June 30, 2017 at 2:43 pm

Yes, turn highway travel into air travel. What an idea. A dumb idea. Think of everyday travels on the highways as rewarding as occasional travels by air. People will believe anything. Flying cars and spaceships to Mars.

87 Larry Siegel July 1, 2017 at 7:59 pm

We will eventually have flying cars and spaceships to Mars, but we will never be able to have everyone live at the expense of everyone else.

88 Ray Lopez June 30, 2017 at 2:44 pm

last week’s Economist had something on this: “I have long proposed selling “government” land in the West but Vernon takes it a step further, privatize the highway network to create a permanent income fund” – not V. Smith’s idea but the fact that in the USA there’s very little privatized infrastructure, compared to the EU and elsewhere.

89 JonFraz June 30, 2017 at 2:44 pm

This would be opposed by a lopsided majority of the public on the (quite sensible) grounds that the highways were mostly built with public funds raised from the taxpayers, some toll roads excepted, and should not be turned over to private businesses to profit from.

90 msgkings June 30, 2017 at 2:55 pm

I’m not in favor of this proposal but they wouldn’t be “turning over” the assets, they would be selling them at market prices.

91 The Other Jim June 30, 2017 at 3:38 pm

>a permanent fund sending checks to every citizen

Every “citizen,” eh? Yeah right. That’s a good one.

Alex, you and your boy Vern might want to look up “libertarian” in the dictionary someday, because you clearly have no idea what it means. I’ll give you a hint: it does not involve setting up a mammoth government program to redistribute money.

92 JWatts June 30, 2017 at 4:07 pm

This is a fall back Libertarian position. The idea being, if you conclude that the welfare state is inevitable, then it’s better to do away with all of the myriad of government programs that support it and instead just write one check to everyone and let them spend the money the way they see fit without hiring an army of government workers to oversee everything.

93 Paul July 2, 2017 at 6:51 pm

This was Friedman’s basic income argument too. And he was no friend to mammoth government programs.

94 Dan Hanson June 30, 2017 at 4:56 pm

A universal basic income is a horrible idea that will carry enormous moral hazards.

I keep hearing how a universal basic income would allow people the freedom to pursue more education, to engage in more rewarding but lower paying jobs, etc. The assumption is fhat people really want to work, so giving them a basic income just empowers them to do what they really want, rather than being trapped in lousy jobs for financial reasons.

I suspect the people who believe this are academics and professionals who love working and can’t imagine just sitting around doing nothing, so they don’t see this as a job killer.

If you think this way, try imagining that you are a kid who just graduated high school who isn’t particularly motivated, not smart enough to do creative, fulfilling work, and facing a lot of hard choices to find a job. In the meantime, your buddies are living on their UBI, partying every night and having a grand time. So now you get your first UBI check, and it feels like a million bucks to a poor kid right out of high school.

I guarantee that the existence of that basic income WILL cause some of these kids to take the easy road and not do the hard things necessary to get a proper start in life.

The mechanization of agriculture caused millions of people to take the very hard step of leaving the family farm to move to where the new jobs were. What do you think would have happened if we had a basic income for those people? I suspect that many of those people and their children would today be wholly dependent on the state. We would have a permanent underclass in rural America, and a giant political lobby for constantly increasing the UBI.

If you don’t believe this will happen, look at native reservations in Canada, where guaranteed incomes resulted in large numbers of people trapped in permanent poverty. Have a look at Atlantic Canada, where in essense a UBI type subsidy props up fishermen in the off-season. The result of that was that Atlantic Canadians never had an incentive to build off-season industries. Contrast that with Maine, which never had the subsidies but instead evolved its economy to solve the seasonal problem.

95 Alan Smith June 30, 2017 at 7:36 pm

Search their local paper and see what the State Government has in plan for the Alaska Permanent Fund.

https://www.adn.com/search/?toggle-drawer=on&q=PFD

96 Tony Cohen June 30, 2017 at 7:36 pm

“That competition would keep tolls affordable.”

Somehow I am guessing our current society as constructed would struggle with actually having, maintaining and funding the public option…in light of existing failures I can only imagine how that would work out in this system…

97 BC June 30, 2017 at 8:52 pm

Agree with the efficiency gains from selling land especially and probably also highways for all the standard reasons. Using the proceeds for UBI, however, I don’t think is rational. Money is fungible. If one wouldn’t raise taxes now to pay for UBI, then why would one create a UBI benefit out of property sales? After all, the proceeds could be used to reduce current and future taxes. We have not even funded the entitlements that already exist so why would converting one asset (land and highways) into another (cash) cause us to create a new entitlement? Selling assets does not make one wealthier, just more liquid.

Land and highways are on the asset side of the federal government balance sheet and future entitlement (e.g., Social Security, Medicare) obligations are on the liability side. Why not use the asset sale proceeds to offset future entitlement liabilities by funding retirement savings accounts? (The government can still invest the funds in a combined sovereign wealth fund, if desired.) Each current Social Security and Medicare recipient will be “bought out” of their promised benefits with a one time deposit into their account. They can use that account as a Social Security replacement and to pay Medicare insurance premiums. If desired, they can use funds in the account to buy an annuity, for example. Remaining proceeds will be used to repay current workers for past Social Security and Medicare contributions, again as a deposit into their accounts. Instead of paying Social Security and Medicare taxes in the future, those payroll deductions will be deposited into their accounts as mandatory savings. With this structure in place, all new workers can similarly deposit payroll deductions into their mandatory savings accounts in lieu of Social Security and Medicare taxes. Then, everyone can begin withdrawals upon reaching retirement as a Social Security replacement and to pay Medicare insurance premiums.

If, after funding these accounts to buy out everyone from Social Security and Medicare, there is still money left over from the land and highway sales, then those proceeds can be invested in the sovereign wealth fund to offset future implied “bailout” liabilities, such as federal assistance to flood victims. Moral hazard problems aside, we all know that after a flood, the political reality is that flood victims will be bailed out so those are effective liabilities of the federal government even if there is no official obligation. After funding all of these unofficial liabilities, if there is still money left over, then dividends from the sovereign wealth fund can be used to pay annual government operating expenses. After all of that, if there is still money left over, *then* we can talk about spending the residual on UBI which, after all, is equivalent to a negative tax. If the sovereign wealth fund can pay all government liabilities and operating expenses, then negative taxation would make sense.

98 Edgar July 1, 2017 at 8:56 pm

+1 A $20 trillion national debt, $222 trillion in unfunded liabilities, a Republican congress incapable of even reducing the deficit, and Alex wants to talk about creating another handout program? And how long would that per capita pay out last with a Democratic congress? I Don’t subscribe to the WSJ, so I couldn’t read through to the full article, bot somehow I imagine the idea is that the extra income would raise people out of eligibility for existing handout programs. This of course would mean it would be decried as benefiting “the rich” and so of course it would have to be modified to buy votes from targeted groups. Unfortunately, no matter how good an idea is, it will always fail in the US if it doesn’t buy the right votes.

99 CorvusB June 30, 2017 at 11:02 pm

Horse puckey. This idea is tomfoolery. ALL you have to do is to look at the history of highways, and you are forced to realize how ridiculous this idea is. We STARTED with private highways. Guess what. They didn’t work very well. That is the WHOLE reason highways became a public good. What idiocy it is to try and take them back to that state. Pfhuh.

100 jorod June 30, 2017 at 11:05 pm

Only in academe. How about toll roads?

101 jorod June 30, 2017 at 11:06 pm

On the other hand, maybe we could sell them to the Chinese?

102 brad July 1, 2017 at 2:50 am

There seems to be no concept of scale or urgency of the issue in these privatize for x to solve for y libertarian style thought experiments.
For example the Forest Service and BLM manage around 440 million acres. That would be an area 6 times larger than the state of New Mexico being added to the rural real estate market In mostly the Western part of the country. If this was all done in a short window of time that the prices would be very low since there would only be a handful of buyers with capital and who are also ready to buy. This just seems like a repeat of how Soviet assets were sold at the end of communism cheaply to a small group of well connected buyers and in a way that brought limited benefit to the public at large.
Even if all this public land could be sold at $2000 an acre the revenue from this sale would only be $880 billion ($2700 per person), I just do not see the point in going through all that effort to get rid of a system that although clunky at times is generally well received by the public in the areas they serve and seems to do an admirable job of balancing use, conservation, and management.
Do understand that the BLM’s annual budget comes out to less than $5 a year per acre they manage. If expenses were that spartan in many other agencies it would be a major accomplishment.
Please libertarians find other arms of government that need your wisdom first such as health care or higher education, before trying to reinvent the West or turning everything into a toll.

103 peri July 3, 2017 at 11:16 am

Good god, yes.

Surveying the federal government and concluding that the perpetual free lunch for everyone plus the wished-for arriving masses from around the globe, is located in the arid public lands of the West, is lunacy.

It says a lot more about our hosts’ urban obsession and indifference to the environment, than their much-vaunted “contrarian” thinking caps.

I enjoy this blog a lot, but there’s a reason my husband only glances at it over my shoulder once in a while and remarks, these people are unserious, aren’t they?

104 brad July 4, 2017 at 12:17 pm

Yes indeed, I am big fan of the blog as well, but it seems like they fail to see that the way public lands work in the US, and how it is actually a huge asset to have.

105 spencer July 1, 2017 at 12:57 pm

Private toll roads keeps getting brought up here. I remember all the attention you gave the Indiana toll road when it opened.

But I do not remember your saying a thing when it went bankrupt some 8 years later.

Moreover, the poor example of the Indiana toll road does not seem to be unusual, as several examples of private toll roads in the US in recent years did not do any better.

http://usa.streetsblog.org/2014/11/18/the-indiana-toll-road-and-the-dark-side-of-privately-financed-highways/

If you are going to keep advocating private roads maybe you should try to explain why recent experiments with them have had such a poor record.

106 Roadrunner July 1, 2017 at 1:03 pm

Yes, let’s give ourselves something nice and make those folks in flyover country pay. Nice.

How about this? We sell off the Lincoln and Holland Tunnels to do it?

107 Colin July 1, 2017 at 2:49 pm

Little wonder that Alaska is second among all the states in income equality.

1. Alaska currently has the country’s highest unemployment rate: https://www.bls.gov/web/laus/laumstrk.htm

2. I wonder if this mostly reflects that billionaires tend to stay away from Alaska, or that the state isn’t home to dynamic companies like Apple which create lots of millionaires? If no, unclear how this is really a point in Alaska’s favor.

108 Edgar July 1, 2017 at 9:09 pm

Alaska, like Canada, has an relatively larger Indigenous population. Could it be that indigenous folks don’t relate to the economy in the same way as other identity groups?

109 Jon July 2, 2017 at 4:56 pm

The Alaska Permanent Fund invests oil royalties. This seems to imply that Alaska did not sell its reserves, but leases them and takes a share. This is not equivalent to selling off the highways.

110 Vernon L. Smith July 2, 2017 at 8:15 pm

Some comments infer that toll road bankruptcy implies policy failure. That only indicates the bidders overvalued the asset’s future growth and revenue. Market economies are profit and loss systems. The asset has not disappeared, but is revalued downward so that the next buyer can get a market return on the investment. Meantime, the road is creating value for the users. Government owned assets, like the VA hospitals can’t go bankrupt, and get revalued and reassigned in the same manner, but nevertheless are “failures” paid for by poor service delivered, and budget waste. Th road privatization was a success story for Indiana, and users, but not the first financiers. Good example of highway privatization at work.
https://www.wsj.com/articles/indiana-toll-road-exits-bankruptcy-protection-1432907793

The primary achievement of the AK Permanent Fund was to take a portion of the AK oil revenue (about 30%) and set it aside, with protections, for the citizens. Interesting fact is that the AK gov. with their 70% has spent most of it, and is now trying to find ways to get at the Fund, but so far not succeeding. AK libertarians were at the forefront of prying those income streams out of the governments hands back it the 1970s-80s.

111 spencer July 3, 2017 at 4:07 pm

What service did the public get from the privatization that they would not have gotten if the state had continued to own the road.?

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