The normative dynamic properties of UBI

While a majority of adults (primarily older non-college workers) would vote in favor of introducing UBI, all future generations (operating behind the veil of ignorance) would prefer to live in an economy without UBI. The expense of the latter leads to lower skill formation and education, requiring even higher tax rates over time.

Here is much more from Diego Daruich and Raquel Fernández.

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Would it have killed them to use the normal English phrasing? IE The UBI will be bad over the long run with various negative effects.

It wouldn't have killed them, but it would have killed their ability to sell a free-money utopia.

Doesn't really matter any way, since UBI is not politically feasible once the Rawlsian veil is lifted: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3518686

I loved your post! I follow your blog quite often and
you’re always coming out with great ideas! I shared this
on my Facebook and my followers did like it! Keep up the good work.

Awesome post! I have been following your blog for a few months
and I can say that they are always quite helpful to me. Keep up the good work.

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Too much consumer spending and rising consumer spending is harmful to GDP growth?

Economists argue today for cutting costs, and costs are always labor costs, never profits, in order to increase GDP most rapidly.

Well, if GDP isn't paid for by labor costs, which ,zero sum, are consumer income enabling consumer spending, unless you argue workers are never consumers and consumers never workers, then consumer spending and thus GDP become dependent on government funding consumption of GDP.

UBI is a "simple" means of government driving up consumer spending so businesses don't need to fund consumer spending by hiring consumers as workers and paying them more and more to drive up GDP.

Other methods are food stamps, housing vouchers, government paying for insurance benefits like health care, instead of businesses paying for health care as part of employment.

If government should not fund consumer spending, then what policy do you propose to have businesses fund all and increasing consumer spending?

Given profits are the business revenue not put in the pockets of consumers, do you argue profits should be taxed at 100% so businesses will use the number one tax dodge, paying workers/consumers, 100% of revenue to not pay taxes?

Milton friedman argued in a Newsweek column that high tax rates on profits made paying too many workers too high wages and benefits, drove too much consumer spending which in turn drove up prices driving businesses to build too many factories (paying too many workers) and then hiring too many more workers who then produce too much stuff which enables workers/consumers to buy too much stuff, which requires businesses keep paying workers/consumers too much to maintain the consumer oriented economy, leading to labor and political action to force businesses to increase their already excessive labor costs, when businesses should focus on profits by cutting labor costs and consumer spending.

It's ironic that Friedman's policies to cut GDP growth are now used in attempts to increase GDP growth.

Yes, rising consumer spending is harmful to GDP growth.

Productivity grows GDP, and investments increase productivity. The more people consume, the less resource available for investing.

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Re: Other methods are food stamps, housing vouchers, government paying for insurance benefits like health care, instead of businesses paying for health care as part of employment.

You can find a lot of agreement on the Right and Left that employer-provided health insurance is the Original Sin of our healthcare system. No other country does this.

"You can find a lot of agreement on the Right and Left that employer-provided health insurance is the Original Sin of our healthcare system. "

+1, it means there's no/poor portability in insurance and that there are less cost constraints on health care costs

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I would've liked it better in Soprano-style Italian Goomba:

Heya hold on a minute Tone, hold on. So you're telling me that giving people free money for doin' nuttin' will cause that load a people to become bums? I mean, they don't gotta do nuttin' and they just get money? They'll just sit around and not invest in nuttin'? Get da hell outta here! Yous gots to be kiddin' me Tone! Good one Tone!

I feel this 'phrasing' would've been infinitely more relatable, as well as graspable to a larger percentage of the population at large.

So, you argue that what businesses want most is customers with constantly decreasing consumer spending?

Ie, neither businesses nor government should put money in consumer pockets?

The best customer has zero money to spend?

Even if you argue some are virtuous and deserve to have business put money in their pockets to buy from businesses, the result is declining GDP as the half deserving consumers become the only consumers of which half are not deserving of businesses funding their consumption so they get fired, and removed from the economy, ....

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Money for nuttin?

Da chicks for free?

I don't got to load deez cullah tee vees?

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Btw, UBI was effectively invented by Milton Friedman.

Not really. Friedman was a negative income tax, which is effectively a premium paid atop your wage if your wage is low. In other words, an incentive to work.

UBI is a disincentive to work. If you only need $10K/year to live in a crappy apartment and smoke weed all day, while you alternate between video games and pornography, then you have zero incentive to work under UBI. That's not good for anyone.

If UBI matched your first $10,000 dollars earned, that would be a lot closer to Friedman.

Finally, UBI is almost 100% inflationary. Let's say there is a city with a supply of 5000 $400/month apartments--the cheapest apartments in the city. When UBI comes along and drops a bunch of cash on the tenants of those apartments, they will suddenly all look for a slightly nicer place since they now have more money. And so, the demand on $450 and $500 apartments will increase.

Concurrently the landlord will be facing a larger tax bill to pay for UBI. So, he will take his $450 apartments that have excess demand and raise the price on those to meet demand AND cover his new expenses.

And in the end, the guy stuck in a $400 apartment before UBI will be in the exact same apartment after UBI. It will just cost more.

The prices on everything will rise under UBI. Your purchasing power before and after UBI will be precisely the same.

+1, a Wage supplement is fundamentally different than a UBI

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Whatever happened to WorkFare? Fell below minimum dignity threshold?

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It's unclear to me whether MF would have rewarded people with voluntarily zero incomes with a negative income tax. And if he would have, that's interesting information but does not affect my view that UBI would be a catastrophe of the first order. Just because I admired MF does not mean he was perfect.

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Re: If you only need $10K/year to live in a crappy apartment and smoke weed all day,

Where in the US in 2020 can you do that on 10K a year?

Look at the average household incomes for the bottom counties in Mississippi. There are millions of people in the country living at roughly that income level.

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

The bottom 5% of the US household have incomes $10K per year. If you assume it's two people sharing a household that would be $20K per year, which would put them at the 15 percentile.

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So basically, in a world with multiple generations, imperfect labor markets, and skill formation, it's much less costly to deal with an automation wave by expanding wage insurance and retraining programs for younger working populations, and boosting social security / lowering retirement age for older, non-college educated populations, with the latter being a de facto UBI for the least re-trainable cohort.

That makes perfect sense to me. Unfortunately UBI proponents are attracted to the radical simplicity of the idea. Hearing that something approximating our existing mix of social insurance programs is actually optimal will just be ignored.

So the boomers need to get bailed out again. Somehow I’m not surprised.

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That's not quite what the abstract says. "The results suggest that UBI may be a useful transitional policy to help current individuals whose skills are more likely to become obsolete"

It's hard to say from the free parts, but it looks like they childlike faith in "education policies...to increase the likelihood that future cohorts remain productive and employed." Particularly so, if the worst (best?) case scenarios about AI become reality.

I always liked the thumbnail "robot socialism" for this reason. A UBI might really be gated by true AI.

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it's much less costly to deal with an automation wave

The current automation wave is mostly over, not just beginning. But also, it's not lower-income workers doing physical labor who are most at risk (remaining work of that kind is extremely difficult to automate). Rather it is higher-income people who sit at computers working with text and images who face the greatest risk of having their functions automated. An algorithm is likely to write a usable Hollywood script or legal brief long before it can put new shingles on a roof, help a nursing home resident get dressed, make a bed, or pull weeds.

Making a major policy change in anticipation of an 'automation wave' that isn't going to happen would be a terrible mistake.

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>all future generations (operating behind the veil of ignorance) would prefer to live in an economy without UBI.

It's behind a paywall, but I'd be interested to know how they polled all future generations

Yeah. The statement is both pretentious and ludicrous on the face of it.

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At a guess, they modeled them? Then polled them?

Maybe they're Hansonian Ems...

Unsuprisingly, the polling results exactly matched the models.

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Do future generations understand the iterated prisoner's dilemma?
By demanding productivity of their ancestors they are committing themselves to a life of selfless dedication to their own descendants, right?

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This argument should apply to anything that raises the reservation wage, no?

Minimum wage, unions, 8 hour workday, worker protections, social security, pensions, mandatory schooling border controls, etc.

All consumer spending that pays your too low wage is bad. The solution is to cut all consumer spending until no one consumers more than the lowest, poorest, consumer.

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Eh not if companies like Amazon that paid $0 in taxes are the core component of UBI; Europe already has a VAT and there's plenty of evidence of its success.

Just curious, how do you measure the "success" of a VAT?

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Bezos follows Keynes not Milton Friedman and pays all revenue to workers and has zero net profits over the past quarter century.

That Amazon stock prices have inflated at a high rates does not mean either profit or income has occurred. Ie, should you be taxed on the price increase on your home as if it is income?

The price on Amazon capital, its warehouses, computer servers, its organized workforce is much higher than the labor cost to build it, just as Sears price was higher than the depreciated labor cost of its capital circa 1980. Tax cuts to "unlock wealth/value" destroyed the first, original, Amazon well before Jeff Bezos reinvented Sears mail order. Turns out there was no profits in Sears, just lots of locked up labor costs which were critical to Sears continued existence.

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A VAT is highly regressive. The US tax system is much, much more progressive than Europe. In Europe, the working poor are forking over some 33% of their earnings to the gov. The US, the working poor are making money from the tax system.

A VAT along the lines of Fair Tax is a very good idea.

If you add in State income tax, Sales tax and Health Insurance premiums, the poor and middle class in the USA pay equivalent taxes and get less for it.

In European countries, lower-income and middle-class taxpayers pay an average marginal wage tax rate of 49 percent on income above $37,000 a year, and an average value-added tax (VAT) of 20 percent. Those same U.S. taxpayers face a marginal wage tax of 32 percent and an average sales tax of 6 percent. The average health insurance premiums and deductibles are 10% of income.

USA college grads also have to pay for school which is much cheaper or free in most of Europe.

Not true.

France has a "Tax Freedom Day" (see wiki) of 27-July (57% tax burden). Germany is 11-July (52% tax burden)

The US is 24-April (31%)

Median income in France (PPP, again see Wiki) is $31K, Germany is $33K. Median income in the US is $43K.

So, at the end of the year, the median earner in France has $13.3K left over after paying taxes. The median earner in the US has $29.6K left over.

The US earner will have to pay state taxes of 2-3%. Let's say 2.5%, or $740. And then the US earner will have $29K left. Assume 33% for rent/mortgage, 10% saved, and that means the US earner has $16.5K to spend on stuff, taxed at maybe a 5% sales tax, so anotehr $800.

All up, the US earner is $28K discretionary at the end of the year. And with $43K gross, they easily qualify for subsidized health care. A bronze plan for a family of 4 years olds will run about $450/month with subsidy.

So, that means the health care cost is $5400. So, the US earner has about $22K left over after taxes and health care, the France earner has $13.3K.

No brainer, eh?

For college, if you pick a state school college is cheap. Europe doesn't pay for your room and board for college--you have to pay for that which is the same as the US. Wyoming has an in-state tuition of $5000. Florida is $6300. Montana is $6400. Utah is $6500. Pretty dang cheap. Use that to get a an engineering degree and you'll do fine in life. You'll have that college tuition repaid in the first year.

The US absolutely crushes the EU here. Think about it: Median earner in France has $13K left over after all taxes with health care. Median earner in US has $22K after all taxes and buying health care.

"free" college is worth about $20 to $30K total for a degree. Spread out over 75 years, that's $333/year.

No thanks. Let me keep the money and pay for it myself.

Apples to oranges. In most other countries healthcare is funded mainly through taxes.

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"In European countries, lower-income and middle-class taxpayers pay an average marginal wage tax rate of 49 percent on income above $37,000 a year, and an average value-added tax (VAT) of 20 percent. Those same U.S. taxpayers face a marginal wage tax of 32 percent and an average sales tax of 6 percent. The average health insurance premiums and deductibles are 10% of income."

What? 32 percent federal bracket doesn't start until over $160,000 for an individual. 24 percent starts at $84,000 for an individual. Most states have a top marginal rate of 4% or less. There's no question federal income tax in the U.S. is much more progressive than the EU and maybe the most progressive in the entire world. 50% of Americans pay no federal income tax.

Low-medium income workers pay 15% to social security but receive benefits far in excess of that so that's a huge net gain for them. Many colleges are free or very low cost for low-medium income families since U.S. universities engage in extreme price discrimination.Low income families receive free medical care, while low-medium income Americans receive heavily subsidized health insurance.

> 32 percent federal bracket doesn't start until over $160,000 for an individual.

Yes, very true. The second quintile in the US has an average of $37.4K (2005 dollars). Their effective income tax rate is -1%. That is, they earn money from the IRS.

They pay 9.9% effective tax rate overall. That is -1% income tax, 9.2% social security tax, 0.5% corp income tax, and 1.3% excise tax.

That entire 9.2% comes back to the taxpayer later in life.

So, in terms of paying things to move society forward--things such as schools, roads--the bottom 40% in the US don't pay a dime towards that stuff. They only pay for their own social security.

In Europe, EVERYONE is paying for schools, roads, etc. The working poor in Europe are paying crushing taxes.

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>A VAT is highly regressive.

It probably depend on whether you define "progressive" against income or wealth. Obviously, an income tax is going to do well at taxing high income individuals, and particularly, high w-2 individuals. The unfortunate corollary is that the income tax is only so-so at taxing high wealth individuals.

A VAT can do a very good job of capturing those that have wealth, no income and live a lavish life. Something our income tax system today cannot. Which is why a Fair Tax makes so much sense.

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Even though I personally am against UBI, I am skeptical of this article. How do they know -- or even have a good estimate of -- the responses of labor supply, demand for education, etc. in response to UBI? There've been only a tiny handful of social experiments.

Surely their results are driven by the assumptions they make about certain key parameters. I can create a model where cutting taxes results in an increase in tax revenue, if I make a sufficiently ridiculous assumption about what the value of t* is, or whatever Laffer called it.

Which isn't to say that they made unreasonable assumptions, but part of the problem is how do we even know what's reasonable or unreasonable. If they can show that their results hold under a complete range of reasonable (and even some unreasonable) assumptions then we can believe their results.

Again, I agree with their conclusion but I question the soundness of their model. It's very easy to create a model that supports whatever conclusion you desire.

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There is a cross over point where the past and future generation overlap.

The latter has the majority to rescind the UBI from the former. The further complication is that, at crossover, the tools looking backward are much more accurate than the tools used to pass the law initially. The equilibrium is found by allocating sample space to each generation based upon the utility of dealing with the issue. AT what point is it useful to attempt the generational over lap.

WQhat is the utility of dealing with the over lap issue?
It is the point where Nash and Coase both apply, the two parties agree on uncertainty, and make the current deal with a promise to review later. That is the point where a single agreement action yields the most reliable contract. Each arty getting equal uncertainty. We know those points in the new math.

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It's an interesting idea, that UBI would produce future generations of slackers. I suppose it's always a balance, between necessary fear and requisite compassion.

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There’s no need for a UBI.

Just change the flow of the program to put more cash into the recipient.

The money is there.

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My minimum minimorum rules on UBI
It is unconditional (So redistribution profiteers hate it)
It is universal
It is fully paid for (no public debts contracted)
It is large enough to help you out of the bed
It is small enough so as not allow you stay in bed
http://myubi.blogspot.com/2017/01/my-universal-basic-income.html

+1,

To be fair, I don't really think Universal is necessary. I think 18-65 is the correct range and leave SS alone. And my preference is that is to use a Wage supplement for workers over a UBI.

Wage supplement less bad but still going to have the problem of suppressing investment in human capital, particularly at margin (poor, poorly educated, poor parents). Then you end up with 10 other policies to try and counteract the bad incentives. Then we end up with some giant bureaucracy, handouts, capture, etc.

How small keeps you out of bed? Because $600 a week is apparently enough to keep a lot of restaurants from hiring back their employees.

"Wage supplement less bad but still going to have the problem of suppressing investment in human capital"

Oh, yeah, it wouldn't be perfect. But still much better than a UBI.

"How small keeps you out of bed? "

Well for a Wage supplement, you don't get any if you don't work. So, it wouldn't suffer from the UBI / $600+state per week unemployment insurance issue.

"particularly at margin (poor, poorly educated, poor parents)."

No, a wage supplement would help the marginal cases the most. Just assume it's $3.50 per hour capped at 40 hours per week and that the minimum wage is dropped to $3.50 per hour. An employer could hire a low skilled working at $3.50 (ignoring taxes, etc) and that worker would still make the current minimum wage. Which should reduce low skilled unemployment and provide opportunities for training and advancement.

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If the UBI is funded by taxes on rents and assets, rather than labor income, it would promote greater skills and education.

For example, a UBI funded by a land value tax and taxes lowered on labor income would induce people to invest in themselves rather than real estate. I.e. invest in becoming a surgeon to earn less taxed labor income rather than real estate whose rents would be taxed away.

we are witnessing a surprising revival of Henry George lately. I have been seeing single-taxers everywhere in the last 2-3 years.

While I do like Georgism, promoting it wasn't the point of my comment. My point was that these discussions like the original post tend to obscure discussions of tax structure which determines incentives for human capital formation.

Shifting the tax base from wage labor income onto assets and rents, and vice versa, affects incentives.

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It wouldn't change future land investment at all, it would just crater the prices and ruin those already invested in it.

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People are meritocratic by nature. Behind the (unnatural) “veil of ignorance” they might choose a slightly socialist state but only for extreme cases, like free primary schools for orphans, or institutions to support people born handicapped so much that they cannot exercise any trade.

A 5 year-old understands that somebody that puts more effort deserves more. It is when he becomes an adult that transforms himself in an aspiring free-loader, corrupted by the false promises of socialism.

The welfare state is like a gigantic dilemma of the prisoner. As Bastiat stated, the State is that great fiction by which everybody tries to live at the expenses of everybody else. Everybody would be much better off without the hand-outs and the corresponding taxes, but nobody is willing to give it up first.

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It's not a UBI, it's a UBE: Universal Basic Excise. We're not debating whether to give everyone in the country free money, we're debating whether to saddle the nation with an enormous new, incontrovertible tax.

From what we've seen of the US government's ability to manage both taxes and subsidies in stable and non-corrupt way, I can't imagine that anyone really believes a UBE will be anything short of a disaster.

If you want to talk pipe-dreams, how about we reallocate the military's recruitment marketing budget to pay for insulin for poor seniors. All it takes is a wave of the technocrat's magic wand, and an appeal to Rawls.

+1 Well said! I think people forget that if 20% of the country makes less than $25k, 80% make more. I also don't think people look at their pay stubs: 20%+ effective federal tax, 10% OSA and medicare, a few % state, 8% sales, a percent in local property tax, most of us are taking home half of what we earn or less

"20%+ effective federal tax"

Who falls into that boat?

People with jobs

For a single taxpayer, marginal rates above 20% start at $39,746 of income after deductions. You figure out the average rate; it's obviously lower but gets high pretty quickly.

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"Who falls into that boat?"

That's around the 80th percentile. So, 1 out of 5 taxpayers.

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This would appear to be a dog bites man story. After all in a recent national referendum, the Swiss rejected a UBI by a strong margin. But the authors point to education and taxes as primary causes, so a comparison between Switzerland and the USA may be useful in analyzing support among older people in the USA.

With respect to education, the current occupant of the rotating Swiss presidency is Simonetta Sommaruga, a college dropout who found her way to the Federal Council for a second one year term and whose Social Democratic Party won 16.8% of the 2019 vote. She, like many Swiss, is a disciple of high-school dropout Greta Thurmberg. So clearly, the education credentials industry in Switzerland has not yet managed to place its boot on the throat of opportunity the way it has in the USA. Many older Americans likely lost a fair share of their life savings being shaken down by colleges through tuition price discrimination. For these older Americans, a UBI might be seen as an alternative path to employment for their grandchildren, providing enough support to allow them to attain marketable skills without subjecting their parents to fleecing through the ed industry choke point.

And with taxation, Switzerland has a standard VAT of 7.7% and a reduced rate of 2.5%. This is less than half the 15 and 5 percent minimum VAT that the EU imposes on member states. In contrast to a broad tax base with low rates, the USA has a very narrow tax base, choosing to impose steeply progressive rates on productive domestic business and members of society and leaving most imported goods untaxed, as well as vast swaths of the economy that claim “non-profit” status. Older people in the USA may correctly foresee that this is a prescriptivists for unending great stagnation. The oldsters may recognize that a little UBI May make the lives of despair that are fated to their grandchildren a little less miserable.

Older people also generally have enough experience to have gained a sense of public choice theory to know that, unlike in democratically accountable Switzerland with its lean and efficient bureaucracy, a UBI might be a cost effective replacement for the numerous bloated bureaucracies administering countless redundant welfare programs.

Younger people in the USA, on the other hand, probably doubt that they will ever even have grandchildren.

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There is a document called “Last Will and Testament.” A boomer could theoretically leave money to said grandchild/children or make provisions for schooling, etc.

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I am an older person. Soon to retire.

I am 100% for UBI. Not for myself as I would not need it and most likely would not be impacted by higher taxes or a wealth tax.

But simply to over time kill the economy so that the little sh*t woke communists pigs running wild right now end up in the ditch. Poor and begging for mercy and break to their masters.

I'd miss that show but what a sweet thought for my last days...

:)

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I'm for UBI because what the hell, we're $22 TRILLION in debt and the Fed just gins up money and buys whatever it feels like with it so why am I still paying taxes.

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Yeah, UBI discussions always seem to assume some eternal conditional, as do most public policy debates. It doesn't usually work that way.

Right now, UBI will have fairly wide appeal because of the conditions we are in due to the economic/social/tech changes that have happened. A lot of people don't see a way to a sustainable path, and some of those doing well can see the trouble this will cause if not addressed. And a lot of people oppose it because, among other more substantive reasons, they believe people will just stay at home playing video games. It's mostly coming from a place of desperation and not seeing any good options. And this may be correct, with the path we're on, but I'm not going to argue it here.

If it is implemented, UBI will likely be in response to the need to keep social stability in the face of clearly disappointed or at least unrealized expectations for people who lived through the social/tech/economic trends.

But if we announced we were essentially giving up on a functional job market and going for UBI, the society would change rapidly, and younger generations would have different expectations. Identity wouldn't be tied to career path, kids wouldn't grow up expecting to realize a consumerist fantasy, and the compliance/standardization of life that the corporate world has encouraged would hold a lot less sway. Some teens/young people would try to seek status and money and power in other ways, maybe more like in local situations (essentially making their own community political machines), and probably eventually try to build their own alternative economic system or demand some level of employment/recognition. They wouldn't all want to sit at home playing videogames, even if a bunch of them do. Some would probably argue for an "autonomous zone" where they could refuse UBI and do their own thing. Society as a whole doesn't stay satisfied for long in a carefully domesticated state--that only works if they believe something better is coming, or have been heavily socialized in certain ways. If you remove the social assumptions and narrative we live in, you will get something very different within a few generations. Not necessarily obviously "better," but very different. There are no "holding patterns" that will last generations.

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A UBI in advanced countries is inevitable and it is only a matter of time before it is implemented. However, UBI will never take off until people get away from the idea that it should be paid for via the tax system. Most countries already tax everyone to death ( high income earners already pay the vast majority of taxes collected in most countries ) and people are sick of it. To suggest higher taxes is envy, plain and simple. We need to devise a system to reduce taxes and kill off the welfare state before it sucks us all dry.

I suggest that the US government and other advanced economies start giving every adult citizen a permanent stipend of beginning at around $2000 per annum as a UBI. This stipend should be paid for by just ‘printing’ the money, no debt. It won’t create any inflation because it is becoming pretty obvious that increasing automation is causing a technological deflation that requires a sort of permanent ‘QE for the people’.

Technological progress - automation - is inherently deflationary and is accelerating. We are now at a point where advanced countries need to offset this deflation by providing a stipend. Governments have been spending money like crazy and all they are doing is creating pointless debt and causing asset inflation in the stock market and elsewhere. This money should be given directly to the people and it should grow at a rate sufficient to prevent deflation. It needs to start low so that people can get on board with it, and it needs to eventually replace the welfare state because the welfare state should rightfully be called the ‘illfare state’ - no one is happy with it.

The amount of $2000 should also increase at a steady rate of about 20% per year for the foreseeable future and as it grows it should gradually replace all other welfare payments. In this way the welfare state can be slowly dismantled leading to huge increases in all spheres of productivity.

As long as the stipend growth doesn’t outpace technological deflation we will be fine. Eventually income tax can also be reduced and finally eliminated as well, causing further increases in productivity.

Mostly agree here... obviously another option would be to give shares in companies Which produce products through automatisation...but yeah taxes might be too high for certain people (e.g. in Germany the top tax rate starts at 50000 💶.

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I have yet to understand why people think a UBI would be better than a wage subsidy.

+1, I'm baffled by it also. Particularly, considering attempts at UBI's have generally been failures and yet the US has had a successful, if limited wage subsidy for 50 years.

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'The amount of $2000 should also increase at a steady rate of about 20% per year '

Citation needed....

The rate needs to be set to an amount that causes about 2% inflation. We live in a debt driven society and 2% is widely considered an ideal balance that reduces debt over time. The worst thing would be a debt deflation where debts became more onerous over time. As I said, technology is inherently deflationary. Marc Andreessen once said that ‘Software is Eating the World’ and this is becoming more true every day. The marginal cost of software is almost zero in more and more cases. Software that once cost hundreds of dollars can now be had for free and increasingly software is driving inefficiencies out of the world. Ie AI, automation etc. This is accelerating at an exponential rate so the UBI should also accelerate at an exponential rate - BUT from a low base. 15 - 20% would be a doubling every 5 years or so, so that in 10 years it would be around $10,000 per person. We can by then start dismantling our awful and stupid and inefficient welfare state.

Citation: https://atom.singularity2050.com/

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Spending = Income = Consumption = Production.

This equation makes it clear that policies that reduce production must reduce total income.

UBI pays people money whether they work or not. This is better than requiring them to stop working to get the money.

It is still better to design government programs that encourage people to work at something productive. Then society will benefit from the work they do to get the money.

I have no problem supporting people who cannot work. But we should encourage able bodied people to work because their production makes everyone better off.

Taxes on the first $20,000 of income should be very low. I would eliminate the employee portion of the FICA tax on the first $20,000 of income to encourage people to work and help them compete with cheap Chinese labor.

We can pay generous unemployment benefits while Coronavirus prevents people from working, but these benefits need to be low enough that work is a better option. The extra $600 per week paid now is preventing some people from seeking work.

Work provides more benefit than just the product of the work. Workers learn how to do something valuable. Workers feel pride in what they produce. Workers use their time better than opioid addicts and are less likely to become addicts, or to use their time in other destructive ways. Workers are less likely to commit suicide than the unemployed.

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A little late to party here but I can't help but notice two pervading patterns in the way the UBI question is addressed (in these comments and, dare I say, in general):

1. Never is it being supposed that people would still work under a UBI scheme since they are paid what their labor really is worth *and* they do work voluntarily. If instead they stop working under an UBI scheme, what does it say about the voluntary character of work under the current labor market? Wouldn't it mean that, effectively, people are forced to work (for subsistence) and then, it follows, aren't really voluntary in their exchange, thus possibly negating any just equilibrium of prices in the actual market?

2. Never do we talk about the possibility of a new market equilibrium, post-UBI. Indeed, if people do not find the work worth doing (for a given price) under a UBI scheme, can't the labor market adjust itself by having the demand side pay more for the work offering or by improving work conditions? Isn't it how the market works, by finding the equilibrium price between buyers and sellers and sharing the exchange surplus? Yes, probably some exchanges wouldn't be made anymore (because the value does not exceed the cost), but since the market is free, that would be good, would it not?

Maybe I'm logically missing something but it seems to me that, most of the comments here forget at the same time the both fundamental necessity of voluntary exchanges and inherently equilibrating nature of free markets.

When properly considered, these two traits of a free market shed another light on the viability and desirability of a UBI scheme. Then it must not be the disaster some make out of it.

Any thoughts?

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