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Stuff [Oct. 12th, 2011|09:28 pm]
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Basic income guarantees.

The first time I heard about them was five years ago, and I decided they were stupid. I think I thought about them again briefly two or three years ago, and was still pretty sure they were stupid. A couple weeks ago, wallowinmaya from Less Wrong asked me what I thought about them, and I was all prepared to say they were still stupid, but after thinking about it longer I'm not so sure.

A basic income guarantee is a system where the government pays everyone in the country a small but liveable income, let's say $15000. If you're poor, you get $15000 a year to live on. If you're rich, you get $15000 from the government above and beyond what you earn from your corporate empire. Everyone in the country, rich or poor, employed or unemployed, young or old, gets $15000.

And the obvious reason it's stupid is that someone has to pay for that. And giving every US adult $15000 a year would cost somewhere around the order of $4 trillion, or just over the current Federal budget.

The real cost would be a bit less, because the government could save some money on things like welfare payments now that nobody is really all that poor. But it would be pretty hard to imagine it costing less than $3 trillion or so, meaning we'd have to at least double taxes, which would have all sorts of horrible domino effects.

And there is much for everyone to hate about the proposal. If you're the type who doesn't like welfare because it takes money away from productive people and gives it to unproductive people who might not even be trying that hard, well, basic income guarantee does the same thing, only much more so. And if you do like welfare, because you think it's important to help the poor, well, basic income guarantee takes the vast majority of the money it raises and hands it over to the middle-class and rich, making them richer. If you're going to give the government ungodly amounts of money to distribute, why not reserve it for people who really need it?

And although the optimist in me conceives of people who use their newfound freedom from fear of poverty to pursue the careers they've always dreamed of as musicians or inventors, or to live in the forest in harmony with nature, the realist in me knows that the vast majority of those people would in fact spend their time drinking beer and watching TV and having ten kids who they never send to school because obviously if you don't need literacy for a job later attaining it just wastes valuable reality-show-watching-time.

So those were the reasons I used to think basic income guarantees were stupid. The reason I'm not so sure now involves structural unemployment and the idea of post-scarcity society.

Back in the 50s, everyone assumed robots would be doing all our work by now and we'd be sitting by the beach all day sipping robot-stirred martinis. That never happened, but it wasn't entirely the roboticists' fault: we did automate a lot of formerly difficult jobs. It just turned out that instead of the people whose jobs were replaced by robots sitting on the beach all day drinking martinis, they become unemployed and essentially unemployable since their only skills were things robots could do better. Although "Well, they should retrain" is a nice thought, not every 50 year old grizzled miner can learn how to program social networking software. So most of them just became destitute and miserable. The gains from automating manufacturing went partly to people in nonmanufacturing fields, who could get more manufactured goods at cheaper prices, and to rich people who owned manufacturing companies and managed to cut costs.

In the future, we can expect technology to replace more and more jobs. This isn't just in the sense of dominating entire job categories like auto manufacturing (although they'll do that too - secretaries and waiters won't be long for this world once we get voice recognition and mobility at low costs) but even in terms of making jobs easier - so that now one engineer can do the work it used to take two engineers, with the second engineer out of a job. The winners will smart people, who can get jobs in technology, and rich people, who can invest in technology and sell what it produces. The losers will be all the unemployed people.

Extending the trend out into the far future and potentially past the singularity, humans will be relatively useless for all forms of work, including robot design (by that time we'll have robot-designing robots). The only people with access to any wealth will be people who own technology and live off what it produces. This is quite like the feudal economy where if you were born owning land you could live off it forever with no work, and if you were born without land, you were out of luck.

This is a relatively dystopian future - enough technology to give everyone a fantastic standard of living with minimal work, but the majority of people being poor and miserable because the technology is concentrated in the hands of a few people who have no incentive to share it with anyone else.

(if you think society is too smart to fall for this, it's essentially the situation right now with world hunger. We have more than enough land/technology/etc to feed everyone in the world, but the poor can't afford food and no farmers want to produce food for free, so the technology goes to making silly luxuries for rich people like sunglasses for dogs. The poor can and do break out of their condition through having natural and human resources that the rich want and will trade for, but as technology increases this advantage will disappear.)

As I write this, this sounds sort of Marxist with stuff about the means of production and so on. But Marx was wrong for a few reasons. For one, workers could save up to own the means of production themselves. For another, human capital proved to be more important than machinery during his era. For a third, the capitalists needed the workers almost as much as the workers needed the capitalists, and advances in worker organization and state regulation gave the workers more bargaining power. In a society where labor becomes less valuable, or completely useless, these checks on the Marxist system disappear.

This whole spiel about technology displacing workers isn't just for the far future. Some economists have suggested this is going on now - that the banking crisis certainly didn't help, but that a lot of ther reason unemployment is so high now is that the economy just really doesn't need that many unskilled people any more, and not everyone has (or can develop) skills.

I don't see an economic or scientific pathway from here to the future where we're all sitting on the beach enjoying the fruits of technology, as opposed to the future where everyone's unemployed and poor except the people who own the technology. The only path I can think of is a political one, in which we start redistributing the heck out of income. And simple welfare won't work; a world in which everyone is on the dole and being constantly hounded by welfare officers and looked down upon by the few people with paying jobs is almost as dystopian as the one where everyone starves to death. At some point we have to say that most people can't produce wealth and that's okay.

It may be too early to start such a redistribution program, although depending on how the economic indicators turn out it might not be. But I would feel a whole lot better if society was at least discussing this question and had a good plan for the transition to a post-labor stage.
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Comments:
[User Picture]From: mercureal
2011-10-12 09:42 pm (UTC)

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Have you met America? We resist planning until what we should have planned for knocks on the door.

Rather than putting enormous money toward the possible boozy complacency of the poor, a fraction of that amount could be put to making decent education more available - rebuild and hire and salary well and provision - and attractive. It might be naive to think this would mean marvelous gains for closing the class gap, but I do, and the future I like to imagine features academia as not an obscure unreachable undesirable ivory tower style vocation. Even if there are robot martinis.
[User Picture]From: jordan179
2011-10-12 10:27 pm (UTC)

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Have you met America? We resist planning until what we should have planned for knocks on the door.

... and this has historically worked very well for us, as those who have "planned" more frequently have planned for the wrong things, while our resources were more readily-redeployable.

I agree with you about education though.
[User Picture]From: platypuslord
2011-10-12 09:52 pm (UTC)

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Could we instead have some sort of "basic employment guarantee"?
ie, if you don't have any other job, the gummint promises to give you a job at some minimum income level like $15000 a year. That job could be basically anything so long as they can verify you did it. (I'm thinking here of the WPA, but you can also imagine people being paid to create art, et cetera.)

This would make people feel better about the "the vast majority of those people would in fact spend their time drinking beer and watching TV and having ten kids who they never send to school" thing, and also we would get some nice bridges and roads and parks out of it. I'm not sure which benefit is more important.
[User Picture]From: squid314
2011-10-13 05:33 pm (UTC)

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This sounds like a pretty good idea in the current climate, but in the far future scenario, well, we can only have so much of the population digging ditches and filling them in again before it starts to get kind of dystopian.
[User Picture]From: gwendally
2011-10-12 10:02 pm (UTC)

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If you have been reading my blog you will note that I have been really struggling to try to answer these questions myself.

I have just about arrived at deciding that a "dividend" for each citizen makes a certain amount of sense. All sorts of awful contortions go on when people try to game the system: far better to give $15K to every single registered soul than to try to waste the time and money and enforcement trying to figure out who is sleeping with who so really isn't as poor a "family" as previously thought.

We can raise quite a lot more in taxes if we're giving people a $15K tax credit to work with, i.e., people who have higher incomes will have that $15K whittled down.

The thing that bugs me is that $15K/person is not enough. When you really get right into the mix of it, the complaint isn't that anyone is starving to death. It's that they don't have as much as the rich people do.

In other words, we're supposed to cure their envy.

I spend a lot of time working with the social safety nets and they really do a decent job of working, overall. People are neither freezing nor starving to death and most of them can even get a basic level of medical services. The big three perils are covered in the First World.

The problem you're trying to solve is already solved.

To solve the problem we have now you have to give everyone $40K.

Now it breaks down.
[User Picture]From: drethelin
2011-10-12 10:48 pm (UTC)

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Pretty sure it's not already solved, at least not for all the homeless people I see if I walk down the street downtown.
[User Picture]From: marycatelli
2011-10-12 10:04 pm (UTC)

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I think this article explains the real problem with it better than anything else:
http://www.city-journal.org/html/9_2_oh_to_be.html
[User Picture]From: John Champagne
2011-10-12 10:10 pm (UTC)

Papers

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This reminds me of Player Piano. As a not, there are economics papers worrying about technology and unemployment:

http://college.holycross.edu/eej/Volume31/V31N4P507_536.pdf

This paper does a good job of talking about assumptions; like are computers perfect substitutes for labor. Maybe by the time robots can do really difficult tasks, the AI won't want to help us anymore. Maybe unemployment insurance will just expand to your whole life. 99 weeks is so little.

Google scholar also has some good results.

[User Picture]From: laplor
2011-10-12 10:16 pm (UTC)

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I wonder what the cost would be to supplement low income earners to that magic $15k per year. Not give it to them outright, but rather top up the income for underemployed people so that no one would not have to work multiple jobs to aspire to poverty level.
[User Picture]From: drethelin
2011-10-13 05:15 pm (UTC)

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This shares a lot of the same problems with a guaranteed minimum, and has the additional problem of killing your incentive to work marginal amounts more if you're under 15k. If you automatically get 15k, then you might not feel the need to get a job but if you want more money you definitely will get one. If you get the difference between what you earn and 15k that means that you earn the exact same amount if you work to earn 5k or 10k, and I don't think that's a good thing.
[User Picture]From: erratio
2011-10-12 10:18 pm (UTC)

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Probably a dumb question given the context, but did you see the recentish article about how the Canadian government tried the Guaranteed Income thing in a small town for a while?

http://www.dominionpaper.ca/articles/4100

Seems like they got pretty good results out of it
[User Picture]From: squid314
2011-10-13 05:36 pm (UTC)

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I saw, though one wonders how many towns they had to collect taxes from to afford the experiment in that one.
[User Picture]From: turil
2011-10-13 01:38 am (UTC)

government serving the people's needs

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In my plan, the government is in charge of serving everyone's needs, that's it. Government uses only voluntarily offered resources (of all kinds) and finds ways to use those collective resources to help everyone get their basic physical needs met (food, water, air, warmth, light, and outlets for expressing one's excess solids, liquids, gases, and energy), plus making conflict negotiation (win-win solutions) available. Everything else is taken care of by organizations and individuals outside of government.

There is little to no money in government, as government deals in direct resources.

So a basic not-guaranteed-but-definitely-intended income becomes: enough food, water, air, warmth, light, and freedom to keep you as healthy as you can be.

If this isn't what government is supposed to do, then I don't know what it's purpose would be! The goal being for everyone to be healthy enough to be actively pro-social (self-actualized, in Maslow's terms, which is a normal human adult state when not suffering from deficiencies), and capable of contributing their best work to the world.
[User Picture]From: turil
2011-10-13 01:49 am (UTC)

Re: government serving the people's needs

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Oh, and we use the right tools for the job when it comes to gathering data. Instead of asking people how they think government should do things, which they, presumably, aren't at all experts in, we ask people for data which they are experts in, that being which of those specific needs they are most in need of currently. And then we create a public database where anyone who has had experience in meeting any of these needs can offer knowledge about how it was done, and under what conditions it worked best. Then we combine the information about what needs there currently are and where they are located, with the information about what has worked best for similar situations.

No more limited choice, amateur, mindless, fear-based data collecting (elections) about things that may or may not be good ideas in the first place. No more mucking about with making assumptions about what people want. No more flailing about with random solutions that no one has tested out, or has shown work only in totally different environments!
[User Picture]From: naath
2011-10-13 08:54 am (UTC)

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In the UK I think this notion is usually called "citizen's income", I understand that the proposal is accompanied by much high tax rates for most people by all people who make it as a sensible proposal.

For instance if the government handed *me* $15,000 in Citizen's Income given my current financial circumstances I expect that they would be taxing me an additional $15,000 to make up for that, and a bit more besides to pay for CI for people without income. Some people claim (with figures) that a liveable Citizen's Income for everyone could be afforded at no more cost than the current benefits system (which is supposed to provide a liveable income to people without one, although it often fails to actually do so); the major benefit of a CI/BIG system over systems more like the present one (in the UK) is that it is in many respects simpler (and thus cheaper) to administer.
[User Picture]From: cakoluchiam
2011-10-13 09:25 am (UTC)

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Very well-put. Thank you, Scott.
[User Picture]From: xuenay
2011-10-13 11:13 am (UTC)

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I've felt for a long time that implementing a basic income guarantee would be just about the best decision this country could make.

Your biggest objection - that it would cost a lot of money, most of which would go to people who wouldn't need it - is easily addressed. Simply modify the tax code so that, after a person's income exceeds a certain point, the basic income gets taxed away. Most of the reasonable proposals I've seen set this limit so that if you wouldn't usually qualify for any welfare benefits, you won't get much money from basic income, either.

See e.g. this 2007 proposal by the Finnish Green party. Your working wage (in euros per month) is on the X-axis, your total income after is on the Y-axis. Green is the basic income, dark blue is your after-tax wage, red is paid in tax. The tax rate would be 39 per cent for incomes under 5000 euros and 49 per cent for incomes above that. Compared to what the Finnish state normally gets in tax income and pays out in welfare, the scheme would be approximately cost neutral.

So what's the point? Well, even ignoring your arguments about post-scarcity society - which I agree with - there are several benefits:

1. It would help those who need it the most. Currently, getting social security or welfare payments typically involves going through a painful bureaucracy which is often more or less horrible and soul-destroying. Needing welfare is often associated with poor physical or mental health, social problems, simply being unsuitable for most kinds of jobs, etc. What these folks would need is a process that makes it as easy as possible to make sure you have enough money to live, so that they can concentrate on getting back on their feet and finding a job that works for them. In practice, they tend to spend all of their energy just fighting with the bureaucracy instead. A basic income guaranatee would change this.

Even if a basic income scheme would end up costing somewhat more than the normal welfare system, I'm pretty sure that this factor alone would eliminate a lot of stress and bad health and bring down healthcare expenses.

2. It would incentivize working. At least in Finland, and I think in many other countries too, the welfare system is often built in such a way to make it unprofitable to take a low-paying job. Typically, any money you earn working gets deducted directly from your welfare payments, so working earns you no extra money but costs you time and energy. In the Greens' proposed scheme, you would always get to keep at least part of the money you earned.

3. Freelance work, running your own company and creative work would all become less risky. Want to do something that you'd really love doing, but where there are no guarantees of being paid? Without a basic income scheme, that's a huge risk. You end racking up more and more debt if things don't go as you planned. With basic income, you'll always get at least some money that you can fall back on even if nothing else works out.

4. It would greatly benefit the economy. See points 1, 2 and 3, above. People have more energy to recover quickly and find a job, there are savings in healthcare expenses, folk are in better health and can thus work longer and better, they have a better incentive to do so, and they could also take more risks and more freely try out things that might or might not work. All of this at no extra expense? It seems like an obvious reform to implement ASAP to me.
[User Picture]From: xuenay
2011-10-13 11:15 am (UTC)

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39 per cent for incomes under 5000 euros and 49 per cent for incomes above that

That's per month, obviously.
[User Picture]From: ciphergoth
2011-10-13 06:35 pm (UTC)

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In the UK the curve that maps gross income to net income has a very weird shape: if your gross income is zero (and you meet the other criteria) you get income support or unemployment benefit, then you're allowed to earn up to (I think) £5, so the curve goes up at 45 degrees. Then it is flat until the benefit is exhausted - every further pound you earn is taken from you in full in benefits. Then it goes up at 45 again until you hit the first tax bracket. And so on.

The citizen's income smooths out this curve in order to remove weird incentives, such as incentives against taking lower-paid work. It also removes the need for weird, market-distorting fixes like the minimum wage.
[User Picture]From: maniakes
2011-10-14 02:42 am (UTC)

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Theoretically, if we got rid of the lower tax brackets along with all tax credits and itemized deductions and taxed every dollar of Adjusted Gross Income at the current top marginal individual income tax rate of 35%, it'd bring in an additional $2.7 trillion in revenue (using 2008 numbers, the most recent I could find; almost certainly less now because of the recession), which could be used to fund a GMI of a bit over $9200 per person.

If you also redirect the money from existing federal transfer programs (Social Security, Medicare, Medicaid, SCHIP, welfare, unemployment insurance, food stamps, etc), that's another $1.5 trillion (also 2008 numbers, for consistency), bringing the total to just over $14,000 per person.

Not advocating this, just running the numbers. Assuming my hypothetical tax increases came mostly from raising rates on the poor and middle-class and getting rid of tax breaks targeted likewise (I'd need to run quite a few more numbers before concluding this), the US Federal Government's fiscal policies currently provide nearly the same degree of redistribution (between preferential tax treatment and explicit transfers) as your hypothetical $15,000 basic living stipend, just shaped differently.
[User Picture]From: squid314
2011-10-14 04:31 pm (UTC)

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Interesting numbers but not precisely applicable; if you currently make $5,000/year, "preferential tax treatment" doesn't help take you up to $15000. There's also a difference between taxing the rich more and taxing the middle class less. We currently tax the rich relatively high, but unless the money is redistributed, that doesn't help the middle class. In your model, if we raised the top tax bracket on the rich to 50% and spent the extra on the military or something, that would be adding to the degree to which we currently approximate a basic income guarantee - but clearly it doesn't actually help the poor/middle class.

Still, an interesting analysis. In particular I wonder what the "break even" point would be - that is, at what income level you'd start making less by living in a world where you got a free $15,000 but were taxed at 35%, than you would in our current world.
[User Picture]From: ari_rahikkala
2011-10-14 05:11 pm (UTC)

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To be fair, there hasn't yet been a time when people have been right when saying there just won't be jobs for everyone. I'm pretty sure that if we were somehow stuck at a steady state on today's level of technology, the current structural unemployment would start disappearing fairly quickly. It's just that, well, there's no indication that that will happen (fortunately), and in fact automation is eating up whole economic sectors faster than education and legislation can keep up with. It's not so much the absolute level of productivity that causes unemployment, it's the rate of change.

But that's just an academic point right now. In practice? It's no use trying to eke productivity out of people that are forced into self-sufficiency by unemployment. Having them participate in the division of labour isn't just a good idea in some hypothetical post-scarcity future, I'm pretty sure it's a good idea now. Not just in terms of human decency and dignity but in sheer economic terms as well.
[User Picture]From: squid314
2011-10-14 08:12 pm (UTC)

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You're going to have to rephrase that. Either you forgot a "not" or two, or I'm not sure what you're trying to say.
[User Picture]From: cynicalcleric
2011-10-17 01:20 am (UTC)

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I don't think I can completely grok this right now.

But I can understand it enough that trying to sell this to the Republican and Libertarian portion of America would seem damn near impossible. You'd lose nearly all of them at "so we're going to give everyone N dollars annual income for simply existing".

My proposed solutions for tackling this problem have been:
1) universal health care
2) minimum wage is a living wage
3) improved education
From: (Anonymous)
2011-10-17 03:53 am (UTC)

basic income guarantees

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One approach is more and better public goods. That means stuff like health care, child allowances, educational expenses, tuition, roads, public transportation, and so on. It might even make sense for the government to run subsidized hostels and restaurants.

Poor people are expensive now, and they probably could be handled more cheaply if we weren't so moralistic about it. Jails aren't cheap nor are police forces. Deferred medical care raises costs and introduces public health risks. Seattle is experimenting with homeless housing for drunks that will let them drink to their heart's, though not their liver's, content.

A $15,000 "living stipend" is not all that bad an idea. We have an earned income credit for people with jobs, unemployment benefits for those recently laid off, other benefits for the long term unemployed, the disabled, and old people. It's a real hodge podge. It would be interesting to see how far from $15,000 this works out as.

What people forget is that most people spend everything they can get their hands on. If you give some shnook $15,000 a year to sit on a couch and watch reality TV, they'll spend every penny. Some of it will go for food, some for clothing and some for rent. The people who get that money pay taxes. The government grabs that. Then, those people spend most of the rest and give it to even more people. The government takes a cut. As long as most of the money doesn't go to some wealthy person who doesn't spend very much, everyone does very well and the program costs a lot less than you think.

That leaves us with the "wealthy people do not spend enough" problem. The answer is higher taxes, or better yet, higher taxes on any wealth that might require government services like police protection, a court system, an army or the like. The rich used to have marginal tax rates as high as 90%, and the economy grew faster then than it does now with lower rates.
[User Picture]From: maniakes
2011-10-17 05:58 pm (UTC)

Re: basic income guarantees

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Be careful with the term "public good", since it's used by economists as a technical term with a very specific meaning.

To an economist, a public good is a good that's non-excludable (it's not practical to specifically withhold the good from people who won't pay for it) and non-rival (adding one more user doesn't add to the cost or subtract from the quality: the marginal cost of providing the service is zero), as distinct from a regular private good that's excludable and rival.

A classic example of a pure private good is pizza. It's perfectly excludable: if I won't pay for any, you don't have to give me a slice; and it's perfectly rival: every slice I eat is either a slice you don't get or an extra slice that someone has to bake. National defense is a classic example of a nearly-pure public good: you can't turn off the national defense to my house if I refuse to pay my army bill, and sending troops to stop the Canadian Hordes from sacking Minneapolis doesn't compete in a meaningful way with stopping the Canadians from sacking Duluth.

Your usage, as a good provided by the public sector regardless of whether it's excludable or rivalrous, is defensible colloquial usage. I only bring it up because the technical term is a very useful concept, but one that's hard to talk about because of confusion with the colloquial usage.
[User Picture]From: cousin_it
2011-10-18 01:44 pm (UTC)

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In your hypothetical future, the rich property-owner is just as much of a good-for-nothing parasite as the poor guy, so a smart enough system will eventually dump the owners too. At least in the middle ages the noble parasites provided the nominal service of protection.

I wouldn't like to live in a world where humans exist but are so useless, even to each other, that they have to rely on dole from a smarter entity. Maybe human enhancement could lead to a better world than that?
[User Picture]From: squid314
2011-10-18 07:58 pm (UTC)

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I think you're being too optimistic in positing a "system" with its own preference for efficiency and clearing out useless elements. The system is only as strong as its elements. And as long as technology is well-designed, it will serve its owners, who in this case would be the rich. It won't occur to the technology to stop working for its owners just because they don't provide social value, unless the technology programmed to believe this. Which would be a very odd thing to program into technology.
[User Picture]From: cakoluchiam
2012-11-17 12:46 pm (UTC)

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Saturday Morning Breakfast Cereal today seemed apropos, only your "technology" is his "aliens". The function is quite similar, but it seems from the societal viewpoint much more offensive to displace a worker in favor of an extraterrestrial doing the job for free than for technology to displace a worker in favor of a machine doing the job for practically free.