The fact that so many people could be taken in by this idea speaks volumes about the utter catastrophe that is our educational system. I am surprised that someone as intelligent as Dan Mitchell doesn’t dismiss it out of hand. And I’m not talking just about the human nature aspect of it, which requires deeper insight. I’m talking about the government handing out money. The government can print money, but can’t give it any value. That has to come from people producing goods or providing services, and being willing to accept money as a means of storing value for future exchange with other producers and providers. If no one is producing or providing, one can print all the money the world’s forests can sustain, and it will buy exactly nothing – including the paper to print the money on. How is this not so blatantly obvious that no one could entertain the idea for more that a few seconds?
It’s literally the last, best hope for socialism. Which is why there’s so much hype about it in the left-wing media.
But the ‘experiment’ would have been useless anyway, because it doesn’t simulate the situation in the real world. If someone gave me free money for a year, I’d say ‘thanks’ and buy some stuff. If someone promised to give me free money for life, I’d quit work and spend my time playing computer games.
The first thing to realize is human situations are dynamic.
A child is born. It’s healthy or not, to parents that are responsible or not.
Assume a healthy child to responsible parents. The parents will prepare the child to be a responsible adult which means the child will at some point start their productive working stage. Over time both income and savings should increase until retirement.
They then live off the interest of their retirement nest egg. Being dynamic also means being insured for glitches (work or health.)
Nothing described so far requires any government assistance of any kind. It describes most of human history.
In an unregulated market, insurance would be available because it’s a profitable business and responsible people will take advantage of it from before birth to their last breath… unscrupulous insurers would be monitored and regulated by consumers and their reputations that watchdog groups can easily handle… which leaves how to deal with the irresponsible.
Force them to be responsible. Let them rely on any charity that will have them (many will.) All any govt. program does is allow people to not care because the govt. will care for them. Unemployment insurance should be actual insurance with paid premiums to a for profit private company. They pay a lump sum on any claim which should be about 90% of paid premiums (market competition would probably make the percentage much higher.) Most people would soon figure out they can self insure for a better deal. Responsible people should all know the rule that the first thing to do is save up the equivalent of six months of income.
Irresponsible parents will be regulated by seeing their children suffer. Reports of child abuse should result in sterilization. Child abuse strictly defined so that over zealous busybodies can’t force unwarranted penalties.
At first blush UBI at a minimum level to replace all social programs sounds like a good idea, but given the above… nope. This might be a problem for the fair tax as well.
“This might be a problem for the fair tax as well.”
In what way?
The fair tax pays everyone so that low income folks have a basic income (to cover taxes, making taxes progressive.) They keep that money if it isn’t paid as taxes. At least that’s my recollection?
It is too early to tell and like they say in the article the experiment itself in Finland is flawed in its design. I disagree that giving a limited amount of money to everyone means people won’t work anymore. If that was the case then rich people wouldn’t work. Different people have different motivations. Sure some people would use the money to not work. These same people would also probably make for fairly unmotivated workers in the first place. So the question is how much would this harm overall productivity? With economic activity becoming increasingly more automated it may not even make much of a difference.
There are some cases where these redistribution policies have been applied however and the results are not that good. One example is the oil producing countries. To a large degree the actual work force there comes from imported labor and natives with the state income basically work in managerial and paper pushing activities. I do not think this is a healthy position to be in either as people become too disconnected from the productive activities. It’s one reason why I fear automation may prove to be an issue. The Japanese themselves IIRC claimed that switching automobile production to fully automated production lines meant that workers lost skills and the next generation wouldn’t even know how to program and optimize the production line properly for example. How much production do we really need and how much needs to be automated? This is a real issue.
Take automated vehicles for example. Modern trains quite often don’t need a driver but still have one for emergency situation. This is one reason why I think the idea some people have that automated driving will mean all human operators will vanish is simply misguided. What we may see, I think, is something like a herdsman with a flock. One person on a vehicle controlling a vehicle fleet.
Let me give you an example of why it would be disastrous.
Ontario has suggested $1500 a month for ‘basic income’, as that’s just about enough for someone to live on there.
At $1500 a month, we could sell our house, my girlfriend’s mother could sell her house, we could buy a big house, and sit at home collecting $4500 a month for doing nothing.
That’s more than enough for me to play computer games all day and for them to go on a cruise every couple of months. Why would we work any more?
Or consider half a dozen twenty-something kids renting a house together and collecting $9,000 a month between them for… doing nothing. Why would they work rather than party all the time?
It’s an insanely stupid idea that falls apart after even two minutes’ thought.
I dunno. I know I can’t be idle. I always have hobbies even when I’m not working. Playing computers games is only one of them. I contribute to open source projects and the like on my spare time. I doubt it would ever work exactly like you mention, because if everyone had that amount of disposable income then the house prices would just adjust upwards as a result.
Assume the $1500/mo per adult.
If that was the case then rich people wouldn’t work.
Edward is exactly right, but it’s even worse. Some will be able to make more money not working (because free time has value.)
It also encourages scofflaws working off the books.
It probably isn’t enough to change the behavior of most of the rich.
But to think it wouldn’t kill motivation (as hunger does) that’s delusional.
Personally, that would be enough money for me to relocate to where it was offered when added to my current fixed income.
“Or consider half a dozen twenty-something kids renting a house together and collecting $9,000 a month between them for… doing nothing. ”
How much is the rent? If a lot of twenty-somethings decided to do this, pretty quickly places to rent would run low and rental prices would climb. This would force those who ‘doing nothing’ to vacate so landlords can get increased rent*
* assuming the laws allow civilised eviction of tenants!
How does pooling resources in a single dwelling reduce housing supply?
Let’s look at the basic arithmetic, admittedly involving large numbers. Suppose you had a Universal Basic Income program that will pay $1,000 a month to everyone in the US aged 19 or older. In addition, it will pay $300 a month for those under 19. How much will that cost per year? NOTE: I chose the age 19 because my source for population data used 0-18.
Children (0-18): 78,181,900 x $3600/year = $281,418,840,000/year
Everyone else: 240,504,600 x $14,400/year = $3,463,266,240,000/year
Total = $3,744,685,080,000. or about $3.75 trillion per year
Where are we going to get the money?
Correction: I brain farted and paid everyone 19 and older $1200 a month instead of $1000. The cost for adults is $2,886,055,200,000. The cost for the entire UBI program would then be $3,167,474,040,000.
For comparison, the US federal budget is around $3.5 trillion a year.
Wodun’s Law: The price of a good or service will always try to rise to the base subsidy plus whatever someone is willing and able to pay.
There are a lot of goods and services that would compete for free money but I suspect some will out compete others. Doubtful that landlords won’t raise rents or that the price of certain goods won’t increase.
That’s the other problem. If the poor have more money, other people will be trying to take it from them.
Also, the UBI fanboys claim that they’ll raise taxes on the middle class so they end up paying back their UBI in additional tax. So that’s really going to encourage people to work harder.
The whole thing is just economic idiocy.
If something like UBI makes sense it will be when automation is so extreme and pervasive, and human labor so worthless, that there’s no acceptable alternative. We are nowhere near that point.
There’s a related concept that might make sense now: conversion of various welfare schemes to a single payment not tied to any specific needs (‘negative income tax’). The idea here is that the recipients have a better idea what they personally need than the bureaucrats and politicians do, so this would increase the economic efficiency of the transfer. This is an old idea; even Milton Friedman was for it if I recall correctly.
1. Fraud and Erroneous Payments. Erroneous overclaims are at least one-quarter of the $59 billion in annual EITC spending. Some 43 percent to 50 percent of EITC tax returns claim illegitimate excess benefits. The most important causes of erroneous overpayments are false reports of earnings and false residence claims by adult claimants.
2. EITC Benefits to Nonparents. The EITC is designed to encourage increased work by parents, but the EITC law permits persons other than the parent to receive benefits on behalf of children. Grandparents, aunts, uncles, and older siblings and stepsiblings can often claim EITC cash bonuses for children. This option leads to “benefit shopping,” arbitrarily assigning children for EITC purposes to relatives whose earnings will elicit the highest EITC payment. Benefit shopping increases costs to taxpayers while undermining the core principle of promoting parental work; it is also a major factor in residence fraud.
3. Very High Multi-tier Benefits. Many families receiving the EITC also receive benefits from other welfare programs such as food stamps, Medicaid, and subsidized housing. When these benefits are piggy-backed on top of each other, the aggregate benefits received can be quite high; this is particularly the case with families that receive both the EITC and subsidized housing.
4. Discrimination Against Married Couples. In most cases, the EITC benefits received by unmarried parents who cohabit are significantly higher than those received by similar couples who are married. A government policy that explicitly rewards parents for remaining unmarried and cohabiting while financially punishing those who do marry is unwise.
Let’s begin by first removing market distortions such as subsidies to homes, health care and education. Reduce silly regulations that elevate prices. When the free market actually works, you will see a decline in prices. The motivation for a basic income will diminish as people can actually afford the necessities of life.
Of course, removing these hurdles means politicians will have less power, so I doubt it will happen.
I disagree on the general premise. Some sort of social bribe is inevitable in today’s flawed world. Might as well be UBI rather than something that pays out only to certain political constituents. Maybe instead, we should think of how UBI could be rigged to encourage healthier political interest in the well being of the US. The Alaska fund, for example, pays more out when the Alaskan pipeline is fully used and well run.
The fact that so many people could be taken in by this idea speaks volumes about the utter catastrophe that is our educational system. I am surprised that someone as intelligent as Dan Mitchell doesn’t dismiss it out of hand. And I’m not talking just about the human nature aspect of it, which requires deeper insight. I’m talking about the government handing out money. The government can print money, but can’t give it any value. That has to come from people producing goods or providing services, and being willing to accept money as a means of storing value for future exchange with other producers and providers. If no one is producing or providing, one can print all the money the world’s forests can sustain, and it will buy exactly nothing – including the paper to print the money on. How is this not so blatantly obvious that no one could entertain the idea for more that a few seconds?
It’s literally the last, best hope for socialism. Which is why there’s so much hype about it in the left-wing media.
But the ‘experiment’ would have been useless anyway, because it doesn’t simulate the situation in the real world. If someone gave me free money for a year, I’d say ‘thanks’ and buy some stuff. If someone promised to give me free money for life, I’d quit work and spend my time playing computer games.
The first thing to realize is human situations are dynamic.
A child is born. It’s healthy or not, to parents that are responsible or not.
Assume a healthy child to responsible parents. The parents will prepare the child to be a responsible adult which means the child will at some point start their productive working stage. Over time both income and savings should increase until retirement.
They then live off the interest of their retirement nest egg. Being dynamic also means being insured for glitches (work or health.)
Nothing described so far requires any government assistance of any kind. It describes most of human history.
In an unregulated market, insurance would be available because it’s a profitable business and responsible people will take advantage of it from before birth to their last breath… unscrupulous insurers would be monitored and regulated by consumers and their reputations that watchdog groups can easily handle… which leaves how to deal with the irresponsible.
Force them to be responsible. Let them rely on any charity that will have them (many will.) All any govt. program does is allow people to not care because the govt. will care for them. Unemployment insurance should be actual insurance with paid premiums to a for profit private company. They pay a lump sum on any claim which should be about 90% of paid premiums (market competition would probably make the percentage much higher.) Most people would soon figure out they can self insure for a better deal. Responsible people should all know the rule that the first thing to do is save up the equivalent of six months of income.
Irresponsible parents will be regulated by seeing their children suffer. Reports of child abuse should result in sterilization. Child abuse strictly defined so that over zealous busybodies can’t force unwarranted penalties.
At first blush UBI at a minimum level to replace all social programs sounds like a good idea, but given the above… nope. This might be a problem for the fair tax as well.
“This might be a problem for the fair tax as well.”
In what way?
The fair tax pays everyone so that low income folks have a basic income (to cover taxes, making taxes progressive.) They keep that money if it isn’t paid as taxes. At least that’s my recollection?
It is too early to tell and like they say in the article the experiment itself in Finland is flawed in its design. I disagree that giving a limited amount of money to everyone means people won’t work anymore. If that was the case then rich people wouldn’t work. Different people have different motivations. Sure some people would use the money to not work. These same people would also probably make for fairly unmotivated workers in the first place. So the question is how much would this harm overall productivity? With economic activity becoming increasingly more automated it may not even make much of a difference.
There are some cases where these redistribution policies have been applied however and the results are not that good. One example is the oil producing countries. To a large degree the actual work force there comes from imported labor and natives with the state income basically work in managerial and paper pushing activities. I do not think this is a healthy position to be in either as people become too disconnected from the productive activities. It’s one reason why I fear automation may prove to be an issue. The Japanese themselves IIRC claimed that switching automobile production to fully automated production lines meant that workers lost skills and the next generation wouldn’t even know how to program and optimize the production line properly for example. How much production do we really need and how much needs to be automated? This is a real issue.
Take automated vehicles for example. Modern trains quite often don’t need a driver but still have one for emergency situation. This is one reason why I think the idea some people have that automated driving will mean all human operators will vanish is simply misguided. What we may see, I think, is something like a herdsman with a flock. One person on a vehicle controlling a vehicle fleet.
Let me give you an example of why it would be disastrous.
Ontario has suggested $1500 a month for ‘basic income’, as that’s just about enough for someone to live on there.
At $1500 a month, we could sell our house, my girlfriend’s mother could sell her house, we could buy a big house, and sit at home collecting $4500 a month for doing nothing.
That’s more than enough for me to play computer games all day and for them to go on a cruise every couple of months. Why would we work any more?
Or consider half a dozen twenty-something kids renting a house together and collecting $9,000 a month between them for… doing nothing. Why would they work rather than party all the time?
It’s an insanely stupid idea that falls apart after even two minutes’ thought.
I dunno. I know I can’t be idle. I always have hobbies even when I’m not working. Playing computers games is only one of them. I contribute to open source projects and the like on my spare time. I doubt it would ever work exactly like you mention, because if everyone had that amount of disposable income then the house prices would just adjust upwards as a result.
Assume the $1500/mo per adult.
If that was the case then rich people wouldn’t work.
Edward is exactly right, but it’s even worse. Some will be able to make more money not working (because free time has value.)
It also encourages scofflaws working off the books.
It probably isn’t enough to change the behavior of most of the rich.
But to think it wouldn’t kill motivation (as hunger does) that’s delusional.
Personally, that would be enough money for me to relocate to where it was offered when added to my current fixed income.
“Or consider half a dozen twenty-something kids renting a house together and collecting $9,000 a month between them for… doing nothing. ”
How much is the rent? If a lot of twenty-somethings decided to do this, pretty quickly places to rent would run low and rental prices would climb. This would force those who ‘doing nothing’ to vacate so landlords can get increased rent*
* assuming the laws allow civilised eviction of tenants!
How does pooling resources in a single dwelling reduce housing supply?
Let’s look at the basic arithmetic, admittedly involving large numbers. Suppose you had a Universal Basic Income program that will pay $1,000 a month to everyone in the US aged 19 or older. In addition, it will pay $300 a month for those under 19. How much will that cost per year? NOTE: I chose the age 19 because my source for population data used 0-18.
Children (0-18): 78,181,900 x $3600/year = $281,418,840,000/year
Everyone else: 240,504,600 x $14,400/year = $3,463,266,240,000/year
Total = $3,744,685,080,000. or about $3.75 trillion per year
Where are we going to get the money?
Correction: I brain farted and paid everyone 19 and older $1200 a month instead of $1000. The cost for adults is $2,886,055,200,000. The cost for the entire UBI program would then be $3,167,474,040,000.
For comparison, the US federal budget is around $3.5 trillion a year.
Wodun’s Law: The price of a good or service will always try to rise to the base subsidy plus whatever someone is willing and able to pay.
There are a lot of goods and services that would compete for free money but I suspect some will out compete others. Doubtful that landlords won’t raise rents or that the price of certain goods won’t increase.
That’s the other problem. If the poor have more money, other people will be trying to take it from them.
Also, the UBI fanboys claim that they’ll raise taxes on the middle class so they end up paying back their UBI in additional tax. So that’s really going to encourage people to work harder.
The whole thing is just economic idiocy.
If something like UBI makes sense it will be when automation is so extreme and pervasive, and human labor so worthless, that there’s no acceptable alternative. We are nowhere near that point.
There’s a related concept that might make sense now: conversion of various welfare schemes to a single payment not tied to any specific needs (‘negative income tax’). The idea here is that the recipients have a better idea what they personally need than the bureaucrats and politicians do, so this would increase the economic efficiency of the transfer. This is an old idea; even Milton Friedman was for it if I recall correctly.
We already have a form of Reverse Income Tax. It’s called the Earned Income Tax Credit. It has been around for decades. The IRS estimates that between 21 and 26% of EITC claims are paid in error with a good portion of that due to fraud. The Heritage Foundation puts the figure somewhat higher.
1. Fraud and Erroneous Payments. Erroneous overclaims are at least one-quarter of the $59 billion in annual EITC spending. Some 43 percent to 50 percent of EITC tax returns claim illegitimate excess benefits. The most important causes of erroneous overpayments are false reports of earnings and false residence claims by adult claimants.
2. EITC Benefits to Nonparents. The EITC is designed to encourage increased work by parents, but the EITC law permits persons other than the parent to receive benefits on behalf of children. Grandparents, aunts, uncles, and older siblings and stepsiblings can often claim EITC cash bonuses for children. This option leads to “benefit shopping,” arbitrarily assigning children for EITC purposes to relatives whose earnings will elicit the highest EITC payment. Benefit shopping increases costs to taxpayers while undermining the core principle of promoting parental work; it is also a major factor in residence fraud.
3. Very High Multi-tier Benefits. Many families receiving the EITC also receive benefits from other welfare programs such as food stamps, Medicaid, and subsidized housing. When these benefits are piggy-backed on top of each other, the aggregate benefits received can be quite high; this is particularly the case with families that receive both the EITC and subsidized housing.
4. Discrimination Against Married Couples. In most cases, the EITC benefits received by unmarried parents who cohabit are significantly higher than those received by similar couples who are married. A government policy that explicitly rewards parents for remaining unmarried and cohabiting while financially punishing those who do marry is unwise.
Let’s begin by first removing market distortions such as subsidies to homes, health care and education. Reduce silly regulations that elevate prices. When the free market actually works, you will see a decline in prices. The motivation for a basic income will diminish as people can actually afford the necessities of life.
Of course, removing these hurdles means politicians will have less power, so I doubt it will happen.
I disagree on the general premise. Some sort of social bribe is inevitable in today’s flawed world. Might as well be UBI rather than something that pays out only to certain political constituents. Maybe instead, we should think of how UBI could be rigged to encourage healthier political interest in the well being of the US. The Alaska fund, for example, pays more out when the Alaskan pipeline is fully used and well run.