Techdirt Podcast Episode 16: Rethinking Work, Income & Leisure: Albert Wenger On Basic Income
from the BIG-ideas dept
Recently, there's been a growing discussion around the concept of a basic income guarantee and its potential to completely change how we think about work, income and leisure. Would it change the world for the better, or create more economic problems than it solves? Albert Wenger from Union Square Ventures joins us this week to discuss the potential of this revolutionary idea.
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Filed Under: albert wenger, basic income guarantee, economics, podcast
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A Nice Idea, but...
1. disincentivizes work
2. stagnates creativity
3. results in inflationary pressures
4. will expand an entitlement mentality
5. ignores the nature of "value"
Let's take these in order.
1. Disincentivizes work
Years ago my dad told me to get a job. It wasn't until he cut off my allowance that I actually got serious about it. This provided a valuable life lesson for me. Others have similarly observed that many on unemployment don't seriously start applying for work until the benefits run out.
A friend grew up on a beach in Hawaii. When she got hungry, she when into the forest and picked fruit. This is a perfect example of a modern aboriginal life style. Unfortunately, this only works if you live in a location where you can sustain yourself. Few people live thusly. Most need to acquire sustinence and shelter from someone (paid) or something (installed, serviced, and upgraded).
The phrase "Tragedy of the Commons" came from the first year of the Pilgrims' settlement where they decided to “Share everything, share the work, and we’ll share the harvest.” The net result was everyone scaled back on their labors, complaining about other people reaping the benefit of their work, and assuming others would make up their shortfall.
This speaks to a basic human reality - people won't work unless they have to.
2. Stagnates creativity
Necessity is the mother of invention. In the book The Obstacle Is the Way, Ryan Holiday describes how struggle and difficulty is the impetus behind creative solutions. Compare, for example, the level of innovation and entrepreneurship in the U.S. as compared to socialist countries.
Automation and mechanization can free us from the drudgery of undesirable jobs, but not from the need to innovate.
It is in fact the unfortunate nature of those jobs that stimulated the creative efforts to automate them. The assumption with BIG is that if we take away stress and discomfort we will free people to create, but the reality is more like the example of the hunter tribe described in the podcast - 3 hours of hunting followed by a life of leisure.
Furthermore, advances in innovation and creativity need a large number of participants. As people opt out of work in favor of pursing fun, fewer people will be available for the long, hard hours of focused creativity that most real advancements need.
3. Results in inflationary pressures
Every place where an industry or service has been subsidized, or loans guaranteed or "incentivized" with public money, the price has gone up. It is not hard to understand this basic cycle: if an ordinary individual can afford $1,000 for a semester of school, that is what the tuition will be, but if Student Aid is available for $10,000 per semester, not surprisingly, the tuition will become $10,000.
There are too many examples in too many industries to list, so google it. Here's a place to start http://www.calculated-success.com/the-inflation-elephant-in-the-room/
4. Will expand an entitlement mentality
In the book Systemantics: How Systems Work and Especially How They Fail, John Gall details how systems will never voluntarily disassemble themselves, and always strives to grow. Name a single government program that has gotten smaller.
We have probably all experience the "entitlement mentality." When signing up for cable or phone service with the 1-year price-saver special, did you get angry when your bill went up at the end of the year? You knew that it would - you read and signed the agreement. Yet we all feel that flush of anger and feeling of being ripped-off when the provider does exactly what they said they would do, and we agreed to.
And what are we angry about? We are "entitled" to that lower price! Nope, not really, but the feeling is very real, and those feeling, associated with all forms of entitlements, have lead to riots, arson and looting, followed by politicians promising better subsidies and entitlements.
Consider that a flat sceen TV, cable, and cell phones are now considered a "necessity" in today's welfare programs.
5. Ignores the nature of "value"
David Gerrold's book A Matter For Men: The War Against the Chtorr had one of the best treatises on the nature of the value of labor. If people value your product or service, they are happy to pay for it. Conversely, if nobody wants what you offer, it has no value.
Much of the discussion around providing basic living subsidies for people assumes that it will free them to create. Yet if we consider the nature of value, if they create something of value, there will be a sustaining market for it. The only time someone would need their creative efforts subsidized is if what they create hold no value for anyone, perhaps themselves included.
William Gibson famously said The future is already here — it's just not very evenly distributed. We must understand from this that while we are looking at a world of automation guaranteeing leisure, much of the rest of the world is struggling with simple survival. They are the ones most in need of our innovations, and the value that provides to them, so unless we are willing to engage in difficult work, we will never be able to create a better world for those who need it most.
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Re: A Nice Idea, but...
2. stagnates creativity
3. results in inflationary pressures
4. will expand an entitlement mentality
5. ignores the nature of "value"
1- Nope. If you want to get all the neat gadgets you will still need to work to increase your income.
2- Nope. In fact, some people that need to get a decent paying job instead of focusing on what they love would be free to pursue their stuff. Case point: most careers that don't generate immediate profit such as science in general.
3- Maybe. Depends on which products and how you implement basic income. The current system also generates such pressures when you try to take people out of misery anyway.
4- Maybe. And even if it does the citizen IS entitled to Govt services (depending, of course, on the country). See the US and how the basic rights are being eroded easily.
Consider that a flat sceen TV, cable, and cell phones are now considered a "necessity" in today's welfare programs.
Do you have a citation? And there are steps to think about before welfare comes into the equation.
5- I struggle with this part too but again it depends on the implementation and it goes right into the inflationary point. This can happen but we know that the current system has plenty of faults too so it's not an excuse not to do it.
This has been attempted in a small scale and it usually works. There are the ones that will simply lay back and spend most of the money given without strings attached in booze or whatever bad thing but you are underestimating people and their aspirations.
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Re: A Nice Idea, but...
Disincentivizes work
Yes, but that's the *point*. If we can automate most important work, maybe we don't want everyone working.
stagnates creativity
The argument seems to go strongly in the other direction, since this would give much more freedom for individuals to be creative, since the downside risk of doing so is removed.
results in inflationary pressures
Directly discussed in the podcast. So much innovation is deflationary in nature right now which counterbalances that. Greater automation decreases prices and counteracts the inflationary pressures.
will expand an entitlement mentality
Not necessarily so -- especially not when it's distributed equally.
Ignores the nature of "value"
But you're confusing value and price. There are lots of things that have tremendous value, but no price. BIG actually helps expand that, allowing the creation of more value not directly tied to pirce.
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Re: A Nice Idea, but...
http://www.huffingtonpost.ca/2014/12/23/mincome-in-dauphin-manitoba_n_6335682.html
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I'm Offended, Mike
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Re: I'm Offended, Mike
1. It's not enough to live on by itself, so you're screwed if you can't get a job or other form of income, and you're particularly screwed if you have complex problems, e.g. long-term health issues. It'd only work out for those of us who are relatively healthy and job-ready.
2. Not all rich people pay tax. The idea of giving it to some rich footballer AND his wife and kids is anathema to me because they don't all pay into it and they don't need it. Which leads me to...
3. How in the world can we afford to dish this money out to those who DON'T need it as well as those who DO? Quick recap: not enough to live on by itself, not required by rich people, who don't all pay into the system.
4. Apparently, it's for citizens. Here's the problem: I'm a foreign resident (Irish) living in the UK. I don't need a British passport now, except for ID. I earn £17.5K a year and would lose half my income and all of my pension to provide enough money to give to the idle rich. No way!
----------------------------------------------
Okay, so what if we tweaked it a bit? Universal Basic Income is non-negotiable. You give it to all or to none. I'd be less inclined to oppose it if you restricted it to people earning less than £10k a year or who lived in households bringing in less than £40k a year, took tax-paying residents like me into consideration, and left my damn pension alone. I've worked for that and I'm entitled to it because I've put in for it.
Don't knock entitlement unless it's unwarranted.
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Re: Re: I'm Offended, Mike
Um, but that's the point. For it to work it DOES need to be enough to live on. You've taken away the most basic premise of Basic Income Guarantee and then said it's no good. But that's only because what you're describing is not Basic Income Guarantee.
Not all rich people pay tax
That's a different problem, which can be addressed.
How in the world can we afford to dish this money out to those who DON'T need it as well as those who DO?
We discuss this in the podcast and it's covered in many other places as well. There are ways to make this perfectly affordable.
Apparently, it's for citizens.
Apparently for whom?
You seem to think that there are set in place official rules for BIG that can't be changed. That's wrong.
left my damn pension alone
Who has said anything about pensions?
You seem to be fighting against a strawman, or some other program that you don't like and assumed that's what we're talking about.
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Re: Re: Re: I'm Offended, Mike
Um, but that's the point. For it to work it DOES need to be enough to live on. You've taken away the most basic premise of Basic Income Guarantee and then said it's no good. But that's only because what you're describing is not Basic Income Guarantee.
Experiment > Basic Income 1000 Euro/month
http://www.9ijanews.com/news/experiment-basic-income-1000-euromonth-for-everyone-always
give every adult £72 a week
http://www.telegraph.co.uk/news/politics/green-party/11383801/Greens-ditch-citizens-income-from-elec tion-manifesto.html
All the European ones seem to want to give us an amount that's not enough to live on by itself. Please confirm: your basic income would effectively be the same amount as the living wage? How much were you thinking of?
Not all rich people pay tax - That's a different problem, which can be addressed.
How? Jacking up taxes isn't enough, they find ways around that.
There are ways to make this perfectly affordable.
I've not heard the podcast yet, I'm reading this during breaks at work. Unlike the UBI supporters I've clashed with over this you seem to have some answers that don't consist of spamming with talking points so I'll take the time to listen to the podcast then let you know what I think. I've been arguing this with UBI supporters from all over the world and they haven't convinced me with their arguments, the most specious of which is, "We need to give this to everyone or the needy will feel bad about receiving it." Having been on the dole, that doesn't make sense to me.
Apparently for whom?
On the Pirate Party's subreddit, enthusiasts said it was for anyone with a UK passport. Mine is Irish. I've been living here for 25 years, paying tax into the system. They scrabbled for a bit and gave up when I told them that.
You seem to think that there are set in place official rules for BIG that can't be changed. That's wrong.
I was told by other enthusiasts I've spoken to about this that the terms are non-negotiable. It's for everyone, it's for citizens of the nation, the idea is to push you into work by leaving you with *just* enough to scrape by with on a VERY tight budget (after firing welfare workers from their jobs), and it will be funded by taxing everyone at 50% of their wage if it's over £10k (okay, that was one guy, who then resorted to pro-UBI spamming instead of answering my questions).
Who has said anything about pensions?
If it replaces all other welfare, bye bye pensions. Are they going to keep those after all and add UBI to them?
You seem to be fighting against a strawman, or some other program that you don't like and assumed that's what we're talking about.
No, I'm pointing out the flaws I've mentioned to other enthusiasts and not had proper answers to. As I said, they resorted to spamming my Twitter timeline with pro-UBI spam and I ended up having to mute them for it. Thank you for responding to my questions; please note, my concerns are genuine and there seem to be a lot of versions of this proposed program.
I STILL don't see the value of giving it to the rich. "But the poor might feel bad about taking it" seems foolish to me.
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Re: Re: Re: Re: I'm Offended, Mike
We weren't discussing any specific proposal, but the idea of how BIG should work, which would very much be a living wage.
How? Jacking up taxes isn't enough, they find ways around that.
You're really focused on this, as if it's a default that people will avoid taxes. That's a different issue.
On the Pirate Party's subreddit, enthusiasts said it was for anyone with a UK passport.
Again, we weren't discussing one particular proposal, but again, there's no reason why it need be limited to those with a particular passport. In fact, that seems counterproductive.
I was told by other enthusiasts I've spoken to about this that the terms are non-negotiable.
I've seen lots of discussions on BIG with a variety of different ideas. Considering it doesn't actually exist anywhere the idea that things are "non-negotiable" is clearly ridiculous.
If it replaces all other welfare, bye bye pensions. Are they going to keep those after all and add UBI to them?
I still don't see what pensions have to do with anything here, unless maybe I'm missing some sort of difference between the US and the UK. Pensions are private programs unrelated to welfare. Or are you discussing something else?
I STILL don't see the value of giving it to the rich. "But the poor might feel bad about taking it" seems foolish to me.
I don't see that as the reason at all. The reason to give it to everyone has a lot more to do with reducing the overhead issues. If you have to do any means-testing, you automatically introduce a large bureaucratic mess of figuring out who qualifies and who doesn't (and creates opportunities for gaming). If you just do it flat across the board then you reduce the costs of running the program.
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Re: Re: Re: Re: Re: I'm Offended, Mike
Yeah... I got halfway through the podcast last night. I kept pausing it to write down what was being said and will make the transcript available online when I've finished. You were saying that but Mr. Wenger said,
I'm sort of in the camp that it doesn't need to be very large because I believe we live in a deflationary world that's deflationary because of technology. Lots and lots of things are getting cheaper. If you look at the US, for instance, since the late 1990s consumer durables have already been getting cheaper on a quality-adjusted basis.
You mentioned the possible rise in prices of food and housing, and he says,
But if you look at what's possible with automation today, it's very hard to see how that would have a meaningful impact on the cost structure of existing products.
So the takeaway is, automation is making All The Things cheaper so food and rent won't go up. Well food might not but rent usually does, and always does in my experience. My household bills have also been rising.
So... there's no specific amount of money being discussed. You think a living wage amount is reasonable and he thinks that it doesn't need to be a lot because technology and automation is making consumer goods cheaper.
You're really focused on this, as if it's a default that people will avoid taxes. That's a different issue.
Tax evasion and avoidance have been in the news a lot lately. I read some of those stories in Techdirt and was particularly interested in the use of anti-terror laws to silence a whistleblower who called out deals with HSBC, etc., to let them away with dodging their taxes. So yes, it seems to be a default.
I can't dodge tax, it comes out of my pay at source, but the wealthy can and do stash their cash in offshore accounts, etc. It's impacting revenues, leaving less money in the kitty. If you want to fund a program, you need a source of income for it. That means tax dodging has to be taken seriously. Therefore it's not a different issue, though you might successfully argue that it's orthogonal to this debate. I'm convinced that there's no solid plan for how to make this venture self-sustaining.
You can't build castles in the air unless you've got your feet on the ground - Terry Pratchett.
Again, we weren't discussing one particular proposal, but again, there's no reason why it need be limited to those with a particular passport. In fact, that seems counterproductive.
Okay, how do you determine who receives it and how do you prevent abuse? The idea of the passport is not about the passport, it's to reserve the monies for citizens. So what does "everyone" mean? Tourists? Illegal aliens? Foreign residents? Expats abroad? How do you dish out the dosh? How do you go about claiming it? How do you make sure people aren't making false claims? That is what the point of asking questions is. We get a lot of fraud in this country, if the media is to be believed. Working off the honour system seems naive at best.
I've seen lots of discussions on BIG with a variety of different ideas. Considering it doesn't actually exist anywhere the idea that things are "non-negotiable" is clearly ridiculous.
Actually, there's a living, breathing version in place in Portugal at the moment.
http://www.basicincome.org/bien/pdf/2002BrutodaCosta.pdf
http://www.basicincome.org/news/2015/ 03/portugal-basic-income-public-discussions-rise-portugal/
It's been tried elsewhere: http://en.wikipedia.org/wiki/Basic_income
And although having more money is awesome, where you find a cost, it's costly because it's not self-sustaining. If it was self-sustaining, I'd be cheering it on. It's funny how the supporters never really get into the nitty gritty of how much it actually costs to run these schemes. They just go on about how much happier people are. That's what makes me so suspicious about it. If they demonstrated an efficient self-sustaining system I'd be cheering it from the rooftops.
I still don't see what pensions have to do with anything here, unless maybe I'm missing some sort of difference between the US and the UK. Pensions are private programs unrelated to welfare. Or are you discussing something else?
I've been paying taxes into the system to fund my old age pension, to which every taxpayer is entitled after age 65, though that's gone up now to 70. I also have a private scheme to supplement it. I though Social Security was for old age pensions in America. Am I wrong?
I don't see that as the reason at all. The reason to give it to everyone has a lot more to do with reducing the overhead issues. If you have to do any means-testing, you automatically introduce a large bureaucratic mess of figuring out who qualifies and who doesn't (and creates opportunities for gaming). If you just do it flat across the board then you reduce the costs of running the program.
I can understand wanting to cut down the bureaucracy that goes with means testing but as a facilities management help desk administrator I also understand the need to keep accurate records to ensure all information is correct. Which again raises the question, "What do you mean by 'everybody' and how do you prevent fraud without applying some kind of restrictions?"
This "nail it to the wall and call it by its name" approach is what I do for a living. I can't have an engineer ask me to raise a purchase order for fifty quid for an electrical supplier, I want the part name and reference number and the correct price to put down. Plus the name of the supplier. This saves me the extra work of adjusting the purchase order later to the correct price. It also shows Accounts who our most cost-effective suppliers are for particular items.
The trouble with over-simplifying this is you end up causing problems that have to be rectified with administrative oversight. And that means the dreaded bureaucracy. BIG is going to need human eyeballs on it somewhere down the line and we need a plan for how to pay for it. I'm not picking the nits off the nits, I'm just trying to be practical, as I am at work. I rarely take my admin hat off, to be honest.
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Re: Re: I'm Offended, Mike
We need a simpler system that allows for some limited policies to encourage business in disadvantaged areas?
And the idea while it may not be enough to live on by itself, is not correct. Here in the United States you can live on a basic income of $1500 Per month, I admit that you have to live with someone to offset rent or the mortgage note. And I admit that it would not be the best living conditions. But, then at least you have a choice, and you could develop your own business.
In essence this would help small businesses all over the place, as many people would do something that "Interests" them and potentially create so many new small businesses that we would have an evolution in goods and services.
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Re: Re: Re: I'm Offended, Mike
We were promised that they would use the money to create jobs and thereby trickle down the wealth created by the new business enterprises. I believe we can agree this is a pile o' poo. The truth is, if you have a choice between artificially jacking up the price of your shareholding via stock buybacks and starting up a new factory and employing more workers, it's a no-brainer, isn't it?
We need a simpler system that allows for some limited policies to encourage business in disadvantaged areas?
I'm in favour of that approach as it would create a self-sustaining system. We've actually had some very successful tax-funded schemes in which industrial areas were cleaned up and used to create leisure facilities. In one case they cleaned up a coal wastewater pool and turned the area into a nature park with a visitor centre and a fishing pond. Result: an economy grew up around supplying the visitor centre with foodstuffs to sell to visitors to take away or eat in the cafe. Craftware, etc., was also sold in the shop there. This thing pretty much sustains its local community.
Nearby, certain farmers made a deal with a promoter to arrange regular music festivals, which people are happy to go to because the area is lovely now that it's been cleaned up. Needless to say, local entrepreneurs make out like bandits when the concerts are on. I love this kind of thing.
The East Lancs Railway is another regeneration success story that was mostly down to private effort and a bit of government assistance. I'm very excited by stories like this, mostly because these things tend to be sustainable so it's great in the long term and has potential for growth.
And the idea while it may not be enough to live on by itself, is not correct. Here in the United States you can live on a basic income of $1500 Per month, I admit that you have to live with someone to offset rent or the mortgage note. And I admit that it would not be the best living conditions. But, then at least you have a choice, and you could develop your own business.
This is where you go against Mike, who argues that it needs to be a living wage, and against me, who would argue that you then have to find someone to live with whom you can live with, and pray that your life does not become complicated by something like a long-term health issue or having to care for others.
This is why I always say that any philosophy predicated on a best case scenario is ultimately doomed to failure. Base it on the worst case scenario; you can hope for the best when prepared for the worst. But people don't, Ed. So the only people who would truly benefit or even do well out of your version are job-ready, entrepreneurial healthy adults.
Mike hasn't developed his idea yet, it's in the embryonic stage and he seems to be thinking more about the implications than the practical applications. Fair dues, but sooner or later I need to get answers to my growing number of questions if I'm going to get behind it. It's the only way to cure my chronic skepticism.
In essence this would help small businesses all over the place, as many people would do something that "Interests" them and potentially create so many new small businesses that we would have an evolution in goods and services.
We've got crowdfunding for that, Ed. Ultimately, when an idea is about a thing to be brought to the market, I think it would be best to let the market decide whether or not it actually wants it. Grants, loans, and investors are already available to provide financial support for business ideas. Though the market is not free, market forces exist and I think they should be respected as failure to do so tends to cause problems, the War on Drugs and the mess that goes with it being a handy example of what I mean.
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Re:
That's what makes it unfair. A sliding scale that goes from £(sum) to £0.00 for those who don't need it would make it fair.
I see this as middle-class bashing (AGAIN!) because middle-income earners would be whacked the hardest for the tax revenues to pay for it. We haven't actually considered how we're going to pay for it, have we?
BTW giving money to people doesn't automagically make them more creative, it just gives them more money. Other sources of income for creatives exist. Now since they're market-inclusive this means your project might not get funded, but that's okay. Sorry, I'm with Nicholas Batik on this on the grounds that having a sum of money that is not enough to live on by itself would require you to get a job in order to pay the rent, etc., there being no free market in housing, etc., which would be one of those things that stagnates creativity per Mike's reasoning because the freedom to be creative wouldn't be there.
I should point out that in the town where this was tried, the costs spiralled out of control and the project was closed down because it was unsustainable. That's why they trumpet the health and happiness benefits, which you can also receive by... having a job that pays enough to live on.
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Re: Re:
How about instead we just make everything free except much more expensive "luxury" goods and services? That'd go over just as well with the UBI crowd as UBI does with people that recognize that it's just going to reduce the incomes of the rich and give that money to the poor. As a poor man myself, fuck no. I'm investigating buying the business I work for with $10K in the bank and a 15 year old car. People can do their own job and seek out the American dream of opportunity, not the European job of seeking out a subsidy.
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So many problems....
First, there is no issues of funding for anything ever just like there is never any problem find funds for bankster bailouts or bombs to kill the enemy of the month. Money is like numbers or points in a ball game; a sovereign government like the ref can't run out. The idea doesn't even make sense.
Taxes fund nothing.
Federal spending creates private savings just like loans create deposits. If you do not understand this please stop writing about economics and politics. Most people have monetary operation backwards. People can pay taxes because the Federal government has deficit spent money into economy that becomes their income which can be taxed. Most people because ultra far right monetarists like Uncle Milty believe the opposite of the truth.
Taxes don't fund government. Government spending funds taxable income which drained by taxation. Until you understand this basic accounting identity you don't understand anything about economics i.e. all libertarian/rightwingers understand nothing as everything they believe is not accounting consistent.
A sovereign government can buy anything no matter the price if it for sell in the it's own currency. The only question is how affects real world supply and thus the inflation level.
The inflationary argument against the UBI isn't based demand outstripping productive capacity as Mr. Winger suggested.
The argument for UBI causing inflation is based on Henry George/Adam Smith/Richardo/Mills/ every single classical economist's argument regarding economic rents.
The problem is introducing new income will create new demand which will cause a boom. Speculators in the FIRE sector will inflate expectations and capture all the new income by driving up rents on real estate and rents on money. The result is that all money that was going towards increasing the basic standard of living now goes to supporting unproductive price increase in economic rent. The market will then crash as the basis for the productive boom is no longer based on a real increase in demand for tangle goods and services because the greedy Dragon will have eaten its own tail so to speak.
Economists call this the business cycle and the UBI will be eaten just like everything else on the path to imperialist madness.
The UBI will simply cause the baseline price of the most essential goods and services to increase because people will invest believing that the initial boom will go on forever and belief itself creates the inflation. As the Chinese say ambition is a dragon that devours everything including itself.
The only solution is has a Job Guarantee so the investment directed back towards workers rather than inflationary speculation. So UBI+JB= balanced economic growth. UBI by itself= hyperinflationary boom-bust cycles.
If you want more technical details about exactly how a JG creates stability as a buffer stock please see the Levy Instutitue papers on the subject.
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Re: So many problems....
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