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I've posted a much simpler model than what Chris did, to make it clearer what's driving his results:


Run it, and it will look very similar to what the more complicated model results in.

Almost the entirety of his model's result comes from the fact that the BI is given to everyone, while the basic job is not. All the other parameters he brings up are interesting asides but irrelevant to the actual results of the simulations. His model of the basic jobs proposal is pretty much equivalent to a proposal that "if you're unemployed, you should get a basic income; if you're employed, you shouldn't."

Basic income advocates consciously reject this. I don't have time to finesse the simple model right now to represent why we reject that proposal (I have, well, a job to go to =). But I'll hopefully get to it this evening.

I have attended a talk by Götz Werner, who advocates for a basic income. In this talk he was basically describing basic income as a reform of the tax system. Basically G.W. argues for most taxes to be abolished in favour of a significant increase in VAT (Value added tax).

He had several arguments for this. One is, that at the moment in Germany, labor is taxed, so there is an incentive to move production to overseas. A VAT is applied to goods from abroad and from the same country fairly.

The basic income would then be a negative tax refund to compensate for the social problems that a high VAT causes (since poor people suffer under high VAT more than rich people).

So let us say a person spends 1000 EUR on VAT-relevant purchases (food, clothes, phone, etc.). Now a VAT is introduced, so the products now cost 2000 EUR. Then a basic income of 1000 EUR would annihilate the additional burden. Another person spending 2000 EUR a month at the moment would soon have to spend 4000 EUR, 1000 EUR being provided by the basic income, therefore this person would have to spend 3000 EUR (1000 EUR increase) to buy the same goods as before. Because other taxes would be abolished, the income would be higher. Furthermore, with VAT there would be less tax loopholes and tax collection would be a lot easier.

As a _second_ idea, this basic income could be chosen to be above the level necessary to compensate for the VAT. This is the idea which is in generally associated with the basic income and outlined in the model.

I will take a look at the model more closely. I find this approach really interesting.

The thing is, the basic income obviously can't be above the level necessary to compensate for the increased VAT for everyone. If people on low incomes benefit hugely from the basic income, and people on very high incomes benefit hugely from income and capital gains tax cuts, it's fair to assume that it's the people in the middle - families with middle incomes and high costs of living, for example - that get screwed...

> Götz Werner

While talking about basic income we should not forget that he's running one of the largest drugstore chains in Germany. If everyone would have a basic income the difference in income would be going into consuming products. So retail would benefit a lot from it.

On the other hand removing tax on labor would benefit retail too because it's a major cost factor there.

I'm not convinced that we would have better society if we would implement his proposed scheme.

I think the biggest item missing when discussing BI is the huge change in behavior you have among those making near to the proposed BI payment. I suspect the marginal value of selling one's labor would increase significantly against the opportunity cost of increased subsidized labor. That is maybe you are willing to work 40 hours/week minimum wage at a shit job compared to the alternative of unemployment. But if the alternative is just BI that that is better than the shit job. But these people still have the time to work and a willingness to earn more - but the bargaining position is different. So I suspect you would see raises rise for lower-end full-time positions, causing fewer of them to exist and spurring more automation while at the same time see lots more low marginal value jobs that have wage values below the new equilibrium point - such as more temp/part time positions where people can quickly enter/exit the job market when they need some additional cash - which in turn further raises the prices of semi-skilled labor since it will be more sparse. This would even further incentivise subgroups to enter low-effort training to capture these wages.

A proposal in the US similar to this is the FairTax.

In my opinion, yours is so far the best comment on this thread. You analyzed the model, made your own, and cut to the heard of the matter. That's probably because you actually wrote some code and played with the model.

Thank you. I look forward to seeing your alternative model. Please email me if this thread vanishes before you write it up, I really want to see it.

Thanks--I appreciate you starting this discussion with this approach, and I almost feel guilty about pushing BI incessantly without doing this as due diligence before. Most people don't seem to get that models are useful starting places and tools for understanding, not the answer itself. Even when you state that explicitly...

A corollary of your observation is that the BI is proposed to replace retirement benefits, whereas the BJ as specified in the model provides income for employed people and registered disabled only. Since BJ advocates seldom oppose the principle of state-aid for the retired, you'd probably need to start by solving this (pretty easily by adding "retired_person" and "administrative_cost_per_retired_person" variables) which would substantially reduce the cost gap between the two proposals.

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