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Basic income (wikipedia.org)
37 points by parenthesis on Aug 12, 2009 | hide | past | favorite | 56 comments

I just learned something new. Milton Friedman supported a form of basic income.


exactly... people like to make Friedman into some sort of ideologue, but he was quite reasonable and most importantly highly creative in his insights about economic policy.

I recommend reading Capitalism and Freedom for a taste of his creativity.

My understanding of Friedman's position was that the negative income tax was a politically viable (if unlikely) system that would be an improvement (more freedom, less socialism) over the social programs we currently have. Not that he thought the negative income tax was the "ideal".

This would have lots of un-intended consequences, especially when you think about how much money can be saved with group living (10 to 100 people per house, economy of scale with respect to room and board).

Separatist cults would now be profitable instead of being money sinks. Debtor's prison is now a possibility again (you can house the person more cheaply than their annual stipend).

If the government gets to confiscate the stipend of incarcerated felons to offset prison expenses, there's now economic incentive to increase prison population.

Er, have you looked at the US or California prison populations lately? They're remarkably high as things are, and there are already all sorts of ways to confiscate the property of convicts, which has proved a bonanza for some law enforcement agencies.

As for the other economic incentive, you would need to compare the potential saving with the cost to the state of keeping someone in jail, which can run anywhere from about $15k (Texas) to $35k (Maine). Weather and geography are significant factors in this variation. The basic income we're talking about is probably only sufficient for basic survival; somehow I doubt it's going to be more than the cost of imprisoning someone.

Of all the possible unforeseen ramifications of how something like this might work out, putting people in jail to save money is not high on my list of things to worry about...though now I think about it, the cost per inmate per year might be a reasonable metric for determining this basic income, since it reflects the approximate cost of living in the most literal sense.

Inmates cost more. They have to be guarded.

I agree. What's to prevent me from cheating the system by having a ton of kids? They'll be provided for by this program. Also, I elect that my salary be $1 and receive bonuses instead... yes, there are arguments against that, but at least right now, I'd have to spend effort to be rich first before taking the $1 salary + bonus.

I just finished reading through the Self-Enforcing Protocols post (http://news.ycombinator.com/item?id=755131), and this scheme strikes me as something being easy to abuse.

What's to prevent me from cheating the system by having a ton of kids?

Um, maybe having the kids around?

He does have a point. In places with good child benefits, some people just keep getting more kids, and not raising them properly.

Which places are those? What kind of family sizes are we talking about?

And of course inflation.

All startups would be instantly ramen profitable.

Startups, or the companies that they would later turn into would have a substantial tax burden keeping them down. (You can't hide an economic inefficiency - the effect of taxing to pay for it would have a negative impact.)

There is no such thing as a free lunch.

The "economic inefficiency" associated with a guaranteed minimum income, or wage subsidy, plus a basic level of government provided health insurance, has less distortionary consequences than the current system with a minimum wage and employer-provided insurance.

But really, this kind of reduction in inequality has generally quite positive effects on economic growth and productivity, and everyone in the society, including the rich, winds up better off after the improvements have compounded for a few decades.

But starting would be easier. That's his point.

According to the article Alaska comes close due to the subsidy. Maybe Alaska is the next Silicon Valley?

$3,290 a year, which is the Alaska permanent fund dividend, will not take any startup to ramen profitability.


Alaska has an amazingly high cost of living, as I discovered when I stayed there to visit a late relative.

According to http://www.ireport.com/docs/DOC-149993, every Alaskan in 2007 received just shy of $3,300. I wouldn't call that enough to live on, but it's not a bad start if you're looking to have just enough to scrape by.

If that's every person, then a family of 4 would get $13000. Allowing for differences in cost of living I'd say that's about 75% of what I'm living on in the UK (and we run a car). If you own housing then I'd say that's more than enough to live on. If you're happy to supplement that income by growing some of your own food (allotments in the UK are very low cost) then I'd say you can live quite comfortably.

I don't know for certain, but I'd imagine it's everyone over the age of 18.

I fail to see how this would not immediately cause the cost of living and prices for most things to just rise to the level of what they were before plus the new stipend?

This is basic supply and demand - If I give everybody in the country $5000 to go buy a computer, over time, computers will start to cost around $5000. If I give everybody $400/month to spend on food, over time, the cost of groceries will rise up to something more than $400.

Because the basic income money isn't given to purchase any particular good. People can spend it on what they like. If the person gets to choose between spending their $5000 on a laptop or plane tickets, supply-and-demand says laptops will stay at their marginal cost.

On the other hand, it's supposed to be an amount of money that is enough to subsist on. If there's a relatively predictable perception of "subsist" in terms of proportional allocation to categories of goods in a basket, prices for goods in this basket might start to track their respective allocations.

On another note, who says the rational thing to do with a windfall is to go blow it on something just because you can?

Basic income money should be taken from other taxes rather than printed, otherwise, of course, no sense in it.

How about everybody just gets to keep whatever they earn from their time and labor? My God, we've become a nation (no, a world) of greedy busybodies who think we deserve a piece of everyone else's stuff.

So what happens if your hands (which you presumably use for programming) stop working and you are unable to do your job? Should you lose all your income, be kicked out of your house, and forced to beg for food? (And eventually get sick, not get medical care, and die at the age of 28?)

I wouldn't want that for you, and I wouldn't want that for myself.

Humans created a society for a reason, and it wasn't so that we could each keep everything we earn and have a slightly bigger flat-screen TV. The collective protects the individual from Bad Things that can be devastating for that individual, in exchange for a tiny bit of each individual's earnings. With that tiny bit, we can also build infrastructure that would be otherwise economically infeasible for a private entity to fun (or for each individual to build himself), but is beneficial to society at large. Roads, public transportation, the Internet, etc.

Assuming that everyone should live in isolation ignores basic human biology -- we are a social animal, and we need the collective.

The question is about how we distribute our wealth fairly.

The fairest method would be: Who creates the most wealth, gets the most wealth. The current method is: Who negotiates the highest salary (founders and passive income excluded), gets the most wealth. Basic income method: Everybody gets an equal little piece of the wealth, the rest is distributed like before.

It seems fairer to me, because for example moms are not compensated with the current system.

What do you mean "we've become"? Can you point to a time in human history where everyone thought they did not deserve a piece of someone else's stuff?

The early Christian Church, as reported in Acts - the believers shared all things in common. There was a brief breakdown when the apostles had to intervene as those distributing food to the widows and orphans were tending to favour their own people.

Are you rejecting the social contract entirely?

"No," says the man in Washington. "No," says the man in the Vatican. "No," says the man in Moscow.

Those men are correct.

Interesting post - I found this quote pretty telling: "After six months the project has been found to significantly reduce child malnutrition and increase school attendance. It was also found to increase the community's income significantly above the actual amount from the grants as it allowed citizens to partake in more productive economic activities"

Perhaps I am not understanding the concept correctly, but this seems just like a linear additive - a distortion - to existing incomes, nothing more, for most people.

The only people for whom it would make a material difference would be folks that are otherwise completely indigent, homeless, etc., and that does hold a lot of appeal.

But it's not going to give every other category of society the freedom to say, not work jobs they hate. The lack of economic survival alternatives isn't the only thing that's keeping people at jobs that pay higher than subsistence wages.

So, it sounds like the following things would happen, among others -- good or bad. Am I completely off track here?

- For people who are indigent, homeless and/or completely unemployed, this would be a big help. However, it would also disincentivise taking any very low-wage job that pays comparably, as long as people who have 'moved up' by virtue of receiving basic income are content with that level of lifestyle.

- That would strip a great, great many service industries in this country - i.e. most fast food, a lot of retail - of their present sources of cheap unskilled labour, requiring them to pay a premium above Basic Income and thus drive up costs for them and everyone that consumes their products and services. It would also greatly injure the competitive position of those firms relative to foreign competitors that do not have a Basic Income requirement. Although the requirement to pay higher wages when operating in the US for those foreign competitors would mitigate that _somewhat_, it would still be a very, very significant competitive distortion that could affect their ability to expand into other markets vs. foreign competitors, etc.

- Other aspects of having to "compete" with Basic Income would create similar distortions elsewhere. It's effectively the same as raising minimum wage significantly; it would encourage more aggressive export of jobs out of the country, where Basic Income does not create a high compensation bar.

- For anyone making substantively above a Basic Income-level salary, it would just add $BASIC_INCOME to their salary, contributing to significant inflation and making just about everything less affordable to people who only receive Basic Income.

- There would be constant disagreement as to just what constitutes Basic Income and how much is really needed to subsist. There's not a lot of consensus as to just what exactly "subsistence" entails. Poor people in America (somewhat understandably) have a standard of "subsistence" that poor people in Third World countries could only aspire to.

These are all pertinent observations. The rational of basic income, as applied in France, is to provide some money (not much) to people who have no revenue. It was called the RMI, "Minimum Insertion Revenue". So it was given to indigent people but only without any revenue.

But there was a backside to this system because it produced a threshold below which it wasn't worth to work. This threshold was above the RMI because working needs to cover the cost of the trip to the job, clothing and such.

This is why the system has changed this year into the RSA "Active Solidarity Revenue". People without revenue still get the equivalent of the RMI. But now, when they get a job, they don't lose the RMI. The revenue is now balanced with the income, also providing an incentive to get a job even if it is only a few hours a week.

The huge cost of such basic income model is balanced by the benefit of reduced criminality, because these people don't need to steal, swindle or whatever to survive anymore. This makes France a pleasant place to live even if the taxes are high.

I have a friend on UK disability allowance. He gets more money than me per month, I work an average 6 day week. He also gets housing on top of the money, so in reality he's a lot better off than I. Most council housing, where people are living on unemployment benefits has satellite TV and eat take-away food a lot. I can't afford that. People we know on benefits buy "all new" for their babies (£300 buggys!) whilst we rely on secondhand and hand-me-downs. Basically my argument is that the current system gives too much if it's not a struggle to get by (requiring some work for yourself, mending clothes, growing food) then it's too much IMO.

My friend has considered working, and has in the past, but he makes less money the more he works.

Last time I checked we were at about 75% of the official poverty line but ate healthily and even managed a small holiday. Now I suspect (one more child and ensuing benefit) we're on the line.

I think we already have that here in Denmark. If I understand the concept correctly, that is.

Basic income is given to people who earn less then that. You'll buy food and shelter with it (no laptops !?), but it is tough to survive with it.

It might be more efficient if it was backed up with some kind of coaching to help people learn how to manage their income and life because this is like giving fish instead of learning to fish (though that's the purpose of school). But sometime you really need fish and have no time to learn, or some people are just too dumb to learn anything.

It has a huge cost, but it has to be balanced by the benefit of criminality and insecurity reduction. Without it these people would have to steal, swindle or deal drugs and this is very likely to have a much higher cost.

The wikipedia article says that basic income is give to all regardless of wealth. That's one of the points - it removes the huge costs involved in administrating a system that has to establish and analyse the wealth of all members of the community.

Mormon settlers practiced a basic wealth version of this briefly during several periods during the 19th century.

From http://en.wikipedia.org/wiki/United_Order

"Members who voluntarily chose to enter the United Order community would deed (consecrate) all their property to the United Order, which would in turn deed back an "inheritance" (or "stewardship") which allowed members to control the property; private property was not eradicated but was rather a fundamental principle of this system. At the end of each year, any excess that the family produced from their stewardship was voluntarily given back to the Order."

In other words: Basic Socialism.

If the US replaced all of its welfare and re-distributional programs with a negative income tax (sales/estate/corporate/etc taxes would be scrapped as well), the US would be far less socialist than it is today.

There seems to be reasonable evidence that at least some quantity of 'welfare' is beneficial. If that's the case, then the negative income tax can provide that without all the bad distortions that traditional welfare/re-distributions (SS, unemployment insurance, etc) produce. (Alas, we can never escape the DWL of taxation, though).

Hayek and friedman are certainly among the more outspoken proponents of socialism

I may be an Austrian, but I don't agree with everything that any Austrian ever wrote. And I am definitely not a Friedman fan, although he is preferable to many alternatives.

Are you using that statement as just a factual observation, or are you attaching a value judgment to it?

Haha! :)) This is a good one

The advantage of this is that it might subsume other redistributory policies. A lot of money is simply transfered from one person to another in this country, and to have a single method of doing so would make every adjustment to the amount a large national debate, rather than a rider on a bill no one reads.

It would also make the benefit impossible to kill or reduce no matter how much it strangled the nation. See: Social Security.

The difference is that instead of the AARP threatening nuclear warfare over any reform it would be everyone. (Incidentally, if you think the AARP is going to give up Social Security just because they're getting Basic Income in return, you're dreaming.)

Charles Murray wrote a whole book, In Our Hands : A Plan To Replace The Welfare State,


on this subject and how it might work in the United States.

Many european countries have something like basic income implemented. It mostly realy basic income, but you can survive on that some time.

Speaking for Germany: Basically yes. But it's split on numerous agencies and bureaucracies. Also it's not unconditional. And among the worst things: The effective marginal tax rate can be quite high for people with low income. I.e. you don't pay much taxes per se, but for each earned Euro above a certain threshold you have to forfeit one Euro of e.g. BAföG. Not a good incentive to work gradually more.

In the UK, we just got increased child benefit (new baby) and so our reduced council tax (local taxation based on [an imaginary] property value) has been increased. Net loss to us. Sadly we're not allowed to refuse the added child benefit.

Mind you the system is so complex that they couldn't tell us in advance what child benefit we'd get - presumably they just wait and see what number the computer spits out. This number appears to have a random perturbation.

How many people who work today would be content with simply subsisting on their stipend? Who would then pay taxes? Would the burden be too great for the workers that remained? Almost certainly, I think.

The stipend, IMO, needs to be at a level that requires you to grow your own food, mend your own clothes, etc., in order to not go hungry and naked. That is it should require you to be productive even if you're not employed.

If you can afford to smoke or buy brand new clothes, buy cable telly or go out for food then you're getting too much stipend.

Then the question becomes how many people on minimum wage jobs would give up what they have and live in charity shop clothing, tending an allotment, not smoking or drinking (unless they grow/bottle their own) and preparing their own food at home in shared accommodation.

I don't think you'll see too many of the current generation choosing that sort of lifestyle.

Just balance the budget first.

These measures are orthogonal.

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