Monday, May 16, 2016

The Libertarian Case for the Universal Basic Income

When I first heard of the Universal Basic Income (UBI), I thought, “Oh no, not another entitlement.”  But, the context within which I heard it got me thinking.

In a post last year (Advice to Give Your Kid in theAge of AI), I cited a 2013 Oxford University Study projecting that 47% of US workers would lose their jobs to automation over the next 20 years.

Many have already lost their jobs to industrial automation.  Stationary robots producing perfect welds in an auto plant are now commonplace.  The jobs lost to that phase of automation are a fait accompli.  The next phase of job losses will come from self-driving vehicles, algorithms and the Internet of Things (See From Turing to Musk to Industry 4.0).

If the technologists predicting this future world of work are correct, a world of luxury awaits.  Vast amounts of mundane work will be eliminated.  We’ll see a dramatic increase in our national wealth as businesses become more productive.  Our social welfare will improve as goods and services are produced more cheaply.

However, the elimination of mundane work means the elimination of income for a great mass of both skilled and unskilled workers.

And so, the concept of the Universal Basic Income was born.  The idea is that everyone would receive a check from the government every month.  Let that sink in for a moment.  Everyone – rich or poor, working or not, able or disabled – would receive a check from the government every month!

Some proponents have suggested an amount equal to about 60% of median household income or about $30,000 per year.

This is an idea that liberals can get behind, right?

However, a conservative case can be made as well.  I contend that the seminal thinking of conservative economists would support it.  The idea of a “safety net” was proposed by Freidrich Hayek in his most read work, The Road to Serfdom.  And, it was Milton Freidman who first floated the idea of a negative income tax.

Let’s pan out and widen the view a bit. 

The UBI would replace all other social welfare programs – HUD housing, SNAP (aka food stamps) – as well as the need for other lightening rod government rules, such as the minimum wage.

Vast government bureaucracies would be shut down.  After all, if there are no rules associated with who gets a monthly check, there is no need to fill out forms or for the bureaucrats who review applications. 

What about concerns that people will just stop working?

Would you?  Would you live on $30K per year if you could find meaningful work?  Wouldn’t you want a job anyway?

There is another benefit to the UBI.  Current programs intended to help the poor aren’t working.  A working paper produced by the National Bureau of Economic Research concludes, in part, “the safety net is doing less to provide protection for the most disadvantaged. In the post-welfare reform world, TANF did not respond in the Great Recession and extreme poverty is more cyclical than in prior recessions.”  And, 89% of those working for minimum wage are earning a second or third income for the household in which they live.

In other words, those initiatives are not working for the impoverished people they are supposed to help. 

Getting Congress to pass the UBI would be difficult, to say the least.  And, it must go hand in hand with other reforms.  The tax code would have to be overhauled – egad! 

However, if we could keep it simple… if we could remain true to the concept… if we could focus on the benefits, it just might work for everyone.

There are only two kinds of people who could screw it up… Republicans and Democrats.



  1. I love it. Pity I was born too early to reap the benefit of this idea. I presume the government would tax the corporations to raise the $30k per person? And would we actually be able to dispose of Congress? I know a lot of folks who'd relish that idea!

  2. Very interesting. A thorough cost analysis would be nice to see and the total cost ROI. That said, I presume the UBI would be per household? per adult over 18 years? At what point does a citizen receive the UBI? And, do you have to be a citizen? Just a few questions to focus on.

  3. After a little pondering I feel there is a problem or two with this idea. What will The Great Unwashed Masses do all day? No jobs, just leisure time. I can see drugs, crime, mischief and mayhem looming. And I'm guessing you realised this is pure socialism?

  4. Things like this, you have to look far down the road, and then look closer in time.

    I would venture a guess that in 200 years, all the jobs that provide for our needs can be done by robots and machines, *but* there will always be provisions for people who like to do "that" work. Out of the entire population, the only people with jobs will be people who want them. Think like Star Trek (but just the realistic parts).

    Now consider the transition to get there. What will it be like in 100 years in this regard? What about 50? What about 10?

    I think a realistic first step is identify people that don't want to work, and to be honest, we don't want them trying to work, and give them a "full time" "job". Yup, I quoted both. Full time pay for minimal work, to keep them productive in some small way, for example, ensuring one park is never littered. And you can see why I quoted "job" in that context.

    This would be handled just like a job, with a normal paycheck. No special, additional oversight or bureacracy, just a boss, who sees that you do your "job". No drug testing, special certification, or extra training.

    This is just the first small step towards the future when all our needs and most of our wants can be provided by machines.

  5. I suggest the same logic applies to "underemployed people," i.e. those mired in minimum wage (or nearly so) work.

    The tautologies that "one works one's way up" or "those people are simply lazy" are self-evidently incorrect when a materially significant fraction of "us" are stuck in such circumstances. Hard work (alone) does not divide haves from have-nots (or have-littles). It's considerably about luck. Lucky to be born smart; lucky to be born when & where we have decent medicine, rule of law, and functioning roads, sewers, water, electricity; lucky to have parents who cared; the list goes on and on.

    I follow the libertarian argument, and think it's likely correct, but empiricism trumps. We'll see how it goes for countries trying this.

  6. David Brown This is basically what Brazil did, and they managed to turn the most booming economy in South America into a disaster now that commodity prices have dropped. So much so they just removed their president from office and intend to impeach her. Automation has been going on for a long time and jobs continue to spring up in new areas to support these new markets. You do have a valid point that to get these new jobs, you will need to be skilled. The grunt labor jobs will dramatically shrink in the future.

  7. Ralph Michalske, MBA Hi John,
    You seemingly never have a shortage for creative ideas. The UBI is a dilly. I can feel Adam Smith reeling in his grave along with others. It reminds me of "reverse Polish notation" invented by Hewlett Packard for their hand held calculators 50 years ago. For UBI to work, you'd have to get more people to think as you do. This is referred to as the Donald Trump Initiative of Civics. To my knowledge, the UBI is not on the Democrat's or Republican's radar. For the Republicans it is too un-Milton Friedman and for the Democrats there is no John Kenneth Galbraith in it. Like me, fighting to repeal the 3rd Amendment, the argument goes no where in American politic.

  8. John W. Stevens, Jr. Wow, John. You certainly got my attention on this one. Let me address some concerns.

    My first concern is who would pay for this UBI? I assume that the concept is not to raise taxes on individuals but rather on businesses using some formula or algorithm that takes into account the degree of automation used by each company. This could be based, perhaps on a ratio of the number of employees compared to the revenue (or profit) generated by the business.

    I also would be concerned about those who do not with to work and choose not to work. It is not as if we did not have more than ample evidence in today's system to demonstrate that there are large numbers of people who prefer not to work and who are essentially unable to perform any useful function. As you indicated, the UBI would have to completely replace all "welfare" programs that would have to be terminated.

  9. Good comments, all. I would like to add a concept to the discussion. Today, we have what some call a "poverty trap". Benefits like HUD Section 8 housing and Medicaid are only available to those below a certain income level. Make one dollar more and you lose thousands of dollars in benefits. So, a poor person is incented to remain poor. Under UBI as I have suggested it (proposed is too strong a word), that problem goes away.

  10. The answer to another question -- how to pay for it -- is buried in my unexplored sentence about tax reform. Easy to talk about but hard to do. But then my blog is always about ideals and principles. Practical aspects are left to others, else my thinking would become as clogged up as theirs. :)

  11. Charles Barr This isn’t a “libertarian” case at all, in the sense of a case derived from libertarian principles. And there are plenty of practical reasons why it wouldn’t work.

    The politicians who support the current system of “entitlements” would still be in power. They would continue buying votes by advocating an even higher “guaranteed income”, or additional special privileges for the sick, the disabled or those otherwise “disadvantaged”. And what would keep the government from controlling how people spend this “free” money?

    Let’s not even talk about “welfare moms” (and dads). If each additional kid means more “free” money for the family to spend, imagine how many kids would be born to uncaring parents who want the extra income and have little concern for the children they bring into the world. And imagine the consequences to society when these children reach maturity.

    For these and many other reasons, a guaranteed income from the government is not a good idea.

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  13. Aleksandar (Alex) Resan Interesting article from Nick Hanauer: "The Pitchforks Are Coming… For Us Plutocrats":
    He also believes that UBI is a good idea:
    I mean anybody who is New Money should be able to see that.
    Corrupt governments (pleonasm isn't it) and Old Money will go so far as to sound the war drums, like they always did, to prevent change, but it is easier than ever before to disrupt anything and anybody today and no Giving Pledge and other PR campaigns will stop the hungry and the unemployed... as they have nothing to lose... And those who are destroying middle class today are creating those who have nothing to lose, who see chaos as a way out.
    Lots of UBI trials in Europe this year, and a vote in Switzerland in June (as interesting as Brexit vote).

  14. Susan Mucha Look no further than angry mobs in Venezuela and Greece. When you run out of other people's money, it doesn't end well. And the Libertarian view would be survival of the fittest in a world with minimal taxation, regulation or government services.

  15. Aleksandar (Alex) Resan UBI is not socialism. How do you call printing money out of thin air and giving it to too big to fail friendly banks who then work with corrupt government in Greece, giving them loans they could not qualify for (unless you believe in false credit rating agencies' reports), and then force new governments to adopt extreme measure and fire all government employees, sell all ports, islands and airports, etc. to repay never-ending debts, and only use that money for unfettered compensation systems and to keep corporate profits away from IRS and in Panamanian paradise... How do you call military-industrial complex and regional powers playing cold war games on Greek territory and sending refugees there to further destabilize now radical left government, influence pipeline routes, silk roads, etc. Low tax rates managed by small accountable government and avoidance of hyper-interventionism are not necessarily bad views...

  16. John W. Stevens, Jr. Considering the large constituency of people with interest in retaining the welfare system, not least of all politicians and government workers, repealing all of the welfare programs would likely be nearly impossible.

    There is the usual "slippery slope" argument. If we pay people not to work, There will be continuous pressure and incentive for politicians to increase the amount of UBI until the system is no longer sustainable.

  17. John W. Stevens, Jr. Finally, there is the purely philosophical objection to UBI, which is that we would be paying perfectly healthy people entirely capable of supporting themselves to do nothing.

  18. Ray Wach Giving a $20 bill to everyone in the country would only mean that the price of bread (and everything else) would rise some slight amount to compensate for the extra money in circulation. $20 sounds appealing at first (I could use it), but giving it to everyone only means that $20 is less valuable than it was before you started giving it out.

  19. Ralph Michalske, MBA Hi JWS, Jr.,

    When you said, "we would be paying perfectly healthy people entirely capable of supporting themselves to do nothing", were you referring to yourself and your career in the Navy?

    Paying for programs is easy. You simply keep the presses at the mint running longer. In short, America has no economic problems that can't be fixed with additional debt. This has been true for about 100 years. Look how far we've come in that time. To keep up with China's growth rate, America will have to monetize its debt. We don't need Donald Trump belly aching about making America great again. He's lost touch, America has been doing fine. Just check the numbers. We've come along way since 2008.

    1. Jay PaccapanicciaMay 21, 2016 at 6:30 AM

      Ralph, how does someone with an MBA not consider that printing extra money devalues the currency and has other adverse second & third order effects? Or consider that unlimited debt financing is a house of cards that will eventually catastrophically come crashing down? Under our current president, our debt has SKYROCKETED - we have come a long way into debt and we have weakened our healthcare system with socialized medicine that has higher costs, fewer choices, and longer wait times. We are NOT doing fine. We are pretty far from doing fine.

  20. Jay PaccapanicciaMay 21, 2016 at 6:24 AM

    A government managed universal income is a stone cold disaster. This sounds like the illegitimate offspring of socialism and communism. Every one will be equally poor due to a forced wealth re-distribution. I am opposed to welfare managed by a government. It tends to breed a permanent welfare section of the society. I like the general concept of "if you don't work, you don't eat". I think it is wiser to allow local, non-government organizations (NGOs) to care for the those who are unable to work. Citizen led social activism will be more cost efficient and will tend to have better controls and oversights about getting people off welfare and into jobs because the limited budget will be a forcing function that motivates the leadership to connect people with jobs.

    Where would the funding come from for universal income? Taxes? That seems like a self-licking ice cream cone. Work, so the government can tax you, so the government can pay you. Cut out the middle man and the parasitical losses from the costs of oversight and administrative processing. Work, so your employer can pay you.

    If everyone draws the same salary, why work? This removes the incentive for those with a weak work ethic to contribute to society. Further, if everyone draws the same salary, why excel? This applies a penalty for those with a strong work ethic because the fruit of their labor will be taken from them (stolen by the government) and will be given to those who choose not to work.

    We are currently breeding an expanding welfare state. We have forgotten the insight and wisdom that a government big enough to give you everything you want will be big enough to take away everything that you have. The cure is not to throw more money at people. The solution is to cut off the welfare and social security. Put money into education so people young and old can learn the skill sets needed for meaningful and appropriate employment, even if basic employment becomes more technical due to scientific advances and automation. Remove the anesthesia of governmental sponsored living and the lethargic will awaken, get a job, and contribute to society. They will have to.

    There are plenty of NGOs and social activists who will catch those who legitimately cannot work due to age or illness. NGOs will also attract creative people who like to solve problems, who will find ways to help many find (perhaps unconventional) employment. There are many organizations that will help create those jobs. Start with the ones that are the most ADA compliant and friendly.

    I agree that getting these reforms will be extremely challenging. Why? Because many on welfare actively and faithfully vote for the Democrats who like to grow big government. These citizens will come out in swarms to vote against any candidate who intends (in their minds, threatens!) to cut back or cut off their free money so they will be forced to get a job. Any leader who steps up to do what is right for this country, reverse these trends, and undo some of the failed social reforms of the New Deal will have a challenging time getting enough voters to step up and say "ENOUGH!" because these voters are so disappointed with the failed government experiments and policies that they don't want to have anything to do with it. "Nothing ever changes, so why vote?"

    For the record, I also think that we should overhaul our penal system. Some people who don't want to work choose to commit a crime so they will be locked up. "3 hots and a cot" (3 cooked meals a day and a place to sleep) for the next 10-20 years without having to work for it sounds pretty good to some. I like the idea of making inmates contribute by having them work, too. Whatever they produce would also offset the cost of their incarceration.

  21. Well sign me up. I'll just sit around and no one has to work. We have that now it is called retirement and many people are already doing it. Let your investments work or you. They never want to retire. There are questions of mental health for people that have worked all their lives and want to continue. Does anyone know history? I guess every on is working so they do not have to work. How did this country grow. The problem developed when we became a world economy. There were more low economic people that high economic people so the low economic people brought the high economic people down. There is also the fact that we had two idiot presidents and we are heading for a third.

  22. The Universal Basic Income is another one of those good intentioned ideas paving the road to hell, and in this case, hell in body, mind, and spirit. The UBI also sounds like treachery coming from the Globalists, again inciting Americans to betray our God inspired Constitution. Starting with the mind games, the Globalists do want troublesome humanity replaced by robots they can control, but it is foolish to think they are going to pay a bunch of people not to work. The Globalists want to reduce the world's population to the minimum of free people and have an adequate number of slaves for breeding purposes. Currently the Globalists are doing this through continuous war, biowarfare, and abortion. Just as any kind of welfare, the UBI will encourage sloth and greed in many people, and many will try to steal their neighbor's stuff, so they can have more stuff. As Jesus Christ and Mark Levin both eloquently have stated, a Utopia on Earth is not possible, period. That is how Marx mislead so many people, and still does today. John Locke, a physician and a devout Christian, is recognized to be the founder of classic liberal philosophy, but he would be appalled at what is called "libertarian" today, as I often am. John Locke's idea of Progress was the progress of the human condition in mind, body, and spirit, not secular progressivism. The idea of America, enshrined in most of our Constitution, is to promote Locke's idea of Progress. It is the best way yet developed that human beings can have work that is based on their passions and dreams and still provide for their families. The idea of America is that the government is as small as possible to protect our borders, provide for the common defense, to maintain civil society and to protect our God given rights. Everything else belongs to the people, people who must be educated, and people who must be good. The Globalists brain-wash our children in government-funded screwls so that they will accept Global government and worship the things of this world, not God. The Globalists are trying their best to destroy the idea of America, and have almost succeeded. So Libertarians who think that global government with moral relativity and things like UBI's are Utopian fools. Who will step up, like my ancestors did, and fight for America?