Well, good start perhaps

But now comes the difficult bit:

A village in Switzerland plans to pay residents almost £2,000 a month for doing nothing as an experiment into an unconditional basic income.

Rheinau, on the Rhine river at the border with Germany, hopes to pay participants up to 2,500 Swiss francs (£1,970) a month to ensure they have a guaranteed income whether they work or not.

The village council decided to go ahead with the scheme after more than half of Rheinau’s 1,300 inhabitants signed up to take part, and efforts to secure funding will now begin.

There’s many a good idea out there it’s getting people to pay for them which is so often the sticking point.

But unlike the national proposals, the Rheinau scheme will not be funded by the taxpayer. Instead the village plans to raise the necessary money through crowdfunding.

The project is the brainchild of Rebecca Panian, a Swiss film-maker who says she was inspired by the rejected national scheme.

“The idea, and the new social system that would go with it, made sense to me,” Ms Panian says on the scheme’s website.

“And, given the social and economic changes around the world, it seemed sensible at least to test an idea for a new future before dismissing it as nonsense.”

Not entirely stupid actually, There are some rich people out there willing to fund basic income experiments. As long as they insist it is an experiment, one that they’ll monitor properly, make all info available etc, they might be able to do it. Makes a nice change really, doesn’t it? Asking not demanding?

70 thoughts on “Well, good start perhaps”

  1. “A village in Switzerland plans to pay”

    “Rheinau…hopes to pay”

    “efforts to secure funding will now begin”

    I ‘plan’ to find teenage twin girls who I ‘hope’ will service my every perverted sexual demand.

    Efforts to find them will now begin.

  2. Looks like his EU funded City university role won’t survive Brexit and he will be thrashing around for a new gig.

    I have my eyes on that £10m house down the road. Efforts to secure funding will now begin.

  3. Whenever I’ve seen proposals for such a universal income the sums mentioned seem to be pitched at roughly equivalent to present basic benefits minus Housing Benefit. I don’t know the Swiss equivalents and whether this scheme is different, but those proposed in the UK suggest there will be an awful lot more homeless people unless I’m missing something.

  4. Personally, I’m in favour of people being taxed less so they get to keep more of their own money out of the grasping and greasy palms of the government.

    Clearly, I am a deranged capitalist running dog.

  5. Is this a version of Elon Musk’s ‘Funding secured’ tweet? Ie Here’s what we’d like to do, if only we can find the money somewhere.

  6. @John Galt

    Worth bearing in mind that economists often use “taxes” as short-hand for “taxes net of transfer payments” – they distinguish sharply between government spending on goods and services, and purely redistributive transfers between the citizenry. You could have a country where the government’s direct spending is eg 10% of the economy but where there is a very extensive system of transfer payments (benefits, pensions etc) and there are lots of very right-wing libertarians who would be happy with that provided the tax/benefits system has appropriate incentives built into it. Universal basic income being one of the more popular approaches on this count, because it means the benefits system doesn’t distort incentives.

  7. +John Galt whatever happened to Counting Cats in Zanzibar? Which I see you still have listed as your website. It was a home for counterintuitive thinking.

  8. Right at the end of the piece Ken kindly linked for us is the stinger. And it really is a stinger. In this real world the UBI will always be tinkered with until it wasn’t UBI at all but something that even John McDonnell’s sick socialist’s mind couldn’t dream up yet.

    That is a real pity, because the basic idea is good.

  9. UBI really is your one blind spot, Tim.

    It won’t work because it will be whatever the side that implements it want to project on to it. If it’s to replace all government largesse the socialists will vote it down, if it’s to transfer wealth from the rich, anyone with a brain will vote it down.

    The idea that a cohort of super rich will fund it without coercion forgets the simple lesson that communism doesn’t scale outside of the boundaries of the family unit without the threat of violence.

    But do continue trying make the case, perhaps I’ve not understood something.

  10. Ken – Yarp.

    Because libertarians – much as I love them, great bunch of guys, the best – have a tendency towards autistic pie-in-the-sky Heath Robinson schemes that sound great on paper but fail as soon as they encounter real-live human beings.

    UBI will never work (unless we actually *want * to live in some sort of “Jeremy Kyle meets Mad Max” hellscape) because of what Ironman said, and also for more fundamental biological reasons

    Most people – about 80% of them, and I don’t exclude myself here – are fundamentally lazy bastards who’d end up getting pissed every day if that was a viable lifestyle option.

    Remember that time traveller movie with Rod Taylor, and everyone in the future had awful blond wigs and lazed about like disgusting hippies waiting for the Morlocks to eat them? That’s what would happen.

    It’s not abundance that creates civilised society, it’s the pressure to go out into the world every day and earn our daily bread.

  11. BTW – the arts may be a test case here.

    So back in the olden times, artists had to work for a living, and if they didn’t give their patrons what they wanted, they didn’t eat.

    We got Michaelangelo’s David, the Pieta, the Mona Lisa, etc. out of this arrangement. And lots and lots of third and fourth rate stuff that was at least nice to look at.

    Then artists figured out they could suckle on the State’s teat without any of this “giving the customer what he wants” business, and suddenly we found ourselves balls-deep in unmade beds, piss crucifixes, and vagina sculptures.

    The traditional arts are dead. Painting and sculpture are cargo cults now, savages twerking amidst the ruins of splendour they cannot understand, appreciate or recreate.

  12. But any money they earn from work or receive from pensions or benefits during the month will be offset against the payment — meaning it guarantees a minimum income rather than supplementing other earnings.

    That’s not how UBI is supposed to work..

  13. @Steve

    Actually it depends on productivity. At some point we might be sufficiently rich so as to be able to afford a viable UBI – but at the moment the US could manage a UBI of around $10,000 per person if we abolished the rest of the state.

    https://www.aei.org/wp-content/uploads/2017/05/UBI-Jensen-et-al-working-paper.pdf

    And yes the caveats about the demands for more state support still apply. But technically at some point productivity could be high enough so that we could achieve a UBI of a decent amount.

  14. What a cruel thing to do to the slightly inadequate, to confirm their inadequacy and uselessness and condemn them to live with nowt to do and all day to do it in, no confidence, no dignity of work, nothing to look forward to and trapped by the money. But some people will be able to get out of it, you say? Yes, but those are not the people I’m worried about.

  15. For reference: Sozialhilfe for a single individual with no benefits is just under CHF 1000.- per month, AFTER housing benefit and healthcare costs. Without bothering to look it up, it’s something like 960.-.

    CHF 2500 is going to be somewhere around Sozialhilfe + cost of health insurance + normal housing benefit, within a couple of hundrer.

  16. @rhoda klapp:
    There was a documentary about Australia a few weeks ago on the BBC.

    The crew visited a village of Aborigines who have a mine on their land, and who get paid by the mining company for the privilege.They call it “sit-down money”.

    Instead of hunting and gathering, they drink and fight. The film-maker approached expecting to find Noble Savages, and ended up dimly realising he’d found chavs.

  17. “Because libertarians – much as I love them, great bunch of guys, the best – have a tendency towards autistic pie-in-the-sky Heath Robinson schemes that sound great on paper but fail as soon as they encounter real-live human beings.”

    Doesn’t everyone?

    “Most people – about 80% of them, and I don’t exclude myself here – are fundamentally lazy bastards who’d end up getting pissed every day if that was a viable lifestyle option.”

    This is where Keynes’ ’15 hours a week’ prediction, that Tim mentioned in another post, comes from. It turns out that people don’t stop working when they’ve got enough to live on – they prefer instead to work more and so get more. Instead of working less and less for the *same* quality of life, they work the same (as hard as they can) for a *better* quality of life.

    One of the problems with welfare is that it breaks this – whether you work hard on minimum wage or laze around on welfare, you get the same. So working harder doesn’t *improve* your lifestyle, it actually *degrades* it, and there’s no motivation. There’s a wide barrier to cross going from welfare to getting off the minimum wage floor. The idea of UBI was to remove this distortion. No matter how little you contributed, you gained the full value of your labour by doing so, and therefore removed the motivational barrier to people getting back into work.

    All welfare is bad (talk about autistic pie-in-the-sky Heath Robinson schemes that sound great on paper but fail as soon as they encounter real-live human beings…), but among possible welfare systems, UBI is arguably the least bad. By one particular metric, at least.

  18. Ken – Sure, but imo the main objection to UBI isn’t affordability, it’s social.

    Do we want 80% of the population to sit on their arses, when they’re not drinking and fighting like the abos CJ describes?

    We’ve already seen what a disaster replacing marriage with child support as the way we provide for women and children has turned out to be: out of control single motherhood and armies of fatherless chavs.

    Bad incentives produce bad behaviour, so what incentives does UBI provide?

  19. All welfare is bad (talk about autistic pie-in-the-sky Heath Robinson schemes that sound great on paper but fail as soon as they encounter real-live human beings…), but among possible welfare systems, UBI is arguably the least bad. By one particular metric, at least.

    If I understand correctly, UBI would turn everyone into a client of the welfare state – Gordon Brown’s wet dream.

    It would then turn every election into a referendum on whether we “deserve” a raise or not. 60% of the population takes more from the state than they pay in tax, so I wonder who’ll win that argument?

    One thing that can be said for the existing, complicated welfare arrangements is that they make it difficult for a single-issue political coalition to build around increasing them across the board

    It turns out that people don’t stop working when they’ve got enough to live on – they prefer instead to work more and so get more. Instead of working less and less for the *same* quality of life, they work the same (as hard as they can) for a *better* quality of life.

    I think it’s naive at best to expect any work ethic to persist in the face of free money for nothing.

    It’s kind of like marriage – the economic underpinnings were demolished ages ago, and it’s now a zombie institution. It took a couple of generations for society to catch down, yet here we are.

    Middle class people still get married out of ingrained cultural habit, but the lower classes have gone feral and judges are increasingly having to acquaint themselves with the sort of sexual mores held by premiership footballers and Jeremy Kyle guests. The people who suffer the most from all this are children, with the outcomes for kids raised by single mothers being measurably worse than children raised in the jungle by Indian wolves.

    Degeneracy is contagious, while living a productive life takes daily commitment. UBI wouldn’t be an improvement on the existing welfare state, it’d be the triumph of the welfare state. Formerly free citizens turned into charity cases expecting pocket money from the almighty state.

    Libertarians ought to know better.

  20. It turns out that people don’t stop working when they’ve got enough to live on – they prefer instead to work more and so get more. Instead of working less and less for the *same* quality of life, they work the same (as hard as they can) for a *better* quality of life.

    SOME people don’t stop working when they’ve got enough to live on. SOME do. In some parts of the world it’s cultural – do the minimum and then sit under a tree until you need to work again.

    Even happens in the West – look at the hand-to-mouth thiefs-by-profession. Steal enough to get through the next few days, don’t go back to stealing until that’s run out.

    The problem with a UBI is that it will massively reward the proportion of the population who don’t want to work and who have no intention of working unless they really, really have to.

    Plus, some will blow the lot toute suite then go whinging to the Grauniad and Mirror that now vey’v got nah munny and what am oi gahnna feed Shazeera and ‘er 4 bruvvers for ve rest ov ve munf?

  21. Further to last:

    We call those people who “prefer instead to work more and so get more. Instead of working less and less for the *same* quality of life, they work the same (as hard as they can) for a *better* quality of life” middle class.

    They’re middle-class because they do this.

  22. Steve

    The theory behind the right wing UBI is that it replaces the welfare state – no more clientilism because the state does nothing more than engage in the Friedmanite negative income tax: everyone gets some money and then pays a income tax on earnings, which is then redistributed. Incentives re not affected because individuals know that they keep X% of their marginal income.

    Many people choose not to work because the existing social welfare net penalises work – why work when the state takes away 90% of the income and you lose the free time. UBI removes this disincentive.

    Whether the future UBI which might be financially possible when incomes are very high would discourage work would be an interesting question – perhaps people might choose to work on non monetary activities or engage in more creative pursuits. I see no objection to the idea that people receive a UBI that does not come with distortionary incentives.

    I do take the point that the UBI would never be the flat rate that the libertarians would find desirable – the clientelism would kick in and people would demand more for special interest groups, which could potentially mean an increase in the discretionary welfare state, with all the negatives.

  23. @ken – sounds great. However it’s as politically-implementable as Full Keynsianism, rather than the Convenient Demi-Keynsisanism of Brown et al, which completely ignores the whole “run a surplus during the boom years” half.

    Fundamentally, unless the authorities are prepared to say “it’s your problem you spent it all on scratch cards and ciggies during the first week, tough”, it can never happen. And since the authorities saying that is politically unlikely…. it’ll never happen.

  24. “It would then turn every election into a referendum on whether we “deserve” a raise or not. 60% of the population takes more from the state than they pay in tax, so I wonder who’ll win that argument?”

    It already is, anyway. It would take a revolution in public understanding of economics to vote the welfare state away.

    “The problem with a UBI is that it will massively reward the proportion of the population who don’t want to work and who have no intention of working unless they really, really have to.”

    Those people will get exactly the same as they do now – the minimum necessary to survive. They’re already on welfare. They already get paid for doing nothing. It will make absolutely no difference to them.

    The people who *will* benefit are the people who go out to work, and so earn both UBI and a wage. That’s why it’s more expensive – we make no change to what we pay the work-shy, but we don’t take it away from people who *want* to improve their lot by working, but are stopped from doing so by the poverty trap. Even if it’s not all of them, it is at least some of them.

    “I do take the point that the UBI would never be the flat rate that the libertarians would find desirable”

    I’m not sure “desirable” is the right word. I’d prefer that there be no need for welfare – that everyone had the skills and experience to do useful work, and that temporary unemployment while looking for work was dealt with through some sort of insurance scheme.

    The “desirability” of UBI is along the lines of “If you’re going to be stabbed in the leg, which bit of the leg would you prefer to be stabbed in?”

    However, given the practical problems of giving everyone the opportunity/ability to acquire the skills and experience they need to work productively – a lot of which comes down to the limitations of technology and human nature – the problem is going to exist for a while yet. UBI is a case of libertarians attempting to compromise with the realities of welfare politics, state education, and human stupidity. It’s not perfect.

  25. NiV
    “Those people will get exactly the same as they do now – the minimum necessary to survive. They’re already on welfare. They already get paid for doing nothing. It will make absolutely no difference to them.”

    I disagree. Many of those on welfare have done the cost-benefit analysis and worked out that not working is optimal for them because of the very high marginal effective tax rates that hit welfare beneficiaries (90% in some cases) and the loss of free time. A UBI means the METR is far lower.

    http://policyinpractice.co.uk/93-tax-effective-tax-rates-explained/

  26. Gee, let’s go out and fund a short-term experiment in an attempt to discover long-term results. That should work. Let me point out the obvious: If the participants are fully aware the basic income is short-term, they will act upon that information and tailor their behavior accordingly.

    Why not just pile the money in the middle of town and burn it. The scientific worth of the evidence obtained from that should roughly equal the scientific worth of the experiment itself.

  27. Steve said:
    “the outcomes for kids raised by single mothers being measurably worse than children raised in the jungle by Indian wolves”

    I don’t suppose there actually is a paper on this?

  28. Richard – Well, Mowgli did okay until he got hoodwinked by that girl.

    BTW – least satisfying ending in a children’s movie ever apart from the little boy, bereaved and alone, at the end of THE SNOWMAN. “Everyone you love will die, kids. Merry Christmas!”

    I wanted Mowgli to have fun with his talking animal pals, what good is running off with a stinky girl?

  29. UBI is interesting as a thought experiment and does have the advantage that those who pay in would get something out which they don’t at the moment.

    The big problem I have with it is that it requires the existence of a big centralised state to administer, since it appears to be the mother of all transfer payment schemes.

    It might work in a civilisation with a high degree of automation across the board and a largely self-motivated citizenry, but even in the West we are decades away from that (and importing the illiterate and ignorant from 3rd world shit holes is not bringing that goal any closer)

    Welfare with a declining population and rising life expectancy will break at some point anyway, so might as well trial things like UBI to at least understand the populations behavioural response. My guess is that we won’t end up with a tonne of people wanting to be artists or teachers, but rather that a large section of the population will sit at home watching Jeremy Kyle all day or go fishing / drinking beer.

    Not even sure what my own attitude would be to a UBI that covers rent, food and utilities. Still, my gut feel is that in the long run UBI would not be sustainable. I’m guessing we would reach the Abe Lincoln tipping point (“Too many piglets, not enough tits”) sooner rather than later.

    “whatever happened to Counting Cats in Zanzibar? Which I see you still have listed as your website. It was a home for counterintuitive thinking.”

    The site was being hosted in a guys home on the Gold Coast, Oz. He became less and less involved in the site and despite being pretty interesting and successful, did things like go on a month long cruise and express “surprise” when three days after he leaves the site goes down.

    We tried to get him to host it elsewhere to provide better support and also to prevent it being held hostage to fortune, but he just wouldn’t.

    In the end “Who cares less wins”. I wasn’t there at the end so don’t know what caused the final switch off. Maybe it was my fault. Dunno really.

  30. JG

    “The big problem I have with it is that it requires the existence of a big centralised state to administer, since it appears to be the mother of all transfer payment schemes.”

    To be fair, if you are using a uniform payment aren’t using a complex formula based on income, previous pay-ins to the system etc then this would be less intrusive, and hopefully less expensive to administer, than current benefits systems. I suspect it does still mean authorities collecting data about number of children and UBI entitlement (via citizenship or whatever).

  31. “I disagree. Many of those on welfare have done the cost-benefit analysis and worked out that not working is optimal for them because of the very high marginal effective tax rates that hit welfare beneficiaries (90% in some cases) and the loss of free time. A UBI means the METR is far lower. “

    How is that disagreeing?

    “The big problem I have with it is that it requires the existence of a big centralised state to administer, since it appears to be the mother of all transfer payment schemes.”

    All state welfare requires a state to administer it. But part of the point of a UBI is that it avoids all the admin costs involved in deciding who is eligible. It’s actually a lot cheaper to administer.

    “Welfare with a declining population and rising life expectancy will break at some point anyway, so might as well trial things like UBI to at least understand the populations behavioural response.”

    Personally, I expect the technological singularity will make the problem disappear. When automation leads prices and hence the cost of living to drop towards zero, the cost of minimum welfare will drop too. That’s why they’ve been switching to “inequality” instead of “poverty”, but there’s only so far they can push that argument and maintain credibility.

    “My guess is that we won’t end up with a tonne of people wanting to be artists or teachers, but rather that a large section of the population will sit at home watching Jeremy Kyle all day or go fishing / drinking beer.”

    We already do have that section of the population, plus a bunch who would like to work for a bit extra but for who there’s no point, because then they would lose welfare. Only the latter gain from UBI.

    “Not even sure what my own attitude would be to a UBI that covers rent, food and utilities. Still, my gut feel is that in the long run UBI would not be sustainable.”

    It doesn’t have to be all that different to means-tested welfare. Without welfare, the income-vs-work graph is a straight line up from zero. With means-tested welfare, there’s a horizontal section at the start near the origin across to the line, and the rest of the line has a shallower slope. With UBI, the line is straight again, but hits the vertical axis at the welfare level. It’s definitely more expensive (assuming it doesn’t reduce the unemployment rate as it’s intended to), but not that much more expensive.

    https://steemit.com/basicincome/@scottsantens/the-cost-of-universal-basic-income-is-the-net-transfer-amount-not-the-gross-price-tag

  32. As others have said, there is the political angle. I find it interesting that Tim can see that the politics makes MMT a nonsense (inflation – politicians get elected promising more toys rather than more tax), but (perhaps) doesn’t see that the same argument can apply to ever increasing rates of UBI.

    To my mind, and more importantly, UBI continues to erode the cultural angle where a signfiicant percentage start from doing whatever possible to avoid the idea of “claiming welfare”.

    UBI risks further changing that working / incentive culture into something less productive (and hence less in the “total” pot). Ie, I’m surprised that the libertarians can’t see that (at least at our current levels of global productivity) it’s little more than a form of socialism dressed up in a pretty frock?

  33. “To my mind, and more importantly, UBI continues to erode the cultural angle where a signfiicant percentage start from doing whatever possible to avoid the idea of “claiming welfare”.”

    That’s fine. You sell it as “negative income tax”. And you can still have a culture of fighting to stop it going negative.

    “UBI risks further changing that working / incentive culture into something less productive (and hence less in the “total” pot).”

    The aim is to make it more productive by ensuring there’s an incentive to work, even at the bottom end. With the current system, there isn’t – get work and you lose the equivalent amount in welfare. Same pay for a lot more work. With UBI, doing more work always means more pay.

    “I’m surprised that the libertarians can’t see that (at least at our current levels of global productivity) it’s little more than a form of socialism dressed up in a pretty frock?”

    Of course it is. Welfare is an aspect of socialism. It’s just a less damaging form of socialism.

    Like I said, it’s like – if you’re going to get stabbed in the leg, which bit of the leg would you prefer to get stabbed in? If you’re going to have socialist welfare, what’s the least damaging, least distorting way to implement it?

  34. The aim is to make it more productive by ensuring there’s an incentive to work, even at the bottom end. With the current system, there isn’t – get work and you lose the equivalent amount in welfare. Same pay for a lot more work. With UBI, doing more work always means more pay.

    Yes, you’re incentivizing the least productive workers to work more. At the same, though, you’re incentivizing your more productive workers to work less, because they’ll have to pay a lot more tax to make UBI happen. It’s hard for me to see how the math could possibly work out.

  35. I’m Mr. Capitalist. You give everyone an extra £2,000 a month, I jack up my prices to absorb it. I get more money, your situation is unchanged.

    THANKS!

  36. ‘“The idea, and the new social system that would go with it, made sense to me,” Ms Panian says on the scheme’s website.’

    New social system?

    “And, given the social and economic changes around the world, it seemed sensible at least to test an idea for a new future before dismissing it as nonsense.”

    Ah, yes, ‘a test.’ The ‘test’ will be a success, just as the $15 minimum wage is a success. The people doing the study will make sure of that.

    ‘When taken in total, the Seattle Minimum Wage Study Team’s reports have proven that the $15 minimum wage is a success.’

  37. That’s not how UBI is supposed to work..

    Yes, the ‘universal’ part is a big clue, but missed here.

    Anyway, useful idea in practice, wouldn’t survive five minutes of contact with actual human society. So bin it and just carry on.

  38. “Yes, you’re incentivizing the least productive workers to work more. At the same, though, you’re incentivizing your more productive workers to work less, because they’ll have to pay a lot more tax to make UBI happen.”

    And there are a lot more of the least productive workers.

    It depends on a whole network of effects. How many people will come off benefits? How many people will be motivated to move up the ladder? How many people will get the work experience and on-the-job training to get better jobs? How many people will get part time jobs, and zero-hours contracts, and piece work, and short-term contracts, and all the more flexible forms of labour that this would make possible? What effect will that have on supply chain efficiency, and investment, and other jobs? With more supply of cheap part-time flexible labour, how will that shift the job market higher up the wage ladder? What effect will it have on automation of the workplace? On the unions? If you increase production, what effect does that have on inflation, imports/exports, the exchange rate? Does it make you more competitive with other countries, and therefore get more business? We can go on and on.

    We don’t know. It’s economics. That’s why they’re doing the experiments.

  39. BlokeInTejasInNormandy

    If you decide that UBI will always use exactly 5% of the tax taken by the government (choose other values as you wish), then the UBI funding problem falls back to the simple one of “how much tax should those swine take from us”, no different from today without UBI.

    If you decide that UBI will pay “the living wage”, or whatever similar, you’re screwed every which way from Tuesday.

  40. ““It would then turn every election into a referendum on whether we “deserve” a raise or not. 60% of the population takes more from the state than they pay in tax, so I wonder who’ll win that argument?”

    It already is, anyway. It would take a revolution in public understanding of economics to vote the welfare state away.”

    At the moment its not exactly easy to see exactly how much extra cash you might get by voting for a ‘welfare friendly’ party, as no party tends to set actual cash amounts for all the various benefits, and the qualification rules for many are opaque to say the least.

    Whereas when every single voter gets exactly the same benefit the future level of that would be a huge issue at every election – every party would have to name a figure they propose setting the UBI at going forward and how they’d finance it. There would be a massive upward pressure, far greater than today

  41. The other elephant in the room for UBI is who gets it – citizens only? Foreign citizens with leave to stay? Anyone who rocks up at the dole office straight off the boat?

  42. NiV

    That’s fine. You sell it as “negative income tax”. And you can still have a culture of fighting to stop it going negative.

    I’m not fully convinced you understand what I mean by a culture (or mindset) of “not claiming welfare”, amongst a very large % of good people.

    And there are a lot more of the least productive workers.

    Output, not workers – think from a business perspective, the value pot is about “output”.

    We don’t know. It’s economics. That’s why they’re doing the experiments.

    Sure. And I am quite confident with what my intuition tells me…

  43. Yep, make it citizens only and remove all minimum wage legislation.
    Immigration slows to a trickle of highly-skilled, highly productive folks – who become net contributors – and differently-abled (or whatever the hell the correct term is) folks who aren’t particularly productive can more easily find low-paying ‘make-jobs’ to top up their UBI; and maybe improve their quality of life as a consequence.

  44. Not explicitly mentioned yet (although Josh is getting close): do newcomers automatically get UBI? Walk off the plane at Heathrow with a family reunification visa in hand sponsored by your cousin, and you’re UBI’d up?

    If once Brexit happens EU citizens still have an automatic right to live in the UK, will they be able to turn up at Dover and get UBI’d up?

    And if you say “citizens only”, or “permanent residents only”, how are you going to deal with the howling about discrimination from all quarters of the press?

    It’s just not implementable.

  45. “I’m not fully convinced you understand what I mean by a culture (or mindset) of “not claiming welfare”, amongst a very large % of good people.”

    I know exactly what you mean. What I’m saying is that when wrapped up as a negative income tax, the UBI component is not apparent. You don’t present it as everyone receiving a handout. What you do is subtract it from the income tax, so for people above the welfare level, all they see is a lower tax rate. It only looks odd for the people earning below that level because the tax rate goes negative and they get a rebate. This, more obviously, is a “government handout” and I think people with that mindset would easily be able to translate.

    “Output, not workers – think from a business perspective, the value pot is about “output”.”

    From a business perspective, all employees contribute positively to output more than they cost, or you’d not employ them. What we’re talking about here is whether they contribute positively (or equivalently, less negatively) to the tax/welfare budget.

    And all I meant was that a million people contributing £1 is better than a thousand people contributing £100.

    “Sure. And I am quite confident with what my intuition tells me…”

    So are the socialists.

    But most people’s intuitions about economics are wrong. Protectionism in all its forms is still popular. People still fall for the Lump of Labour fallacy and the Broken Windows fallacy all the time. People still think minimum wage laws help the poor, giving them more money. As soon as people start talking about “But my intuition tells me that…” about any sort of complex economic phenomena, you know you’re entering the woo-woo Amateur Zone…

    I’ve got some fairly well-developed intuitions about economics myself, but it’s not at all obvious to me what the net effect of UBI would be. I’d want something with numbers and equations in it to convince me – and I’m not sure I’m sufficiently interested to make the effort.

  46. I know exactly what you mean.

    It’s not one jot evident to me, in that I’m not talkimg about arithmetic, but culture. You can put a pretty frock on a pig, but people really (honestly) can still see it’s a pig.

    I am not sure you understand my point about output either, if you seriously imagine that those on benefits are going to contribute more as a result of something like this than the value lost from those employed elsewhere [connected issues including all sorts of things such as the huge differences (in the real world) between the value of output of different people].

  47. “What I’m saying is that when wrapped up as a negative income tax, the UBI component is not apparent.”

    While true in terms of how the benefit is received, the calculation of the benefit will ultimately hinge on (in the case of a true UBI) a single figure – what you’d get as a rebate if your other income was zero – and it’s that figure that would be manipulated by the finance minister at budget time. Hard to see how political debate wouldn’t therefore end up focused around that figure.

  48. “It’s not one jot evident to me, in that I’m not talkimg about arithmetic, but culture.”

    So am I.

    The question of how much it costs and what effect it has on the economy is largely a question of arithmetic and statistics. But on the question of people too proud to take government handouts, yes that’s culture, and I knew what you meant.

    “I am not sure you understand my point about output either, if you seriously imagine that those on benefits are going to contribute more as a result of something like this than the value lost from those employed elsewhere”

    It depends on the respective elasticity of supply of labour at the top and bottom end of the market, yes? In fact, it depends on the respective elasticity of supply/demand of all the interacting markets – customers for the goods and services provided, investors, suppliers, and internationally. It depends on the longer-term accumulation of human capital. You’re making a hell of a lot of assumptions, aren’t you?

    Oh, yes… “Intuition”…

    £1 of high-level labour is worth the same as £1 of low-level labour – that’s the function of money as a medium of exchange, to make precisely that sort of comparison and trade-off. Transfering £1 from one to the other does not make any difference to the value of work done because of the difference in £/hour of the work. You gain 10 minutes of low-level work, say, and lose only 2 minutes of the high level. It might make a difference for other, less direct reasons.

    “and it’s that figure that would be manipulated by the finance minister at budget time. Hard to see how political debate wouldn’t therefore end up focused around that figure.”

    As it is now.

    The justifications used to set welfare level are not changed by UBI – it assumes whatever level was previously being used, selected by the same method. If they can be manipulated under UBI, they’ll be manipulated in exactly the same way without it. If you can stop the manipulation without UBI, then the same applies with UBI. It makes no difference.

    The basic justification for welfare is that we shouldn’t let people who are incapable of finding work starve or freeze to death, and we should help people who are temporarily out of work survive to get back on the treadmill as quickly as possible. It’s about that human instinct by which people (non-psychopaths, at least) don’t like to see other people suffer. It’s about charity. The level is set on that basis – of what we think the minimum quality of life we’re collectively (as voting taxpayers) prepared to tolerate seeing people suffer costs. (So if that gets cheaper, the bill should go down – not stay fixed at 5% or whatever.)

    Government is a bad way to organise it, and there are all sorts of (frequently libertarian) economic arguments for why it helps the poor less than you’d think and is generally a bad idea, but it’s where we are. The voting majority in this country *like* welfare, and fully intend to keep it. And yes, the finance minister is going to manipulate things to keep them happy. That’s people, for you.

    Libertarians have been accused of coming up with “autistic pie-in-the-sky Heath Robinson schemes that sound great on paper but fail as soon as they encounter real-live human beings”. Well, real life human beings want state welfare. Coming up with autistic demands to eliminate it – and rejecting any proposal that doesn’t as imperfect – is all very well, but it’s simply not going to happen.

    UBI is what happens when we try to stop being autistic, and compromise with real-life people. Obviously, that doesn’t work either! That just means *nobody* is happy.

  49. Let’s not dismiss the arithmetic as trivial here. This is an absolutely massive benefit we’re talking about.

    The UBI in this experiment is $30K a year. If you provided this to every adult in the US, you’ve got a $7.3T bill to pay, which is about twice the size of the current US Federal budget. The taxes that you would have to slap on high earners would be a yuge disincentive for high earning behavior.

  50. “Let’s not dismiss the arithmetic as trivial here. This is an absolutely massive benefit we’re talking about.”

    OK, let’s talk about the arithmetic.

    This example is not supposed to be at all realistic – it’s just to illustrate a particular arithmetical point.

    Let’s say the living wage/welfare level is £300/wk, 5% of the workforce is unemployed, and the remaining 95% all earn exactly £500/wk. The 95% have to pay about £15/wk in taxes to pay the welfare bill, which is about 3%.

    Now we introduce UBI. Assume none of the unemployed bother to get jobs. Everybody gets paid £300/wk UBI. The employed now earn £800/wk and are charged £315/wk tax to pay for it all. The unemployed still get the same £300/wk they did before. The employed have gained £300/wk UBI and lost £300/wk extra tax, for a net change of nil. The unemployed have gained £300/wk UBI and lost £300/wk welfare benefits for a net change of nil. Nothing real has actually changed – it all cancels out.

    Can you see what is wrong with simply adding up the tax bill – 95% of the population goes from paying £15/wk to paying £315/wk – and declaring that to be obviously unaffordable? What’s been missed out of the arithmetic?

    Like I said, you don’t present it as a universal payout – you combine the UBI and the tax needed to pay for it into a ‘negative income tax’ scheme. Most of the big numbers cancel out, leaving just the adjustment. Those below the mean wage get a little more, those above get a little less, but all you’re doing is straightening the line, not radically shifting it.

    Intuition can be tricky, when it comes to the arithmetic of economics.

  51. “Intuition can be tricky, when it comes to the arithmetic of economics.”

    I’m perhaps being harsh – but that’s perhaps understandable, if your intuition when devising a simple arithmetic example doesn’t even mention or consider the absolutely crucial issue of marginal rates, and the negative impact on incentive (for the vast majority working) of very high marginal rates?

    Maybe you happily get out of bed for a high marginal tax rate, but lots of people don’t. Indeed, that’s part of the argument for introducing it – for the low/unemployed – but that thinking also impacts on the much, much larger % of people that were previously being highly productive.

    You are right, it’s complicated…

  52. “I’m perhaps being harsh – but that’s perhaps understandable, if your intuition when devising a simple arithmetic example doesn’t even mention or consider the absolutely crucial issue of marginal rates, and the negative impact on incentive (for the vast majority working) of very high marginal rates?”

    I did indeed consider mentioning the topic.

    I was going to try to describe the graph of disposable income versus gross income that makes the issue clearer, note that one minus the gradient of this line gives the marginal tax rate, and that the issue with the poverty trap could be understood as the initial bit of the line being flat, implying that you was effectively charging the poorest people a 100% tax rate!

    In fact, Ken above had already alluded to this point: “Many people choose not to work because the existing social welfare net penalises work – why work when the state takes away 90% of the income and you lose the free time. UBI removes this disincentive.”

    I know of many anecdotal cases where the effective rate can even be greater than 100%! If you add on the cost of bus fares and work uniforms and similar work-related expenses, some people actually take home *less* money by working than they would get on benefit! They do so because it gives them the work experience and CV to get themselves on the bottom rung and start climbing.

    As you suggest, a 100% marginal rate on one part of the population to subsidise a slightly lower marginal rate on the rest affects their motivation to work in the expected way. A more equitable approach would be to charge everyone the same, more reasonable marginal rate, which is what UBI aims to do.

    Now, it may be that there are secondary effects that mean we prefer to pay welfare, and force those people out of work than have the rest of the population face that slightly higher marginal rate. The effect is an odd one, because the cost is disconnected from the motivation. While it is the unemployed whose motivation to work is eliminated by the 100% marginal rate, it’s the rest of the population who pay for it. Given that they do, you might argue that they should have some say in the matter. Maybe they have a rational reason to prefer to keep a bunch of low-skilled people idle than discourage the high-skilled any further? To have 5% unemployed instead of 1% unemployed, so that a similar percentage of people a lot further up the ladder don’t retire to Bali? All I’d say is that if this is the reason, they can damn well stop criticising the unemployed for not working, when that’s the deliberate intention of their policy!

    But anyway, another way of looking at UBI is that we’re evening out the marginal tax rate, so everyone pays at the same rate, and all parts of the market face the same degree of market distortion. We’re not loading 90%+ rates on those least able to cope.

    I did think about discussing it, but couldn’t think of a way to do so succinctly, and make it flow naturally with the existing comment.

    “You are right, it’s complicated…”

    Thanks! And no problem. I find it difficult to disentangle all the potential interactions myself – trying to explain complicated things to someone else is a very good way to improve one’s own understanding. I’ve found this discussion useful.

  53. I agree with a lot of what you say there. Let me tweak your own example and illustrate why I think that it fails from an incentive perspective.

    But let me change one existing fact, simply for the illustrative effect. Let our starting point be to get rid of personal allowances and have a flat rate from zilch, ie the opposite direction from UBI (as the comparable).

    £300/£500 etc, translates (per assum) into £15K UBI and everyone else earning £25K. Because tax isn’t only spent on welfare, but lots else, lets assume (purely for a “not too far out” illustration) that those on £25K net are paying £6K of tax, £31K gross. Marginal tax rate is ~20%. Perhaps not too unreasonable?

    Those few on welfare of £15K (or a new UBI of £15K) we will assume are paying no tax.

    With a UBI, we now need to give to (UBI) and collect from (tax) everyone else circa £15K.

    If the UBI level is our new “tax free”, then roughly £31K (or £46K (of salary plus UBI) less £15 UBI tax free) needs to generate tax of £6K (as before) plus another ~£15K of UBI, ie £21K.

    Even without progressive tax rates, that’s a marginal tax rate of circa / over 65%.

    There may be errors (or judgement differences) with the above, but in big picture terms, the argument for me is this:

    We start with necessary expenditure, we need to get out of bed, for food, clothes, a roof, etc. And we finish with our luxuries, toys, etc.

    If I am taxed at 20%, earning money for toys is just absolutely fine. But if I have to pay tax at 65%, my effort per toy has just gone through the roof. The toy (holiday, whatever) is far less attractive.

    That’s why my gut was telling me that the value of the total pot will fall with a scheme like this, and it’s also why (contrary to Tim / others), I like the idea of scrapping personal allowances and having very simple flat taxes. Flat taxes reduce the marginal tax rates at the “discretionary” spend levels, and hence make them a lot more attractive. The overall pot should get bigger?

    Hence, the reason above for my comments re intuition? Ie, for me, just like MMT and aother stuff, it fails the basic smell test.

    If you disagree with my judgement / perspective – that’s fine..:) In that you are right – only a real world example, and over a proper period of time, would prove the point one way or another.

  54. “Even without progressive tax rates, that’s a marginal tax rate of circa / over 65%.”

    I’m not sure if I’m following your calculation method correctly, but that doesn’t sound like the right way to calculate the *marginal* rate.

    For illustration, in my example above, the employed were earning £800/wk and paying £315/wk tax. That’s an *effective* tax rate of nearly 40%! And yet, as we saw, it’s identical in outcome to the original situation with a 3% tax rate. The marginal rate is something else entirely.

    Is that what you mean?

    If it’s not, I’m going to have to do a lot more work to come up with a semi-realistic example with some numbers. I don’t have the time right now. I might have a look tomorrow, if I’ve got nothing better to do.

  55. For illustration, in my example above, the employed were earning £800/wk and paying £315/wk tax. That’s an *effective* tax rate of nearly 40%!

    “Effective” is not relevant to my point above – you are right, I’m talking about marginal tax rates. At the margin, that is where incremental decisions are made and incentive is affected.

    If the UBI element is tax free, the marginal rate of that earned in excess of UBI is higher. Hence, your 40% “effective” is over 60% at the marginal point (ie £315 has be generated on the £500 “between £300 and £800”), and that’s without any other progressive taxation.

    My marginal rate was even higher than that because of the reality of the £500 (per week) being net of a higher gross amount due to other existing income taxes.

  56. OK, I’ve had a tinker with some equations, and it looks to me like the marginal rate comes out as approximately 1 – UBI / mean income, which is horrendously big for the numbers chosen. Not so big that I’m certain a different set of numbers couldn’t give a reasonable answer, but it would take some optimisation.

    I’ll continue to think about it some more, but you’re probably right. Thanks! That was interesting!

  57. I appreciate that I’m talking to myself by this stage, but there is another way to look at this, and which simply follows the net pay..

    Example A

    As before, net pay £25K. Ie, each day of the week you work earns you £5K. Necessities are £15K, discretionary spend is £10K. Yes, life is not binary but simply for this example.

    You have to work Monday to Wednesday for the necessities simply to live. No choice. And if you want all your discretionary toys, you work Thursday and Friday.

    Example B

    UBI £15K (if we really believe that the necessities are £15K).

    Salary as before of £25K (but less an extra tax of £15K to pay for your UBI), gives us £10K which takes us to the same total as before – £25K. This example assumes those wealthier / working are no worse off, purely for illustration. [That won’t be the case once incentives start reducing the overall pot, hence the “downward spiral” below.]

    In this example, necessities are paid for – for nothing. But, to get the discretionary stuff, you now have to work the whole week, Monday to Friday, not just Thursday to Friday.

    That’s the point where “some or all time off” and hence sacrificing “some or all discretionary spend” becomes a whole lot more attractive. Simply following the incentive approach. Extra time off versus toys, meals out, holidays, etc.

    Whatever small fresh incentive there may be for the low or unemployed (to counter the above), I fail to see how the total pot doesn’t shrink as a result?

    As others have previously noted, it’s the same argument (incentive) as that made against communism. The higher the UBI (and which covers the necessities), the more effort (per reward) that is required to gain any discretionary benefit. And hence, the less total effort a society will make.

    And once less effort is made, it’s the same “downward incentive spiral” over time (wealthier losing more and more and therefore why bother make the effort, the pot gets even smaller) that is communism’s inevitable destiny.

    UBI – the route to communism but with a prettier frock?

  58. And yes, sure, in a more robotic future, those numbers do change, but the underlying incentive argument doesn’t (even if the negative incentive impact is smaller, because the necessities % is smaller)?

  59. “I appreciate that I’m talking to myself by this stage, but there is another way to look at this, and which simply follows the net pay..”

    Yes. Understood. The marginal tax rate affects motivation. I agree. But that’s not really the question.

    There are two groups of people in society, let’s call them Group A and Group B. You charge Group A at a 100% marginal tax rate, so you can charge Group B at a 20% marginal tax rate.

    The marginal tax rate impacts motivation to work, with the expected result that Group A do no work, and Group B pay all their bills for them. Group B motivation is impacted by the 20% tax rate, but to a lesser degree.

    You keep on pointing out – correctly – that if we even things up and charge both at the same marginal tax rate, intermediate between 20% and 100%, that Group B will be demotivated. Demotivating potential workers is bad. But of course, the same argument applies to Group A! If you hit them with a 100% marginal tax rate, they won’t work. Why is that OK, when you’re making exactly that complaint with regard to Goup B?

    There’s no dispute that charging Group B a higher marginal tax rate will have an effect on their motivation. The question is whether and why it’s to society’s advantage to charge different rates to different parts of the population, subsidising one at the expense of the other.

    I don’t know the answer to that question. It depends on a vast network of interactions and effects over different timescales. It depends on the relative elasticity of supply of labour in each group. It depends on the rate at which people move from one group to the other with work experience. It depends on lots of things, most of which we don’t know in sufficient detail to model. I don’t find it at all as obvious what the net effect of these will be as you apparently do.

    As a general rule, free markets are thought to work best with a minimum of artificial and differential barriers to trade. If you use price-fixing tariffs and taxes to charge one group more overhead than another, then the market equilibrium allocation of resources between them is not determined purely by people’s actual preferences as expressed in their freely made trade decisions, but partly by this artificial input from government policy. If you tax cakes more than biscuits, the amount of each that people buy is not determined by how much people like/want each, but by tax policy. The result is usually sub-optimal with regard to people’s preferences.

    There are exceptions – market failures, public goods, externalities and so on – where the free market doesn’t find the optimum and you have to introduce differential charges. But why is this such a case?

    I’ve not really thought about UBI in any detail. It’s one of those economic ideas hovering around in the background of free market economics that I was aware of but haven’t studied in any great detail. It’s never been taken seriously, so I never saw the point. There may indeed be some reason why it’s not feasible or advisable, but it’s not obvious to me.

  60. NiV

    You make some interesting points. Like you, I don’t take UBI seriously, maybe for slightly different reasons? I would make just one point – re treating people equally / charging the A group more than the B group etc:

    We’re “giving” a small number in society – the A group, a chunk of which let’s face it are totally incapable in any case – free “welfare”? Ie, we are already treating them a shit load more favourably than the much larger B group!

    If we really want to minimise their marginal tax rate (of getting those back into work that actually want to), I would prefer ways that focus on that group specifically (after all, no one else is getting welfare in the first place?).

    A method that risks de-incentivising some part of the vast majority who are creating all the value (ignoring the B-ark thread obviously!) really doesn’t seem to me to be something that is in any way likely to be net positive for the total pot?

    Yes, I know you are right, that there are lots of interactions / a lot of complexity, but I can’t myself see past the most obvious issues at the micro level (ably demonstrated yourself with a bit of arithmetic).

    Hey, if others have a different view, that’s fine. But I see the incentive argument against UBI no differently to the argument against communism – ie, the potential downward spiral.

    For another time perhaps!

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