Adam Lee on Basic Income

The idea of a “basic income” has become popular over the past few years.  The general idea is that the government would pay everyone a basic income — which I guess would preferably be what is considered minimum wage and more likely be a living wage — so that everyone could get their needs met without having to work for it, and then working would be only to provide wants and luxuries or for personal fulfillment.  The best arguments for it are that we could eliminate pretty much all other social programs and so it would save money and ensure that people who are unfortunate don’t starve or are left homeless, and the arguments that I, at least, am most skeptical of are ones that say that it would allow people to choose what they work at and so have more personal fulfillment in their lives.  In general, I’m a bit skeptical of the idea, since being guaranteed a living is definitely something that we are not used to and so it is likely to change society in major ways, ways that I’m not sure will be desirable.

However, Adam Lee is a big proponent of it, and over at his blog at Only Sky he has a post — that was featured for a while — promoting it.  I find a few points in it a bit suspicious, and want to talk about them as well as the idea in general.

Lee starts with working out the numbers, but immediately he starts running into issues where he doesn’t really grasp how the numbers really work out in the world, which is an issue because his main point is that from a practical, real-world perspective this will work:

But if we divided GWP evenly into population—i.e., if the world’s economic output were distributed evenly to every human being—it yields an annual income of $11,000. This world of Gini coefficient zero is an unrealistic hypothetical, like frictionless spheres in a vacuum, but it gives a sense of where the limits are.

For most of us in the West, this would be a severe demotion: $11,000 is below the poverty level, even if you assume people would partner off and form families to share that income.

But for billions of people, this would be an enormous increase. 85% of humanity survives on $30 per day or less. For these aspiring billions, human beings with the same dreams and aspirations as Westerners, that income would bring them from subsistence to stability, even to comfort.

You know, until I did the math, I had a different objection to this.  But then I wanted to work it out for the comparison, and since it doesn’t only include days of work — or, at least, it doesn’t seem to — I worked it out simply by taking $30 X 365 days and got … $10,950.  So, uh, giving them $11,000 a year wouldn’t “bring them from subsistence to stability, or even comfort”.  It would leave them at the poverty line.  They would be, at best, subsisting if that was the only income they had.  Which shouldn’t be a surprise, because that link there was for determining what the global line of poverty should be, and the original reference was the level that was considered poverty level in Denmark.  In those parts of the world that are not Western nations — and if you read the original post he is clearly making the distinction at this point, because it’s only later that he talks about poor people in Western nations — this wouldn’t necessarily apply, for the reason that I was originally going to take him to task.

That reason is that when you’re calculating this, you need to consider more than just the total income.  You need to consider cost of living as well.  In poorer non-Western nations, it’s entirely possible that $30 a day would indeed allow them to live comfortably.  They might even be considered rich in those countries.  The cost of what you need to purchase determines how comfortable you would be given a specific income, and that cost of living is indeed actually related to incomes in that area.  If most people, say, made $5000 a year, then prices in that area would be tied and in some sense normalized to that income.  After all, if they weren’t then people who were renting apartments and selling both necessities and luxuries wouldn’t be able to sell anything.  So, for the most part, prices will converge around average salaries, and so someone making twice that would indeed be wealthy.  The issue in most Western cities is that the average salary or, at least, the salary that most renters and sellers can rely on is quite a bit higher than that $11,000, and so there’s no incentive for them to lower their prices.  Yes, they won’t get the business of those at the bottom of the income scale, but they can make sufficient profits without them.

This, then, also carries over to areas inside a country.  The cost of living in Toronto, say, is quite a bit higher than it is in Ottawa for most things (one reason for me to stay in the latter instead of taking a job in the former) which is a bit higher than it is in the rural area where I grew up.  Housing prices are the biggest example of that disparity, and some things that benefit from a bigger market might be cheaper, but in general that’s how it works.  So you might be able to live pretty comfortably in a rural area for $11,000, but you aren’t going to be able to live at all comfortably on that in a bustling metropolis area.  And a basic income needs to be able to provide for basic needs.  If it doesn’t, then it’s pretty much useless.

So Lee actually messes up the original calculation, but he will have more fun with numbers later.  But first, he’s going to try to prove that it’s Western lifestyles that are the problem:

If you start with the stereotypical Western lifestyle—a large private house, travel by personal auto or airplane, a diet heavy in meat—and try to fit it into $11,000 a year, it seems like serious deprivation. Then again, that lifestyle contains many luxuries which aren’t necessary for a good life. It’s perfectly possible to live happily and comfortably without them. Mr. Money Mustache raised a family on less than $30,000 a year, relying on strategic frugality and a DIY ethos rather than asceticism or deprivation.

So, let me work it out in previous terms.  I, a single bachelor, had as my first apartment a basement bachelor apartment, that cost me $500 a month.  So housing was $6000 a year, which is already over half of what I would be getting.  I also had to pay for electricity and food and all other necessities, so let’s simply ballpark that at $200 a month, for another $2400, which leaves me $2400 a year for everything else I’d need, including transportation.  That would be running me pretty close to the line, but it looks like I might be able to squeeze that in.  Unfortunately, that was 20 years ago.  Apartment prices have gone up quite a bit, and my understanding is that a similar unit to mine is probably at least $1000 a month, which would take over the entire amount Lee suggests everyone be given.  So unless Lee is going to adjust all the prices, it won’t be enough … and again that’s with a system where I deliberately didn’t include a private vehicle — I did have one at the time — or traveling by plane — which I never did — or living in a large private house.  It also wouldn’t leave much if any room for saving for emergencies or for investments, and note that one of the reasons that Mr. Money Mustache could do what he did is that he saved and invested and so had some income there and some savings he could fall back on, which few people starting out can say.  And you can’t say that people would have savings from childhood because even by Lee’s plan that’s probably going to have to be used to, well, support the family, as a family of three under Lee’s plan would make $33,000 which is pretty much the $30,000 that Lee references above.

So, at $11,000, everyone is going to need some kind of job to make money for luxuries like even cable television.  And that doesn’t count that the Internet now might be a necessity.  Also, Lee chides for some odd reason “a diet heavy in meat” despite it being the case that most people who need to, at least, already economize on that and the big expense is fresh fruit and vegetables, which is more what people skip.  Lee here really seems to want to attack the lifestyle instead of making his case.

Which is where we get into more fun with numbers.  Lee got that $11,000 number from this:

In 2021, the world’s population was 7.9 billion people. Over the same time period, the gross world product (GWP)—the sum total of all human economic activity—was around $87 trillion.

This figure encompasses vast inequality, everyone from yacht-owning billionaires to slum-dwelling sweatshop laborers to rural subsistence farmers. But if we divided GWP evenly into population—i.e., if the world’s economic output were distributed evenly to every human being—it yields an annual income of $11,000.

But then he tries to talk about how cheap it would be to get everyone out of poverty, and gives us more numbers:

Best of all, it would be cheap. A relatively small amount of money could make a huge difference in the lives of the poorest. By one estimate, a mere $66 billion—just half of what the world spends on foreign aid already—would eliminate extreme poverty worldwide, if given as direct cash transfers.

Another line of evidence is the expanded child tax credit passed in 2021 as part of the American Rescue Plan. It was a short-lived benefit, since Congress shamefully allowed it to expire. But while it was in effect, it reduced the child poverty rate in the U.S. by almost one-third. It kept 3.7 million children out of poverty. Survey data shows that 91% of beneficiaries spent the money on basic needs like food, clothing, rent and school supplies.

An analysis by the Tax Policy Center found that keeping the more generous child tax credit would cost $225 billion per year. That sounds like a lot, but it’s only 1% of U.S. GDP. Clearly, that’s a cost that we could sustain if we chose to. As the price for making sure children have enough to eat and a roof over their head, it sounds like an outright bargain.

So, since $66 billion and $225 billion are quite a bit less than $87 trillion, clearly Lee is not proposing giving $11,000 to each person in the world, which he is fairly clear isn’t possible anyway.  But then we are left wondering what he is proposing that would cost so much less and yet would elevate everyone out of poverty.  It’s certainly not a basic income as he just talked about and said was the thing that would solve it.  So, then, what, in detail, is he proposing?  The two ideas seem to appeal either to foreign aid or to a specific tax credit in one country, but both of those rely on giving money to people who do not have enough by using the tax dollars of those who do.  Yes, we can have some sympathy and be willing to give money to those who don’t, but that’s not at all what a basic income would be, and is far closer to, well, existing social assistance than it is to a basic income.  And in those cases we all do seem to want this to be temporary, hoping that the unfortunate circumstances that landed them in that predicament will be relieved and this will tide them over until it does.  Lee wants to simply give them money but at least in his post gives us no solution so that we will eventually be able to stop doing that, and in fact a basic income system is one that repudiates ever doing that.  So how are those systems going to work in the basic income model that he is actually supposed to be advocating for?

He then talks about other things that we produce more than enough for all:

When you look for it, you see this pattern over and over. The world’s farmers grow enough food to feed 10 billion people, 1.5 times the current population, even without accounting for how much food goes to waste. Global energy production, if it could be redistributed equitably, is more than enough for everyone’s needs. In the U.S., there are more empty houses than homeless people. We make so many clothes that some places burn them for fuel.

All these lines of evidence converge on one insight: there’s enough for everyone. No human being needs to go without the necessities of life.

The problem is that these cases are not true, or at least not in the way Lee needs them to.  One of the issues with food is that where it is produced is not always where it is needed, and it costs a lot to move it around and preserve it until it makes it there.  We might be able to do it, but it would cost a lot, which would take away that money that Lee wants to just give people.  Giving everyone in the world that amount of money is not going to make it so that they can afford to pay to get that food distributed.  So that’s at least not as easily workable as Lee insists.  For energy, of course, we can’t distribute it that evenly.  It’s just impossible with the technology we have, so we would need to add generation, not simply shuffle it around.  And that housing number is for New York and is misleading, because some of them were being renovated and some of them were units that were either being held or would have been rented by someone else later (it was a snapshot).  And since most of those were luxury apartments, Lee would have to advocate that homeless people be simply given those luxury apartments, or that we shuffle everyone around to get people who can afford it in.  You can argue that we shouldn’t have them at all, but then if we didn’t then there might not even be those housing units, which wouldn’t solve the problem.  And from his own article the clothes that were destroyed were mold or lead infested, and since outside of things like that clothes can last for a while it is entirely possible that they would have been sold already, so again it’s not that clear that we really do produce that much more.  So it’s not as simple to say that there’s enough for everyone as Lee seems to think.

Especially when he adds things that require money and not just production:

If we wanted to, we could feed everyone, clothe everyone, house everyone, ensure that everyone has health care and education.

Anyway, after this he tries to look at whether this is fair, which is one of the main objections to it, which is the main point I wanted to talk about:

Now, you can imagine arguments against this. One common objection is that it encourages laziness and selfishness. Those who make this argument say that if the necessities of life are given away for free, some people will choose to stop working and others will have to pick up their slack. They fear that we’ll end up with the productive supporting the unproductive.

Note, however, that this is a moral objection rather than a purely economic one. It may offend our intuitions of fairness if some people slack off at the expense of others, but it doesn’t threaten to undermine civilization. There are already tens of millions of people who don’t work, whether from age, disability or choice, and that hasn’t caused a collapse. If you believe that people should be forced to work, have the honesty to say that it’s a preference—not a necessity.

Okay, first, since when has Lee been so egregiously unconcerned about morality?  His argument here is basically “Well, yeah, it might be immoral but I don’t want to think about that so let’s just say that it’s practical and figure out the morality later”, which is a sharp contrast to most of his other posts, where morality is to be privileged and pragmatics be damned.  So that he’s so willing to abandon any discussion of morality seems to indicate that he, at least, doesn’t want to talk about that.  Second, he dismisses what he himself considers to be a moral argument as a mere preference, which is again in sharp contrast to how he normally thinks of morality.  Third, he moves from the argument about people slacking off at the expense of others to without any argument calling it a belief that people should be forced to work, which is a rather unfair and manipulative move.

But the biggest problem from a moral perspective — there’s actually a practical problem that I’ll look at in a minute — is that for Lee the idea that we could blithely accept people slacking off and relying on others to support them is completely opposed to the foundation of his own moral system.  Lee relies heavily on justifying morality on the basis of Game Theory and avoiding the “Tragedy of the Commons”, but those are systems that rely heavily on avoiding and producing strong consequences for “freeloading”, which is pretty much defined as “slacking off at the expense of others”.  By Lee’s own arguments, we have thousands of years of an evolutionary imperative to do whatever we can to ensure that people don’t do that, which Lee thinks we can just dismiss because pragmatically we could.  And since his own morality, as noted above, is based on this idea, avoiding “Tragedies of the Commons” and freeloading in general.  We all agree to play by the rules and so adopt a sense of fairness to avoid the disastrous consequences of everyone trying to get ahead at the expense of others.  So Lee, here, is suggesting a solution that violates his entire moral system.  No wonder he doesn’t want to talk about morality here.

But this leads to the pragmatic problem that Lee ignores:  how can he actually avoid a “Tragedy of the Commons” here?  In order for his system to work, he needs it to be the case that more people produce than choose to not work, so that there can be enough production to cover those who drop out.  But if we assume that everyone will have similar reasons to work or not work, then how can he guarantee that?  What happens if those who have the potential to be the most productive drop out and only those who don’t stay in?  Or, more likely, what if people all choose what they do based on what they most want to do rather than what they are best suited for?  Taking myself as an example, I ended up as a software designer and not as a writer or lecturer because I was good with computers and at least with English but I needed a degree that I could get a job with and so went into Computer Science instead of English.  If I had that guaranteed wage, then I could have gone into an Arts degree … or even became a professional student.  While I might have enjoyed that, it wouldn’t have been as productive to society as my current job (er, depending on what you think of my job [grin]).  And most of the examples of what people would now be free to do are precisely of that sort:  pursuing what someone loves rather than what they are best at or what is more valuable to society (in terms of productivity).  I am likely better at writing than at computer programming, but we need more computer programmers than we need writers.

Now, the way most people talk about this, it seems to me, is to play on the idea of “Type A personalities” and argue that the most productive and innovative people will still do that even if they have a basic income, as that is their nature and personality and so they just can’t help themselves.  That might be true for the biggest entrepreneurs, but it’s not true for the bulk of the people who right now work hard at their jobs.  We know that most of those would be more than happy to quit their jobs if they didn’t have to work, as evidenced by the fact that most people will pretty much immediately quit their jobs if they win the lottery, or men who quit their high pressure jobs after a divorce, or people who retire early, and so on and so forth.  Yes, the argument that they will almost certainly not just be idle, but that doesn’t mean that they’ll do something productive, and Lee needs most people to produce more, far more, than they need to make this work.

And Lee’s examples don’t save him, because first those people are in the minority and for those people these conditions don’t apply.  For those who are disabled, we are willing to at least in theory support them without asking that they work because they can’t work, and we don’t want them to starve (and some people, of course, still watch them closely to ensure that they aren’t taking advantage of us, in line with Lee’s own theories).  For age and choice, those are not people, in general, who are doing that at the expense of others because they don’t do that while expecting others to support them.  In general, they have either worked hard — and likely paid into pension plans — and so have generated through their own hard work and productivity the means to support themselves, or else they are willing to make sacrifices so as to be able to live on what they can produce without working.  So that model is not the one that Lee is suggesting, and so he doesn’t can’t use those examples as arguments to say “Well, this happens, and society is still going, so this will work, too!”.  All of those are cases where people are not slacking off at the expense of others:  the disabled are not “slacking off”, and the other cases are not doing that at the expense of others.

So, in order to make this work, Lee needs to ensure that most people produce more than they use so that a minority of people can use more than they produce.  So this immediately calls to mind the Marxist model of “From each according to his ability, to each according to his needs”.  Except for this to be freeing, we’re going to need to be able to get more than our basic needs, and Lee is not going to accept — at least for him — people being forced to work at the jobs that they are most productive at.  So what he will need is for most people to fall into the jobs that they are the most productive at and produce more than they take while leaving room for some people to choose jobs that they like more but are not the most productive and produce less than they take.  If this doesn’t just happen on its own, then Lee will hit a “Tragedy of the Commons” and it will all fall apart (in little pieces on the floor, too wild to keep together, so you want it more, yeah).

That … will be extremely difficult to pull off.

So, no, his idea isn’t as practical as he makes it sound, and so he is reduced, at the end, to ignoring issues of fairness and returning to the point that he managed to contradict while arguing for it:

Once this truth is more widely recognized, we can go on to ask what’s fair. We can discuss how to divide up the bounty of civilization so that no one is deprived and no one is forced to work to support those who won’t. But the starting point of that conversation has to be the acknowledgment that poverty isn’t inherent to the natural order. There’s no reason it has to exist.

He might even be right that we can alleviate poverty (once we define it).  But we can’t determine that he’s right about that until we determine what the possible ways of dividing things up are, to see if we can actually find one that both suffices and is fair.  And if we can’t, then that would be the reason poverty exists, and he can’t say there’s no reason for poverty exist until he can find a way that is both practical and moral to eliminate it.

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