6 ms·

See also http://en.wikipedia.org/wiki/Mincome http://en.wikipedia.org/wiki/Mincome . I don't see what's the theoretical problem of having a "socialist" minimum

by lazyant 13y ago

See also http://en.wikipedia.org/wiki/Mincome http://en.wikipedia.org/wiki/Mincome . I don't see what's the theoretical problem of having a "socialist" minimum for everybody together with a "capitalist" system where you can make as much as you can.

yummyfajitas 13y ago
The theoretical argument is that due to the diminishing marginal utility of income, you get less labor supplied. Suppose the utility loss from taking a job is X, and U(income) is a concave function. Both of these are standard assumptions, well validated empirically. With no basic income, people will take a job if U(job income) - X > U(income=0), or equivalently U(job income)-U(income=0) > X. With a basic income, people take a job if U(job income + basic income) - U(basic income) > X. By concavity, there are values of X for which the former inequality holds and the latter does not. So people falling into this regime will be deterred from taking a job by a basic income. Society as a whole is poorer as a result by an amount equal to those individual's marginal productivity. I.e., fewer nails are manicured, fewer homes are cleaned, fewer restaurant meals are supplied. Note that you can alleviate these negative effects by replacing a basic income guarantee with a basic job guarantee (i.e., just like a basic income, but you need to work for it). That also costs the taxpayer far less.
- anonymoushn 13y ago
  The current policy of means-tested welfare is just a complex combination of minimum income and high (sometimes >100%) marginal tax rates for the poor. The proposal to get rid of these programs and replace them with a more simple system of basic income is just a proposal to lower the marginal tax rates for the poor, so that they are no longer the highest.
  - yummyfajitas 13y ago
    The policy of a guaranteed job achieves the same goals, without the incentives for idleness. Society also benefits, since it gains some productive labor from the workers. Rather than paying $7/hour of Basic Income and getting $0 in value in return, society might pay $7/hour of Basic Job and get $4 of litter removed from parks in return.
    - dragonwriter 13y ago
      > The policy of a guaranteed job achieves the same goals It doesn't acheive the goal of reducing administrative overhead, since actually creating jobs has considerable administrative overhead. It also doesn't achieve the goal of increasing labor mobility and facilitating experimental, entrepreneurial endeavours. In fact, it doesn't do much of what Basic Income does.
      - yummyfajitas 13y ago
        Reducing administrative overhead specifically is pointless. It's looking at one part of the cost while ignoring everything else. The relevant question is costs - benefits. The cost of Basic Income is $20k x # of adults + overhead. The cost of Basic Jobs is $20k x # of adults willing to work who can't find work + overhead - value of labor provided. I'll make up some USA-centric numbers to illustrate the calculation. Suppose overhead for BI is $50/year and overhead for BJ is $5000/year. Suppose further that there are 250M adults, 50M of which are willing to work but can't find work. (The remaining 200M will keep their current job.) Cost of BI is $5 trillion, cost of BJ is $1.25 trillion. This assumes that the Basic Jobs provide no value whatsoever and Basic Income provides no disincentive to labor whatsoever. If you disagree, please cook up your own numbers and show me how this could be wrong. I'm just curious to see any mathematical model where BI makes sense - I haven't been able to come up with one myself.
    - anonymoushn 13y ago
      Sure. I don't think we actually disagree about this. I just wanted to point out that the status quo has this problem of incentivizing idleness to a greater degree than the proposed Basic Income. edit: Additionally, I think it would be harder to implement a Basic Job program well. Compared to Basic Income, we'll lose some amount of physical mobility and some amount of value from enterprises that take a long time to bear fruit. The Basic Job program will have to be pretty well managed to provide enough value to compensate.
- iSnow 13y ago
  >you can alleviate these negative effects by replacing a basic income guarantee with a basic job guarantee Since a lot of industrialized countries have had high unemployment for years, if not decades, that seems like an impossible idea. It might even be worse because if you send the unemployed to clean parks and plant trees, you effectively destroy a labor market for gardeners. I don't know if a "Mincome" would work but if you want to guarantee everyone a job, you need some pretty clever ideas how to create those jobs - preferably without negative side-effects on existing low-wage markets.
  - tptacek 13y ago
    The basic job doesn't need to be economically valuable; it can literally be make-work, and is there to correct the incentives, not to (say) clean the parks.
    - swift 13y ago
      These are human beings we're talking about, with ideas and dreams and goals. I find the idea of wasting their lives with 'make-work' morally reprehensible. We should be trying to free them up to focus on their dreams and big ideas, not throwing away their potential uselessly.
      - tptacek 13y ago
        I'm not sure what this has to do with my point. I was responding to a comment that worried that "basic job" programs would sabotage labor markets, and merely observed that problem had a simple solution.
        swift 13y ago
        I understood what you were saying. My point is that the "simple solution" you propose is not really a solution at all. If that's the best solution we have for implementing a "basic job guarantee", then such a thing is unworkable.
    - iSnow 13y ago
- chrisduesing 13y ago
  You are leaving out a couple of details. First, there is already unemployment, so there are already people not filling jobs. Second, this is a redistribution of tax money, so society is not getting poorer that way. As for people not filling jobs, there would be new pressures on corporations that needed workers, McDonald's could continue to pay minimum wage (assuming it wasn't abolished) for people that cannot live on $10k, and startups could pay substantially less, as could not for profits or other organizations that had missions more aligned with people's worldview of themselves. New jobs might become possible that are not today. Who knows. The point is you cannot say the outcome of changing one variable while holding all others constant, because they are not constant. Also, your counter suggestion is based on the assumption that the government can redistribute jobs instead of tax money, it cannot.
  - swift 13y ago
    Yeah, my gut feeling is that this sort of social safety net will allow more people to take on risky projects that have low probability of success but big potential payoff. This seems likely to be a net win for society even if most people don't try this and most of those that do fail.
  - rgraham 13y ago
    Re: job redistribution. What about the New Deal's CCC?
  - john_b 13y ago
    > "Second, this is a redistribution of tax money, so society is not getting poorer that way" Unless it turns out to be more efficient than the social welfare programs it would replace, it would be a redistribution of additional tax money that would have to be collected. If you define "poorer" as "less output collectively produced" then the parent's point about the concavity of utility would hold and imply that society as a whole would indeed become poorer. All this is based on a simplified model of things, but that's what most of economics is. The biggest gains to be had in my opinion would be due to difficult-to-quantify human effects related to people having to spend less time worrying about making ends meet and being able to think and plan more than a few weeks ahead.
  - 13y ago
- blahbl4hblahtoo 13y ago
  I think that there are assumptions made by your argument that sound reasonable on the face of it but that don't actually match reality. Not just yours but pretty much every economic argument that I've heard that takes this "forces of nature" form.
- akjj 13y ago
  This is a very reductionist view of worth. Your model implicitly values people's non-working time at zero, which is true as far as GDP is concerned, but is pretty clearly false as far as how actual human beings chose to live. If fewer people are doing nails or cleaning other people's houses, then those people must be doing something else. Maybe they're working a job which is less economically productive, but which they enjoy more. Maybe they're not working and they're spending more time with their grand-kids. In either case, it's a real improvement in their quality of life. If your model doesn't incorporate personal preferences not related to the purchasing capacity of your paycheck, then that's a flaw in the model, in my opinion.
- djur 13y ago
  "With a basic income, people take a job if U(job income + basic income) - U(basic income) > X." Which is the beauty of a basic income -- it means that employers no longer need to merely outcompete destitution, but instead offer a compelling reason for people to come work for them. Unpleasant but vital jobs would become better compensated, while there would be strong pressure to eliminate useless make-work jobs. The world economy has not been suffering a labor shortage for a very long time. Basic income allows a lot of menial labor to be automated without destroying lives, and in the long term will redirect that output to creative and skilled labor, thus enriching society on more than one level.
- ianbicking 13y ago
  Another factor people take into account when deciding whether to take a job is what the effect is on their total benefits. Higher taxes for instance decrease the amount of benefit in taking a job (relative to the value to your employer of you having taken that job). But taxes aren't the only thing that decreases the benefit of taking a job, there is also the potential loss of other benefits. When we have "means tested" programs (i.e., anything for "the poor" or "the unemployed") then the marginal benefit of a job (or doing more work) U(base or base job income + new job income) - U(base or base job income). When you factor in needs-based benefits U() can be a very peculiar function, and the marginal benefit can be small relative to the new job income, or even negative. If we take the social safety net as a given, then we shouldn't abstract away the existence of that net. A basic income has the potential to remove the need for more sophisticated implementations of the safety net, ones that can lead to poor U() functions. In fact I think that the bottom of the concave U() function cannot work as in theory, because of what is considered socially acceptable. Your first $1000 in income is very valuable because you are living in terrible deprivation. But some people are not able to make that income, no matter the utility. It may be job availability, it may be a disability, or an injury, or addiction to drugs, a criminal history. It could be a parent that has succumbed to any of these. It's hard to enumerate or easily define what any of these are, so to some degree we are willing to offer help simply because someone is experiencing deprivation. Which is to say, the part of the U() curve that a basic income chops off is already really messed up.
- xixi77 13y ago
  It's all true, but in practice, in the US, and I strongly suspect in Switzerland as well, there are all kinds of means-tested transfers, such as unemployment support, so the first equation is actually U(job income) - X > U(unemployment support) which (unlike the concavity issue) is a first-order effect, and keeps millions of people from working. I very much suspect that replacing that with basic income is going to bring more people into the workplace, not the other way around -- as long as the basic income is kept reasonably small. Now, keeping it small is another matter.
- summerdown2 13y ago
  One of the arguments for wealth redistribution is that rich people tend more to spend money internationally on luxuries, while poor people tend to spend money in their local communities on essentials. It's possible that under this system the Swiss will gain more employment because their people will be spending more on goods that proportionately employ other Swiss people in the value chain. It's the reverse argument to the Trickle-down idea, I think.
ctdonath 13y ago
1: Motivation. A lot of people will decide that their "minimum" income is sufficient and will try to live on that without contributing to society. 2: Entitlement. A lot of people will decide that they are entitled to that money, that it is not enough for whatever arbitrary minimum lifestyle they decide they are entitled to, and that the police power of the state should/will/must be used to confiscate the difference from taxpayers. In fairness, all should contribute to society at least as much value as they derive from society (at least insofar as they are physically & mentally capable). Giving people enough to live on while requiring nothing of them screws up the human psychology of self-worth: they can exert $X of effort/skill and get $X, or do nothing at all and get $X ... meaning their effort/skill is worth nothing.
- iSnow 13y ago
  > A lot of people will decide that they are entitled to that money Well, that's the point, isn't it?
- icebraining 13y ago
  they can exert $X of effort/skill and get $X, or do nothing at all and get $X ... meaning their effort/skill is worth nothing. That's only with current welfare systems, not with basic income, where you receive it regardless of your income. So under the regime being proposed, by not working you'd get $X, and by working $Y you'd get $X+$Y (less taxes).
- InclinedPlane 13y ago
  1 & 2 are already problems, and huge ones, and not just with the poor. Lots of people get handouts from the government and you can bet that most of them think they are entitled to it. The problem is making sure the system is setup with appropriate feedback mechanisms to keep things at an appropriate level.
  - djur 13y ago
    What do you mean by "entitled"? Yes, they are entitled to claim benefits from the government due to meeting certain criteria. This is value-neutral language, and yet it seems like you're suggesting there's something wrong with it.
VLM 13y ago
There is a theoretical environmental problem relating to franchise fees. If you want to run utility poles in most municipalities, you can, but you'll pay a franchise fee to the city. The theory is you're making a profit by inconveniencing all the residents by occasionally blocking streets and putting up ugly utility poles and the like. So you pay everyone a little bit of your profit because you're ruining everyone's property by a tiny little bit. Now the environmental (or any regulatory) problem is demonstrated as "hey, I should be able to dump raw nuclear waste in the river, although it is true that it ruins the river for everyone, it is also true that everyone gets an equal fraction of my profits". Same argument for "I should be able to boom/bust the housing economy because everyone gets a cut" or avoid OSHA or whatever.

by lazyant 13y ago

yummyfajitas 13y ago

The theoretical argument is that due to the diminishing marginal utility of income, you get less labor supplied. Suppose the utility loss from taking a job is X, and U(income) is a concave function. Both of these are standard assumptions, well validated empirically. With no basic income, people will take a job if U(job income) - X > U(income=0), or equivalently U(job income)-U(income=0) > X. With a basic income, people take a job if U(job income + basic income) - U(basic income) > X. By concavity, there are values of X for which the former inequality holds and the latter does not. So people falling into this regime will be deterred from taking a job by a basic income. Society as a whole is poorer as a result by an amount equal to those individual's marginal productivity. I.e., fewer nails are manicured, fewer homes are cleaned, fewer restaurant meals are supplied. Note that you can alleviate these negative effects by replacing a basic income guarantee with a basic job guarantee (i.e., just like a basic income, but you need to work for it). That also costs the taxpayer far less.

anonymoushn 13y ago
The current policy of means-tested welfare is just a complex combination of minimum income and high (sometimes >100%) marginal tax rates for the poor. The proposal to get rid of these programs and replace them with a more simple system of basic income is just a proposal to lower the marginal tax rates for the poor, so that they are no longer the highest.
- yummyfajitas 13y ago
  The policy of a guaranteed job achieves the same goals, without the incentives for idleness. Society also benefits, since it gains some productive labor from the workers. Rather than paying $7/hour of Basic Income and getting $0 in value in return, society might pay $7/hour of Basic Job and get $4 of litter removed from parks in return.
  - dragonwriter 13y ago
    > The policy of a guaranteed job achieves the same goals It doesn't acheive the goal of reducing administrative overhead, since actually creating jobs has considerable administrative overhead. It also doesn't achieve the goal of increasing labor mobility and facilitating experimental, entrepreneurial endeavours. In fact, it doesn't do much of what Basic Income does.
    - yummyfajitas 13y ago
      Reducing administrative overhead specifically is pointless. It's looking at one part of the cost while ignoring everything else. The relevant question is costs - benefits. The cost of Basic Income is $20k x # of adults + overhead. The cost of Basic Jobs is $20k x # of adults willing to work who can't find work + overhead - value of labor provided. I'll make up some USA-centric numbers to illustrate the calculation. Suppose overhead for BI is $50/year and overhead for BJ is $5000/year. Suppose further that there are 250M adults, 50M of which are willing to work but can't find work. (The remaining 200M will keep their current job.) Cost of BI is $5 trillion, cost of BJ is $1.25 trillion. This assumes that the Basic Jobs provide no value whatsoever and Basic Income provides no disincentive to labor whatsoever. If you disagree, please cook up your own numbers and show me how this could be wrong. I'm just curious to see any mathematical model where BI makes sense - I haven't been able to come up with one myself.
  - anonymoushn 13y ago
    Sure. I don't think we actually disagree about this. I just wanted to point out that the status quo has this problem of incentivizing idleness to a greater degree than the proposed Basic Income. edit: Additionally, I think it would be harder to implement a Basic Job program well. Compared to Basic Income, we'll lose some amount of physical mobility and some amount of value from enterprises that take a long time to bear fruit. The Basic Job program will have to be pretty well managed to provide enough value to compensate.
iSnow 13y ago
>you can alleviate these negative effects by replacing a basic income guarantee with a basic job guarantee Since a lot of industrialized countries have had high unemployment for years, if not decades, that seems like an impossible idea. It might even be worse because if you send the unemployed to clean parks and plant trees, you effectively destroy a labor market for gardeners. I don't know if a "Mincome" would work but if you want to guarantee everyone a job, you need some pretty clever ideas how to create those jobs - preferably without negative side-effects on existing low-wage markets.
- tptacek 13y ago
  The basic job doesn't need to be economically valuable; it can literally be make-work, and is there to correct the incentives, not to (say) clean the parks.
  - swift 13y ago
    These are human beings we're talking about, with ideas and dreams and goals. I find the idea of wasting their lives with 'make-work' morally reprehensible. We should be trying to free them up to focus on their dreams and big ideas, not throwing away their potential uselessly.
    - tptacek 13y ago
      I'm not sure what this has to do with my point. I was responding to a comment that worried that "basic job" programs would sabotage labor markets, and merely observed that problem had a simple solution.
      - swift 13y ago
        I understood what you were saying. My point is that the "simple solution" you propose is not really a solution at all. If that's the best solution we have for implementing a "basic job guarantee", then such a thing is unworkable.
  - iSnow 13y ago
chrisduesing 13y ago
You are leaving out a couple of details. First, there is already unemployment, so there are already people not filling jobs. Second, this is a redistribution of tax money, so society is not getting poorer that way. As for people not filling jobs, there would be new pressures on corporations that needed workers, McDonald's could continue to pay minimum wage (assuming it wasn't abolished) for people that cannot live on $10k, and startups could pay substantially less, as could not for profits or other organizations that had missions more aligned with people's worldview of themselves. New jobs might become possible that are not today. Who knows. The point is you cannot say the outcome of changing one variable while holding all others constant, because they are not constant. Also, your counter suggestion is based on the assumption that the government can redistribute jobs instead of tax money, it cannot.
- swift 13y ago
  Yeah, my gut feeling is that this sort of social safety net will allow more people to take on risky projects that have low probability of success but big potential payoff. This seems likely to be a net win for society even if most people don't try this and most of those that do fail.
- rgraham 13y ago
  Re: job redistribution. What about the New Deal's CCC?
- john_b 13y ago
  > "Second, this is a redistribution of tax money, so society is not getting poorer that way" Unless it turns out to be more efficient than the social welfare programs it would replace, it would be a redistribution of additional tax money that would have to be collected. If you define "poorer" as "less output collectively produced" then the parent's point about the concavity of utility would hold and imply that society as a whole would indeed become poorer. All this is based on a simplified model of things, but that's what most of economics is. The biggest gains to be had in my opinion would be due to difficult-to-quantify human effects related to people having to spend less time worrying about making ends meet and being able to think and plan more than a few weeks ahead.
- 13y ago
blahbl4hblahtoo 13y ago
I think that there are assumptions made by your argument that sound reasonable on the face of it but that don't actually match reality. Not just yours but pretty much every economic argument that I've heard that takes this "forces of nature" form.
akjj 13y ago
This is a very reductionist view of worth. Your model implicitly values people's non-working time at zero, which is true as far as GDP is concerned, but is pretty clearly false as far as how actual human beings chose to live. If fewer people are doing nails or cleaning other people's houses, then those people must be doing something else. Maybe they're working a job which is less economically productive, but which they enjoy more. Maybe they're not working and they're spending more time with their grand-kids. In either case, it's a real improvement in their quality of life. If your model doesn't incorporate personal preferences not related to the purchasing capacity of your paycheck, then that's a flaw in the model, in my opinion.
djur 13y ago
"With a basic income, people take a job if U(job income + basic income) - U(basic income) > X." Which is the beauty of a basic income -- it means that employers no longer need to merely outcompete destitution, but instead offer a compelling reason for people to come work for them. Unpleasant but vital jobs would become better compensated, while there would be strong pressure to eliminate useless make-work jobs. The world economy has not been suffering a labor shortage for a very long time. Basic income allows a lot of menial labor to be automated without destroying lives, and in the long term will redirect that output to creative and skilled labor, thus enriching society on more than one level.
ianbicking 13y ago
Another factor people take into account when deciding whether to take a job is what the effect is on their total benefits. Higher taxes for instance decrease the amount of benefit in taking a job (relative to the value to your employer of you having taken that job). But taxes aren't the only thing that decreases the benefit of taking a job, there is also the potential loss of other benefits. When we have "means tested" programs (i.e., anything for "the poor" or "the unemployed") then the marginal benefit of a job (or doing more work) U(base or base job income + new job income) - U(base or base job income). When you factor in needs-based benefits U() can be a very peculiar function, and the marginal benefit can be small relative to the new job income, or even negative. If we take the social safety net as a given, then we shouldn't abstract away the existence of that net. A basic income has the potential to remove the need for more sophisticated implementations of the safety net, ones that can lead to poor U() functions. In fact I think that the bottom of the concave U() function cannot work as in theory, because of what is considered socially acceptable. Your first $1000 in income is very valuable because you are living in terrible deprivation. But some people are not able to make that income, no matter the utility. It may be job availability, it may be a disability, or an injury, or addiction to drugs, a criminal history. It could be a parent that has succumbed to any of these. It's hard to enumerate or easily define what any of these are, so to some degree we are willing to offer help simply because someone is experiencing deprivation. Which is to say, the part of the U() curve that a basic income chops off is already really messed up.
xixi77 13y ago
It's all true, but in practice, in the US, and I strongly suspect in Switzerland as well, there are all kinds of means-tested transfers, such as unemployment support, so the first equation is actually U(job income) - X > U(unemployment support) which (unlike the concavity issue) is a first-order effect, and keeps millions of people from working. I very much suspect that replacing that with basic income is going to bring more people into the workplace, not the other way around -- as long as the basic income is kept reasonably small. Now, keeping it small is another matter.
summerdown2 13y ago
One of the arguments for wealth redistribution is that rich people tend more to spend money internationally on luxuries, while poor people tend to spend money in their local communities on essentials. It's possible that under this system the Swiss will gain more employment because their people will be spending more on goods that proportionately employ other Swiss people in the value chain. It's the reverse argument to the Trickle-down idea, I think.

ctdonath 13y ago

1: Motivation. A lot of people will decide that their "minimum" income is sufficient and will try to live on that without contributing to society. 2: Entitlement. A lot of people will decide that they are entitled to that money, that it is not enough for whatever arbitrary minimum lifestyle they decide they are entitled to, and that the police power of the state should/will/must be used to confiscate the difference from taxpayers. In fairness, all should contribute to society at least as much value as they derive from society (at least insofar as they are physically & mentally capable). Giving people enough to live on while requiring nothing of them screws up the human psychology of self-worth: they can exert $X of effort/skill and get $X, or do nothing at all and get $X ... meaning their effort/skill is worth nothing.

iSnow 13y ago
> A lot of people will decide that they are entitled to that money Well, that's the point, isn't it?
icebraining 13y ago
they can exert $X of effort/skill and get $X, or do nothing at all and get $X ... meaning their effort/skill is worth nothing. That's only with current welfare systems, not with basic income, where you receive it regardless of your income. So under the regime being proposed, by not working you'd get $X, and by working $Y you'd get $X+$Y (less taxes).
InclinedPlane 13y ago
1 & 2 are already problems, and huge ones, and not just with the poor. Lots of people get handouts from the government and you can bet that most of them think they are entitled to it. The problem is making sure the system is setup with appropriate feedback mechanisms to keep things at an appropriate level.
- djur 13y ago
  What do you mean by "entitled"? Yes, they are entitled to claim benefits from the government due to meeting certain criteria. This is value-neutral language, and yet it seems like you're suggesting there's something wrong with it.

VLM 13y ago

There is a theoretical environmental problem relating to franchise fees. If you want to run utility poles in most municipalities, you can, but you'll pay a franchise fee to the city. The theory is you're making a profit by inconveniencing all the residents by occasionally blocking streets and putting up ugly utility poles and the like. So you pay everyone a little bit of your profit because you're ruining everyone's property by a tiny little bit. Now the environmental (or any regulatory) problem is demonstrated as "hey, I should be able to dump raw nuclear waste in the river, although it is true that it ruins the river for everyone, it is also true that everyone gets an equal fraction of my profits". Same argument for "I should be able to boom/bust the housing economy because everyone gets a cut" or avoid OSHA or whatever.