The UBI Idea
The goal is to provide a “living wage” to everyone as a basic right no matter how productive anyone is.
Under UBI, governments collect taxes and redistribute the money or alternatively just hand out free money.
Under some proposals, everyone gets free (or redistributed) money but in other proposals, free money only goes to the needy.
German Test of UBI Coming Up
Eurointelligence reports Universal Basic Income Now Subject to a Vaccine-Style Test.
A German NGO is funding a unique economic experiment that works like a vaccination test: a group 120 people will be given a universal basic income of €1200 per month for three years. The idea is to study what they will do with the money and how the universal basic income changes their lives.
This reminds us of scientific experiments funded by the pharmaceutical or tobacco industry. If the source of funding has an interest in a particular outcome of a study, chances are that the study will be biased in many subtle and not-so-subtle ways. We would be very surprised if this particular NGO concluded that the universal basic income was a thoroughly bad idea in the unlikely event that the experiment sprang a surprise. Remember: no empirical evidence in economics ever led to the abandonment of an economic theory. They exist in a universe of their own.
Test Cannot Possibly Fail
Even without the built-in bias, the test cannot possibly fail.
If you give a carefully-selected group of 120 people €1200 free money monthly, it is certain all 120 people will have an improved standard of living.
Any UBI test has but one mission: Come up with the wrong answer.
Free Money, What Can Go Wrong?
The obvious problem, which is why these tests should never happen in the first place, is the tests do not scale.
It’s relatively easy to come up with €1200 * 12 months for 120 people. That’s €1,728,000.
UBI Annual Cost for Germany
Let’s do the math for 83 million people in Germany.
UBI for all of Germany would cost about €1.2 trillion annually.
Where is that money supposed to come from? Unlike the US, Germany does not even have its own printing press.
And right off the bat Germany would face a huge immigration problem. People from all over the EU would move to Germany.
That would cause an instant housing crisis with soaring rent, mandating a bigger monthly UBI to keep up.
I suppose you could pick winners (no immigrants and no wealthy) instead of handing out free money to everybody.
But that creates a huge incentive to not work, especially at the margin.
Previous studies claim that does not happen. But participants know the test will end.
Higher Taxes? How High?
Tax the wealthy enough to pay for this monstrosity and the wealthy will move.
More Studies? Why?
The problems are many, obvious, and insolvable. UBI in any non-trivial amount will never scale.
I show how and why studies are guaranteed less than useless. Unfortunately, ridiculous economic theories never die.
For example, the economic illiterates at YouMatter conclude “more experiments will probably need to be done to assess whether a universal basic income would be a good idea.”
The clamoring and studies will continue until the economic fools eventually get approval somewhere.
Will California Be First?
California, like Germany, has no printing press but it is willing to tax anything and everything for the sake of social fairness.
Also note that California’s Radical Brainwashing Curriculum Soon To Be Mandatory.
Thus, California may be as good a guess as any.
Mish
I still fail to see why the current scheme of non-universal-way-above-basic income for the few, connected and invariably entirely useless, is somehow superior to Universal and Basic.
As long as all UBI does, is add another redistribution racket on top of the the already waaaaaay to many, and too intrusive, existing ones (pensions, asset appreciation, income and sales taxes, fines, ambulance chaser shakedowns, traditional welfare, “mandated spending”, social security….) then yes, obviously it is idiotic. Adding more to already too much, trivially is.
But the “promise” of UBI/citizen salaries, at least to those sentient, is specifically to replace the existing muck of a billion special case-, everyone fights everyone for Massa’s loot-, idiocies, with something more universal, efficient and less intentionally designed specifically for vote and favor buying and those only.
“30% of all taxes collected last year distributed evenly to all citizens without a sigle exception” would do that. Then nothing else. Every other scheme thrown on the trash heap of history, where they all belonged from the get go.
No disincentive to work, the way traditional “unemployment benefits” by necessity entails. No “unless we bail out blah, blah people will be starving in the streets….. ” No “without Obamacare, people will, again, die in the streets…” “Without ever more Teacher’s Union pensions, retired teachers will also be dying in the streets……”
Etc., etc., etc. Blah, blah blah..
By having a UBI, all those “dying in the streets” (imaginary as always but still..) hobgoblins can all be slain in one fell swoop: “No dude! UBI ensures noone will starve in the streets on account of lack of funds to buy basic calories for. So take your self-serving argument for yet another junta shakedown of others on your behalf, shut the f up and stuff it!”
RE: “I still fail to see why the current scheme of non-universal-way-above-basic income for the few, connected and invariably entirely useless, is somehow superior to Universal and Basic.”
Could it be that those “few, connected and invariably entirely useless” currently receiving their “non-universal-way-above-basic income” are afraid that if everyone received a UBI … (1) they might lose their “Fed largesse” and (2) they are afraid that everyone else now laboring productively on their behalf and from whom the majority of the created wealth is “appropriated”, would become as “entirely useless” as those few are, thereby cutting off yet another undeserved stream of wealth from themselves.
Touche!
It’s awfully hard living solely off of theft, when everyone else does so as well…….
He who pays the piper calls the tune.
It might be instructive the divide those who advocate a UBI in to three groups:
Those who want it for others.
Those who want it for themselves.
Those who want to work for the UBI program – to hand the money over, so to speak.
How do people in these groups feel about UBI recipients in comparison to themselves?
Isn’t this current MANUFACTURED gaming the of financial system, compliments of the Fed,..isn’t this in reality and actually UBI for the 1% uber rich ?
Of course it is !!!
I cite,…
this is the program: Devalue or deflate everything owned by the “little people”, buy it up for pennies on the dollars with unlimited free money, and attempt to use this massive financial asymmetry between the super-wealthy and the ordinary to manipulate markets back upward through artificially goosed “demand” backed by empty, cheap-money purchasing power.
AND
On April 9, 2020 for the “first time in its 107 year history” the Fed changed its terms and bought junk bonds, bailing out at the trashiest level yet, the deceits of the big players, particularly private equity firms.
~ Zeus Yiamouyiannis, Ph.D.
I am sooooo totallllly sick and tired of the BS rational of “if we do it it’s not the same “,…what a bunch of manucia.
It’s lie after lie after lie. And its stacked against mom and pop.
All that is happening is UBI on a massive level for the uber rich.
For anyone not to see this has denial painted across their few still active firing neurons.
Fix it for you:
UNPRODUCTIVE people from all over the EU would move to Germany.
UBI is like welfare, with negative public perceptions attached. Instead, we should have a job guarantee program. Every person that is able to work, should be guaranteed a living wage job by a combined State/Federal program. Focus should still be on private sector job creation, but at times that the private sector can’t create enough jobs, the guaranteed job program would kick in. This would also require a bigger investment in training programs.
How do you get fired?
Your social score goes below zero, and you’re ejected from the matrix into the sewers below, to be transformed into a nutrient-rich liquid.
Its easy – you are guaranteed a job, as long as you do the job. If you don’t want to do the job, then you are willing to apply for a different job, either public or private. If you don’t do the job, then you are told to go away, and come back when you are willing to earn your paycheck. I think every community could come up with a list of jobs that could be done, that would benefit the community.
Another excellent article. What a curious world we live in. We claim we need to solve the problem of “structural unemployment”, yet unemployment is something we artificially create in the first place. Sadly, the law of supply and demand isn’t taught in high school, and few seem to grasp it.
If you artificially raise the price of a commodity, you get more supply, and less demand, resulting in a surplus. Labor is a commodity. If you raise its price (i.e. institute a minimum wage), you increase the supply (number of people wanting jobs), and decrease the demand (eliminate jobs). We call a labor surplus “unemployment”. Now, we also know that, if you allow the market to work on it’s own, the price will find a natural point at which supply=demand, and thus there is no unemployment.
That brings us to where we find ourselves. First, we raise the price of labor above it’s equilibrium point, creating unemployment. In the process, we cause prices to increase, and burden the economy, lowering the overall standard of living (though big business, and big labor are better off, with less competition). Then we complain about the results of what we have done, but rather than eliminating the unemployment, we instead create things to further burden the economy, and to further decrease the overall standard of living.
The stupid thing is that there is an obvious solution, but it’s so obvious, that it’s never tried. We know that lower marginal tax rates incentive people. We know that UBI disincentives people. So, the obvious answer is to eliminate the minimum wage, and then to combine all of the various benefit programs into a single unified benefit, and make the amount of assistance decline with rising income in such a way that every time a person gains a dollar of income, he loses perhaps $.50 in benefits. That way everyone is incentivized to get a job and to keep trying to move ahead, since every dollar he/she makes, makes him/her better off. The net result is that each person then produces the maximum that they can produce, and in turn the overall economy is maximized, along with the overall standard of living. Prices fall, productivity increases, and we are all better off.
Someone asked above if I really want to see people doing things that machines could do? Of course! Work is it’s own reward. Ask people what they do, and they say “I’m a plumber” or “I’m a teacher” or “I’m in manufacturing”, and they usually say it with pride. A job is an identity. when you rob people of their personal pride, you rob them of dignity, and you rob them of feeling that they play a role in society. The result is more crime, more drug addiction, and more broken homes. “What do you do?” “I live on handouts” just doesn’t have the same ring to it.
This is a little theoretical. In practice wages bear little relationship to “productivity”. In many societies, the most productive classes were the slaves. Nothing to do with incentives and maximizing production. The last time we tried your experiment, children worked in factories to avoid starvation, and millions of young women worked as domestics, at the mercy of their employers as they bent over the washing.
Supply/demand curves are nice for economists.
The real world revolves around entirely different dynamics.
Or do you propose that the lives of molested and beaten children digging up coltran in the Congo is the exact intersection of various market “forces”?
Note that what I just proposed has never been tried before, anywhere, at least so far as I know. McGovern proposed it in 1972, but that’s the only time I’ve heard a politician mention it. He called it a “negative income tax”, but the concept is the same.
If you don’t know it, studies are a ruse to justify a desired outcome.
$500/month to every adult American citizen not on social security would be about $1.2T annually. Half of that could be funded by eliminating all other forms of assistance, including tax credits, other than medicaid.
Yes, actually the conservative Hoover Institute once said that UBI would be actually cheaper than welfare is today, if the yearly sum was kept low. The problem is, all government programs start with good intentions but then expand.
The post-Bretton Woods monetary system (born 8/15/71) is in its death throes anyway.
They might as well administer the “coup de grace” by handing out soon-to-be-worthless, free “money” to everyone and finish it off.
And then they can say “Look at what happens when we hand out free money!”
I think I will sit on my butt all day, smoke weed and watch TV while you suckers go to work.
Definitely not a Central Bank idea. They are beholden to the banks. The banks want debt slaves, not living wages!
I could see where it would benefit the creditors to know that everyone will have a minimum income. I bet they’d even be able to set up garnishment. Most people will continue to overspend stupidly, and end up in the clutches of the creditors.
Giving people money will only give them a false sense of security to go have kids. Once the money stops, the kids will still have to be fed. Instead of UBI and welfare, reproductive buyouts should be offered. Amounts would be less if the person has already had at least one child.
People need to work. It keeps unhealthy habits and social unrest at bay. Hey you want go out and drink/ protest etc. tonight. No i have go to work tomorrow. Should be figuring out how to provide jobs for everyone.
Some people maybe. There are plenty of us that can be quite productive without being under the corporate lash 8 hours a day.
…and since when is protesting police shooting people that didn’t need to be shot a bad thing?
I agree; work creates a sense of accomplishment and promotes self esteem.
Agreed, but there is also a balance that seems to be tipping towards working longer and longer hours. Even before Covid-19, look at business districts in the US outside NYC, SF, DC. All the stores were doing poorly. Why? My theory is because no one gets an hour for lunch anymore. No business people to shop or go to a sit-down restaurant. Ironically, working so much can hurt your local economy.
Is it really possible to raise the bottom in relative terms? Give people more money and prices will go up and they’re no better off. Which may not happen with such a small sample of people but certainly would on a large scale. Seems like all socialism really does is buy votes.
Could it be that redistribution isn’t a replacement for increased production?
Almost nothing the government / central bank does can ever increase production. They chase numbers and engage in stealth theft (the flip side of “low interest rates” and “universal basic income”) in an attempt to give the illusion of production and wealth.
“But that creates a huge incentive to not work, especially at the margin.
Previous studies claim that does not happen.”
…
I would DEARLY like to know who funded those “previous studies”.
Some will be fine subsisting on the handout, some will want more, so they’ll work.
Well, I’m not OK footing the bill.
Productive people will take their talents (and assets) elsewhere.
To another planet that doesn’t have 4 billion people on it that nobody has any use for? Until such a planet is found, there is no escaping the useless.
Why don’t you answer the question?
What will the masses do all day every day if not employed??
I’ll refill my coffee while I await your reply.
My reply got lost, so, again. The masses will do as they please. This is called “freedom”. The alternative you propose, forcing people to compete with machines or starve, is the opposite of freedom.
Literately whatever they want, that is literately the point. Yours, mine, and everyone’s life is not valued at being busy. Human really weren’t meant to be working 40 hours weeks under constant stress.
You also talk about about how a “UBI would breed alcoholism, depression, substance abuse, lack of self worth” in another thread like we already don’t have those issues in our current society which, surprise surprise, is because people are under constant stress, underpaid, and are living in poverty.
I do believe that work has some psychological value, but I bet the average normal person would rather be spending time with family and friends, not having to decided whether to get food for the week or get their car fixed.
That being said people would still work and school, they would just do things they are passionate about that would not necessarily ‘profitable’.
“they would just do things they are passionate about that would not necessarily ‘profitable’.”
…
They can do those things now. No one said life was fair. Easy to live a very simple (cheap) lifestyle if you wish.
I certainly don’t expect Big Gov to make my life better for me … as you seem to suggest.
UBI is an attempt to think your way out of structural unemployment (quite significant in most OECD countries since the seventies) and an upsurge of automating jobs. Unless you let people die by the wayside as in third world countries, a puzzle remains. Simply asserting that such crises have been filled in the past after technological shifts is blind faith … you actually have to think the problem through to productive/remunerative work.
“you actually have to think the problem through to productive/remunerative work.”
…
UBI not just a question of $$s for the masses. UBI would breed alcoholism, depression, substance abuse, lack of self worth.
UBI is nothing more than the elites – who have benefited massively from current regime promoting wealth inequality – throwing a few crumbs to ease their conscience (if they have one).
Better yet – crash assets to flatten divide of wealth. UBI would not be necessary if cost of living not so high (which leads to asset levitation).
Lower cost of living —-> lowers wages necessary —-> slows need for automation.
You seriously want to spend your time on this planet doing something a machine could do better?
So, you are saying I should quit playing golf because I’m no Tiger Woods?
What EXACTLY do you think the masses will do 24/7 going forward?
Give me A Day In The Life of j6p.
I foresee no Utopia.
“What EXACTLY do you think the masses will do 24/7 going forward?”
Things so complicated even a fruit fly can do it. Much less a power drill or other machine.
No it is actually because of globalization and automation. If you are a country like the US you have about 175M adults. Most of them are not necessary in the developed world due to automation and globalization of labor force. At some point, competition just doesn’t work when you have 7.5B people.
“No it is actually because of globalization and automation.”
…
Obviously. My #1 disagreement with Mish is his trade policies. I’m all FOR “inefficiencies” (labor) at the expense of profit (which accrue to owners of capital). What we have now is cartels / monopolies running the show. For the sake of argument, DC actually cared about anti trust. Take the TBTFs. JPM broke up into 10 smaller banks. Presto, 10 CEOs and hq staff. A lot more high paying job … and taxpayer off the hook as no longer TBTF.
The US in an unique position (natural resources) to tell other (trading partners) to pound sand and mfg domestically … creating jobs. Obviously, automation will get here some day, but current set up puts it on front burner.
The same applies to large tech companies. Too much market power in the hands of a few stifles competition.
“What EXACTLY do you think the masses will do 24/7 going forward?“
What they damn well please? Some call that “freedom”. I think most find it preferable to being forced to compete with machines or starve.
Sometimes Silence is Golden
Rule #1: life ain’t fair.